Justice Department Makes A Strong Case for Health Care Price Transparency

While everyone focuses on Americans’ health in the time of COVID-19, efforts to fix the country’s broken health care system continue under the radar. 

Earlier this month, the Department of Justice squared off against several hospital associations in a (virtual) hearing in federal district court in Washington, D.C. over the Trump administration’s health care price transparency rule. A Department of Health and Human Services’ regulation, issued last November, requires hospitals to publish both their cash prices and the prices they charge patients in employer-sponsored insurance plans. This rule will allow patients to know the cost of their care in advance of purchasing it, rather than weeks or months later when they receive their bills. Hospital groups promptly sued the administration to block the rule’s implementation, currently scheduled for Jan. 1, 2021.

The plaintiffs tried to argue that hospitals already publish their prices through documents known as “chargemasters,” which are lists of inflated and largely meaningless prices that few people actually pay.

“How do you define what a charge is?” U.S. District Judge Judge Carl J. Nichols asked.

“Is a charge the amount that the hospitals bill and expect to be paid … or is it the amount that the hospital tells the third-party payer is its chargemaster rate even though everyone in the transaction understands that’s not the amount being billed?”

Justice Department attorney Michael Baer pointed to the dictionary definition of a charge as being how much money is actually demanded for the service in question.

Baer further argued that the government has two substantial interests in requiring health care price transparency:

First, providing consumers with critical information about the cost of their care; and second, lowering stratospheric health care costs.

These interests, he explained, easily justify any purported burden on the hospitals’ speech. After all, given that businesses in all other sectors of the economy must publish their prices in advance of a transaction, it is hardly an undue burden on speech to require hospitals to do the same.

The hospitals’ attorney pointed out that COVID-19 is projected to cost hospitals $200 billion, implying that they shouldn’t be further burdened by this rule during this difficult time. What she failed to mention, however, is that hospitals have also received roughly the same amount of money in recent bailouts from the same government they’re suing in the case before Nichols.

Price transparency is even more vital during the coronavirus pandemic. Taxpayers should know how much hospitals are charging so they can hold hospitals accountable for how they are using these staggering bailout funds. According to a Journal of the American Medical Association study released last year, waste accounts for 25% of American health care costs. Under the current opaque system, where patients typically don’t know what they’ll pay until after they get their bills, consumers often have no meaningful ability to comparison shop to find the best value.  

Knowing prices before care is fundamental to comparison shopping. Price transparency will empower consumers, promote competition, and lead to innovations throughout the health care delivery system. Economic and anecdotal evidence demonstrate that price transparency reduces healthcare costs by 30% to 50%.

Health care costs were already unsustainable before the pandemic. They have doubled, after adjusting for inflation, so far this century to the point where they consume 18% of U.S. GDP. Roughly 16% of Americans have medical debt in collections. And one-third have put off needed care due to cost concerns.

Now, with the COVID-19-induced economic carnage, there’s an even greater need to control costs. According to the April jobs report, the national unemployment rate is 14.7%, the highest since the Great Depression. Employers, which provide health care coverage for 181 million Americans, have seen revenues crater. State, local, and federal governments are in dire fiscal shape.

Congress can moot the hospitals’ legal challenge and eliminate any uncertainty by including price transparency measures in its forthcoming Phase 4 stimulus legislation. Not surprisingly, the Associated Press recently reported that hospitals are aggressively lobbying against this legislative measure.

Strong public support – polls show that nine out of 10 Americans support health care price transparency – can overcome this lobbying. Though it won’t make it to the top of the 24-hour news cycle, public officials should continue to fight for this reform that consumers need now more than ever.

Cynthia A. Fisher is a life sciences entrepreneur, the founder and chairman of PatientRightsAdvocate.org, and the founder and former CEO of ViaCord Inc.