President Trump has been the champion of reducing red tape. That’s why it’s confusing that he plans to issue an executive order requiring healthcare insurers and providers to reveal the details of their pricing contracts.
Reducing the cost of healthcare is a well-intentioned goal. However, this so-called “transparency” plays into the never-ending myth that a new government mandate will fix what ails us.
The plan sounds deceptively simple: Government will require insurers and providers — doctors, hospitals, clinics, etc. — to disclose the prices of care they negotiate, including routine checkups, drugs, major surgeries, in-patient treatments, medical supplies, therapies, and more. In doing so, the speculation goes, patients would be able to make more informed choices and might save money.
Testing this theory has enormous costs. Even if we ignore the economists and experts who warn this proposal can increase prices in other ways, the cost of implementing regulations would be passed on to taxpayers and the cost of compliance would be passed on to patients.
Yet lawmakers and activists are pushing the president and already are patting themselves on the back for “doing something” about healthcare costs, even though their plan would empower federal bureaucrats far more than consumers.
It sounds simple to reveal prices to a government agency that then would make them available to the public. But the infrastructure and paperwork to implement this will become a new Washington swamp.
How many agreements and how many prices exist? The number is unknown, but likely runs into the hundreds of millions. Even if submitted electronically, the enormous red tape would require an army of government bureaucrats to sort, file, organize, and report it in a form the average consumer still might not find useful. By the time these negotiated rates would be available to the public, a great many would be outdated.
Although only the largest are widely known, the U.S. has approximately 1,000 health insurance companies. Each creates pricing agreements with a massive number of healthcare providers, outpatient facilities, physician groups, and hospitals, many of which also have a multitude of contracts among each other.
More than 6 million providers are listed in the National Provider Index maintained by the Centers for Medicare and Medicaid Services. These include 6,000 hospitals, 67,000 pharmacies, tens of thousands of clinical testing laboratories, thousands of physical therapy and rehab centers, over 1 million physicians, and a multitude of medical equipment companies, all employing thousands of nurses, technicians, and other professionals.
Agreements also must consider over 1,500 prescription drugs approved by the FDA. Those are offered in a multitude of doses. For example, Blue Cross’ formulary lists over 2,700 available medications and the Department of Veterans Affairs formulary lists 1,650.
Prices are cross-referenced by multiple systems of medical, surgical, and diagnostic codes that already make heads spin. There are 10,000 different codes in the Current Procedural Terminology maintained and published by the American Medical Association. CMS also publishes a list of diagnostic, procedure, disease classification, and drug codes for record and billing purposes.
Mega-millions, if not billions, of pricing permutations and combinations would require federal workers to analyze, sort, compile, index, catalog, and organize it all into massive databases and reports.
Then each time there are changes or updates to agreements, the old information must be revised.
This nightmare of red tape could put Obamacare to shame. Would it do any good for Americans looking to lower their healthcare costs?
Everything is based upon the theory that consumers would wade through the data to decide whether to seek care from different hospitals or doctors and would pay less (even if the quality of care were the same).
Yet insurance companies already create networks that have done that, negotiating prices and discounts. Patients usually care most about their out-of-pocket costs, as controlled by copays, deductibles, and premiums. The massive disclosures contemplated by a Trump action would not resolve those personal decisions.
An insurance plan can be a sophisticated advocate; a good insurance carrier shares its negotiated savings with patients, allowing them to offer cheaper rates.
The horror stories typically told by advocates of “transparency” usually involve insureds who chose to go out-of-network, or who were in places or circumstances where they had no choices available — a problem that exorbitant piles of pricing information won’t fix.
Red tape is the bane of affordable healthcare, not the solution.
Adding another federal mandate won’t fix what ails us. President Trump and his administration should not issue orders that guarantee only one thing — more bureaucracy.
Former Rep. Ernest Istook, R-Okla., is president of Americans for Less Regulation.