In a recent decision by the U.S. District Court for the District of Columbia, the AHA lost its bid to avoid having to disclose rates hospitals negotiate with insurers. While an appeal is expected, this is a win for the administration, which is committed to providing patients with understandable information about the cost of medical services.
The rule approved last year required hospitals to post a list of standard charges and
rates they charge for diagnostic-related groups (DRGs). These charges were, however,
posted as “chargemaster rates” – a format that meant little to the general public.
By requiring that hospitals post median prices negotiated with commercial health
insurers, CMS believes that providers will be forced to compete on price and that
consumers will be better able to make informed choices.
In other developments, the Trump administration was stopped from requiring that
drug companies disclose prices in their TV commercials. The President also brokered
an agreement with drug companies and insurers to limit Medicare recipients’ copays
on insulin to $35 a month. This will go into effect in 2021.
In late June, President Trump signed an executive order directing HHS to develop rules requiring hospitals to publish clear and understandable pricing that reflects what people will actually pay for services. HHS Secretary Alex Azar added that the order should also make certain that providers and insurers provide patients with information about potential out-of-pocket costs they will face before receiving healthcare services.
While details about how the rules of the order will work are yet to be determined, hospital and health plan lobbyists criticized the order, saying it will increase prices and reduce competition. The President and CMS Administrator Seema Verma emphasized that the intention of the order is to combat the huge price variations that have long existed among healthcare facilities and make it easier for patients to find low cost, high-quality care.
The rule requiring hospitals to post their prices online, which became effective on January 1, 2019, really hasn’t done much to promote cost transparency. The problem is that the price lists, which payers refer to as chargemasters, break common procedures into complex, coded retail-priced components that mean little to the average consumer.
As an example, determining the cost of an ER visit would require knowing the codes and locating costs for all parts involved in the visit. Few people, if any, are familiar with these complex details. While giving consumers price information in an easy-to-understand format would be a big help, it appears that CMS Administrator Seema Verma was accurate when she described this as little more than a “critical first step”.