{"id":3482,"date":"2021-02-08T17:35:04","date_gmt":"2021-02-08T17:35:04","guid":{"rendered":"https:\/\/live-journal-of-law-and-public-policy.pantheonsite.io\/?p=3482"},"modified":"2021-02-08T17:35:04","modified_gmt":"2021-02-08T17:35:04","slug":"healthcare-price-transparency-in-a-privately-insured-united-states-is-patient-ignorance-bliss","status":"publish","type":"post","link":"https:\/\/publications.lawschool.cornell.edu\/jlpp\/2021\/02\/08\/healthcare-price-transparency-in-a-privately-insured-united-states-is-patient-ignorance-bliss\/","title":{"rendered":"Healthcare Price Transparency in a Privately Insured United States: Is Patient Ignorance Bliss?"},"content":{"rendered":"\n

(Source<\/em><\/a>)<\/p>\n\n\n\n

It is no secret that the United\nStates is the only industrialized nation\nwithout a single-payer universal healthcare program<\/a>. Among the many issues created by\nthe high cost of healthcare, both parties agree that unexpected,\nand often extremely expensive, medical bills present a serious threat<\/a> to financial security in a nation\nwhere around two-thirds of individuals declare\nbankruptcy due to an inability to afford medical care<\/a>. Despite both parties agreeing that\nsurprise medical bills are a pressing issue, there is little agreement\nconcerning what an appropriate solution might look like<\/a>. <\/p>\n\n\n\n

On June 24, 2019, the Trump\nadministration issued an executive order requiring\nhospitals to make negotiated pricing information accessible to the public<\/a>. In November 2019, the Department\nof Health and Human Services, in complying with the order, created a \u201cfinal rule\u201d requiring\nall hospitals in the nation to publish the prices of certain procedures on\ntheir websites<\/a>. The\nAmerican Hospital Administration (\u201cAHA\u201d) and several other hospital networks\nsubsequently filed a lawsuit challenging the administration\u2019s\nauthority to impose such a requirement<\/a>.\nThe AHA asserted that the rules imposed by this executive order would require\nmore administrative positions to organize and deliver the requested pricing\ndata, an increased cost that ultimately would be passed on to individuals\nseeking care. The AHA also argued that releasing price information for certain\nprocedures would not help patients determine their out-of-pocket costs because\nan individual\u2019s out-of-pocket costs are not determined by the negotiated rate\nbetween the insurance provider and the hospital, but are influenced by several\nother factors, including the patient\u2019s health plan design and features\n(including co-insurances and deductibles) and the patient\u2019s individual medical\nneeds, which may not be fully known before a procedure commences. <\/p>\n\n\n\n

On June 23, 2020, a district judge\nin the District of Columbia issued an opinion rejecting the\nAHA\u2019s arguments<\/a>\nthat the price transparency requirements were unlawful and would result in\nadministrative burdens that drive up the cost of care. The court also granted\nthe Secretary of Health and Human Services\u2019 motion for summary judgment,\nfinding that the agency action did take the AHA\u2019s concerns into account and\nthat the agency\u2019s final rule was not implemented in an arbitrary or capricious\nway. The judge echoed an argument made by many conservatives, including\nPresident Trump, that \u201cinformed customers\u201d<\/a> could limit inflation in\nhealthcare markets by exerting market pressure on healthcare providers who\ncharge higher prices for medical services and procedures. Part of the court\u2019s\nreasoning rested on the hope that price transparency would result in lower\nhealthcare costs over time, although the judge admitted there is no consensus\nin the economic community about whether price transparency does, in fact, lead\nto lower costs.<\/p>\n\n\n\n

Economists\u2019 lack of agreement about the effects of different types of economic regulation on healthcare markets stems from: 1) a lack of models and analyses that take the unique complexities of the U.S. healthcare system into account, and 2) the unpredictable behavior of the healthcare market as compared to other markets.<\/a> For conservatives who oppose a single-payer system, price transparency and market pressure by consumers could provide a solution without increasing taxes or enabling complete government control over healthcare market prices. This perspective assumes that a healthcare market would behave like other U.S. markets that readily respond to consumer demand, but that is not the case<\/a>. In healthcare markets, rather than service providers negotiating directly with the consumer for payment, third-party intermediaries can have a significant influence on the price-setting side of the transaction process<\/a>. Private insurers act as intermediaries for approximately 90% of healthcare consumers<\/a>, indicating that private insurers, not individual consumers, are in control of price negotiations in the U.S. This raises questions about whether price transparency would make any difference to individual consumers who do not carry negotiating power in the price-setting aspects of healthcare transactions. In a single-payer system, where the government has more control over setting prices for different procedures<\/a>, private insurers could be removed from the transaction process altogether. Under the current system, however, as long as private insurers serve as intermediaries with financial interests in higher overall costs, the healthcare market will not behave like a standard supplier-to-consumer market. <\/p>\n\n\n\n

Proponents of price transparency\nshould also consider the elasticity (flexibility of consumer\ndemand)<\/a> of\nhealthcare demand. Those in favor of transparency also assume that there is\nenough elasticity in the demand for medical care to allow for consumers (i.e.,\npatients) to influence prices. For these proponents, the fact that 43% of healthcare spending is\nconsidered \u201cshoppable\u201d<\/a>\nindicates there is enough room for healthcare consumers to seek out lower-cost\noptions and drive down prices over time. Critics of price transparency,\nhowever, view this 43% figure from a glass-half-empty perspective. For these\ncritics, the key takeaway is that over half of medical services are not “shoppable,”\nindicating inelasticity in the healthcare market<\/a>. Furthermore, the 57% of\nnon-\u201cshoppable\u201d or emergency services may become more\nexpensive<\/a> in order\nto offset the revenue reduction caused by consumers shopping and driving down\nthe costs of elective and non-emergency care. <\/p>\n\n\n\n

Lastly, the supply of healthcare\nservices in the U.S. is not fixed or uniform. Since 2013, healthcare providers\nhave become more concentrated across the U.S<\/a>., making the healthcare services\nmarket less competitive. This trend has correlated with an increase in\nhealthcare costs, which are more pronounced where there is higher market concentration.<\/a> While not necessarily a causative\nrelationship, this correlation does indicate an intuitive economic principle:\nwhen there is less competition, prices will rise. Competition is greatest in urban areas, and lowest\nin small cities and rural areas<\/a>\nof the U.S. Proponents of price transparency consider the U.S. healthcare\neconomy in the aggregate<\/a>.\nThis approach, however, is flawed, because it fails to assess the relatively\nreduced ability to influence prices by \u201cshopping\u201d in areas where there may be\nonly one healthcare provider or hospital network. Furthermore, by openly\nembracing a market-driven model, individuals in less-developed areas with fewer\nproviders may be subject to higher healthcare costs than those in more\ndeveloped areas with more healthcare options. <\/p>\n\n\n\n

Forcing hospitals to disclose prices up front may resolve some issues in certain urban, competitive healthcare markets. The concept of transparency and accountability in healthcare pricing is attractive, and perhaps, a step in the right direction. Proponents of price transparency, however, tend to favor a market-driven approach to healthcare that may harm those in emergency situations and those in communities with limited access to healthcare providers and perhaps only one hospital system providing healthcare services. Additionally, the focus on hospitals and hospital networks alone fails to address the rising cost of pharmaceuticals, diagnostic products, and medical devices,<\/a> which drive the increasing cost of medical care. Without a single-payer system and healthcare price regulations in place, healthcare costs in the U.S. will continue to rise because of the information asymmetries inherent in modern medical care and the inflexibility of patient demand in non-elective medical care and procedures. <\/p>\n\n\n\n

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About the Author: Gabriella Pico is a J.D. candidate for the class of 2022 at Cornell Law School. Prior to attending Cornell, she completed her B.A. in Public Policy and French at Hamilton College. Gabriella is a member of LALSA and serves as President of Cornell\u2019s Cuban American Bar Association. Last spring, she participated in Cornell\u2019s 1L Immigration Law and Advocacy Clinic where she provided direct services to DACA recipients in the Cornell community. Some of her academic interests include immigration, education, and health policy in the U.S. <\/p>\n<\/div><\/div>\n\n\n\n

Suggested Citation: Gabriella Pico, Healthcare Price Transparency in a Privately Insured United States: Is Patient Ignorance Bliss?<\/em>, Cornell J.L. & Pub. Pol\u2019y: The Issue Spotter (Feb. 8, 2021), https:\/\/live-journal-of-law-and-public-policy.pantheonsite.io\/healthcare-price-transparency-in-a-privately-insured-united-states-is-patient-ignorance-bliss<\/a>\/. <\/p>\n","protected":false},"excerpt":{"rendered":"

(Source) It is no secret that the United States is the only industrialized nation without a single-payer universal healthcare program. Among the many issues created by the high cost of healthcare, both parties agree that unexpected, and often extremely expensive, medical bills present a serious threat to financial security in a nation where around two-thirds…<\/p>\n","protected":false},"author":1,"featured_media":3483,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[14,15,16,17,18,19,21,25,27,28],"tags":[529,769,843,879,1603],"class_list":["post-3482","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-archives","category-authors","category-blog-news","category-certified-review","category-feature","category-feature-img","category-spotters","category-policycontributor-blogs","category-recent-stories","category-student-blogs","tag-economics","tag-healthcare","tag-insurance","tag-jlpp","tag-universal-healthcare"],"acf":[],"_links":{"self":[{"href":"https:\/\/publications.lawschool.cornell.edu\/jlpp\/wp-json\/wp\/v2\/posts\/3482","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/publications.lawschool.cornell.edu\/jlpp\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/publications.lawschool.cornell.edu\/jlpp\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/publications.lawschool.cornell.edu\/jlpp\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/publications.lawschool.cornell.edu\/jlpp\/wp-json\/wp\/v2\/comments?post=3482"}],"version-history":[{"count":0,"href":"https:\/\/publications.lawschool.cornell.edu\/jlpp\/wp-json\/wp\/v2\/posts\/3482\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/publications.lawschool.cornell.edu\/jlpp\/wp-json\/wp\/v2\/media\/3483"}],"wp:attachment":[{"href":"https:\/\/publications.lawschool.cornell.edu\/jlpp\/wp-json\/wp\/v2\/media?parent=3482"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/publications.lawschool.cornell.edu\/jlpp\/wp-json\/wp\/v2\/categories?post=3482"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/publications.lawschool.cornell.edu\/jlpp\/wp-json\/wp\/v2\/tags?post=3482"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}