Roger Smith

Viewpoints: The next big health reform is transparency

Published: Thursday, May. 29, 2014 - 12:00 am

Health care consumers – and that means all of us – need to get ready for the next reform: transparency.

It’s a word with a great positive vibe. It means we might get to understand how hospitals and doctors and labs bill us, and how that compares to similar charges down the block or around the state. It is being promoted through a variety of legislative efforts nationwide, including Assembly Bill 1558 in California, which would create a Health Data Organization within the University of California to gather pricing information and to build a searchable database online that the public could access.

But if that reform is to have any usefulness, it will have to revive something that has been substantially diminished in American medicine over the last 50 years – consumer responsibility for using price to select medical procedures and doctors.

Beginning with the rapid growth of employer-paid health plans in the 1950s, and accelerated by Medicare in the 1960s, insurance companies and government agencies steadily supplanted individuals as the decision-makers in health care.

Hospitals and doctors adjusted accordingly. Their chief customers became those companies and agencies, not patients.

Many health policy experts thought that was a good thing. Health care, they argued, should not be treated as a consumer-driven industry. Can patients really know how to shop for a procedure, especially in an emergency? Their interests, the argument went, are better served by bigger, more expert surrogates in government and private insurance who can negotiate with providers and set prices.

That system, however, has proved inadequate in restraining health spending, which has soared to almost 18 percent of the total U.S. economy from about 6 percent in 1965. And the wherewithal of patients to fathom, let alone participate in, a health care transaction has almost disappeared.

Here is an example of how a lack of transparency has been built into the system, confounding the ability of patients to get the best price from providers.

My brother-in-law physician serves on his hospital’s committee that decides what to do about patient bills that haven’t been paid. The committee can send a bill to collection or forgive it entirely, based on what is known about the patient’s ability to pay.

I posed a hypothetical question: What if I had an appendix operation, but didn’t have insurance? Could I say to his committee, I’ll pay whatever Aetna or Blue Cross pays, which is always at a discount? He said, first off, no patient has attempted such a negotiation in his memory. And second, the answer would be “no,” because the hospital would need to protect the confidentiality of its price agreements with the insurers.

In other words, we don’t publish what we really get paid, and we don’t negotiate with patients, only insurers.

But what if his hospital was more transparent, and open to patients shopping with their own checkbook?

A clue came in a Los Angeles Times article in May 2012, which reported that a Long Beach hospital charged a patient named Jo Ann Snyder $6,707 for a CT scan of her abdomen and pelvis after colon surgery. Because she had health insurance her share was much less: $2,336. But if she hadn’t used her insurance, her bill would have been even lower, just $1,054.

It’s not unlike the auto repair shop that discounts for cash. That example can’t be extrapolated to all cases. But it certainly illustrates the power of opening price decisions and billing explanations to public scrutiny.

According to Gerald Kominski, director of the UCLA Center for Health Policy Research, AB 1558 will lead to lower costs. “This bill would provide basic price information, to allow market forces to do what they do in other markets, and that means lower prices,” he said in an interview with California Healthline. “Price transparency is the missing piece.”

While insurers and hospitals are saluting the transparency word publicly, they are rightfully concerned about what a wide open database would do to their closed business models.

Still, the bill sailed through the Assembly on a 72-0 vote Tuesday. Consumers should take a look at this measure. Nothing in it interferes with existing insurance for emergency treatment. No one will have to negotiate from a gurney.

But if premiums, deductibles, co-pays and out-of-pocket limits keep rising, the best weapon for finding affordable care may not be more government regulation, but more comparison shopping, online.


Roger Smith is managing editor of the California HealthCare Foundation Center for Health Reporting at the USC Annenberg School for Communication and Journalism.

Read more articles by Roger Smith



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