Policy & Regulation News

Price Transparency a Key Way States Control Healthcare Costs

The federal government should monitor the development and impact of state price transparency laws, which are helping to curb healthcare costs, industry experts say.

Healthcare price transparency and healthcare costs

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By Jacqueline LaPointe

- As the 2020 elections draw closer, healthcare reform is taking center stage on the national level. But the topic has already been at the top of state priority lists, with several states already passing laws to cut healthcare costs using price transparency requirements.

That was the finding industry experts from non-profit Catalyst for Payment Reform and the Hastings College of the Law at the University of California reported in a recent Health Affairs blog post.

In the post, they outlined five strategies states have used to not only reduce healthcare spending – which actuaries project to account for over 19 percent of gross domestic product (GDP) by 2027 – but also improve care quality for consumers.

A key strategy the states are using is healthcare price transparency.

Price transparency is notoriously missing from healthcare. Consumers often cannot determine the cost of healthcare services prior to care delivery and providers typically cannot provide accurate cost estimates.

READ MORE: Going Above and Beyond the CMS Hospital Price Transparency Rule

State legislatures have acknowledged the problem of limited price transparency in healthcare and have started to tackle the issue with all-payer claims databases (APCDs), which collect and aggregate healthcare price and quality information, the experts reported.

Sixteen states currently have mandatory APCDs, and eight of the states make price and quality information directly available to the public through state-based websites, the post stated.

“A lot of times people equate higher cost with better quality and that may or may not be the case. Seeing those two pieces side by side is key for the consumer to start understanding healthcare,” Thea Mounts, the APCD program director in Washington, one of the states making ACPD data available to the public, recently told RevCycleIntelligence.com.

But more work still needs to be done to make the information useful to consumers, she said regarding her experience creating a website that consumers can use to compare healthcare costs and quality using ACPD data.

“The jury is still out whether providing this type of information is useful or not,” she explained. “We understand that consumers really need to talk to their health insurance carriers to make sure a specific provider is in their network for their specific situation and the amount that they have to pay after deductibles and so forth is worked out.”

READ MORE: White House Announces New Healthcare Price Transparency Order

That concern has prompted many states to also enact laws that address surprise medical bills, which typically occur when a patient receives care from an out-of-network provider at an in-network hospital.

More than half of the states have passed or expanded laws to protect patients from surprise medical bills, the experts found. Of those, nine states have comprehensive protections that limit patient financial responsibly to their cost-sharing amounts, while others limit protections for patients to certain types of care or providers, they stated.

Hospital advocates have opposed some state surprise medical billing laws. Notably, providers have been unhappy with California’s 2017 law that limited how much providers can charge patients and payers for out-of-network, non-emergency services at in-network hospitals.

A recent RAND Corporation study published in the American Journal of Managed Care found that the law may have resulted in payers lowering or canceling contracts with some providers and even motivated consolidation among physician practice groups.

Stakeholders have pointed to the study as a reason why policymakers should reconsider similar laws at the federal level. Many of these stakeholders would rather see the federal government protect patients from surprise medical bills using an arbitration process in which a third-party determines the rate providers receive for out-of-network care at an in-network facility.

READ MORE: How Practices Can Benefit from Healthcare Price Transparency

“Such models have been successfully implemented in several states and are a proven solution to resolving these disputes while fully protecting the patient,” said James L. Madara, MD, the CEO and executive vice president of the American Medical Association (AMA).

One of the states the AMA leader referred to is New York. In the Empire State, the law states that, in the event of a surprise medical bill, providers and payers must submit a payment amount and a third-party arbitrator decides which payment offer will stand.

Researchers from Georgetown University recently called the law a success after finding that the number of surprise medical bill complaints from consumers dropped dramatically after the law’s implementation.

“For the most part, insurers and providers appear to be working out their differences without resorting to arbitration,” the study stated.

The federal government should be looking to states like California and New York when enacting price transparency regulations, experts stated in Health Affairs.

“Whether experimenting with laws and regulations to address an imbalance of market power in their local health care markets, reforming provider and hospital payment methods in hopes of greater value, or ensuring greater price transparency for consumers, states are taking a variety of approaches to contain health care costs and improve quality. Monitoring the development and impact of these various laws helps to identify potential models for federal reform and other states,” they concluded.