Much of our life is conducted with full price transparency. Enjoying a meal out? The prices are right there on the menu. Filling the fridge? The price of everything you pile into your real or virtual grocery cart is clearly displayed long before you reach check out. Does your car need some maintenance work? You don’t hand over the keys to the mechanic without having an estimate of what it will cost, right?
And then there is health care.
Paying our medical bills is anything but price transparent. Whether it’s a lab test, an MRI, or surgery, we typically only learn the cost of the service—and our share of the bill – after the procedure has been completed.
Surprise hospital bills are perhaps the worst of healthcare opacity. Consumers who think they are doing everything “right” by using an in-network hospital to have a procedure performed by an in-network physician can nonetheless be hit with a huge out-of-pocket payment when they find out weeks later the anesthesiologist, radiologist, or another care provider involved in their care was not covered by insurance.
A new study of consumer insurance claims by the non-partisan Kaiser Family Foundation found that on average nearly 1 in 5 emergency hospital visits in 2017 ended up with at least one out-of-network charge.
Overall, the Kaiser study reports that four in 10 non-elderly adults got slapped with an unexpected medical bill in the past 12 months. More than one in 10 who were hit with a surprise bill said it was for at least $2,000.
Health care transparency is about making pricing available to consumers before they have care. That is, making health care operate like every other part of your financial life where pricing is available and can be part of our decision-making process.
Health care transparency is shaping up as a focus of the 2020 Presidential election. The “Medicare for all” platform of some Democrat candidates is a direct answer to the financial burden of health care that is fueled in part by a lack of transparency.
In late June, President Trump signed an executive order that would increase health care transparency. Federal agencies are tasked with drawing up rules before year-end that would require hospitals and insurers to publish the price of care based on their agreements with insurers. Hospitals and insurers would also be required to provide patients with an estimate of their out-of-pocket costs before they receive non-emergency medical care.
The idea is that armed with that information, consumers who often end up paying a big chunk of bills given the prevalence of high-deductible health plans and high coinsurance charges could shop around for cost-effective care.
The devil will be in the details of how the final rules read. It will not be a magic bullet. The called-for price transparency would only apply to employees of a hospital; many doctors and medical technicians who work at a hospital are in fact independent contractors, who wouldn’t be covered.
Moreover, it’s one thing to comparison shop for the best deal on a television or car. But it’s less clear if consumers will be motivated to shop around (or negotiate) for the best deal for medical care, or if we’re most concerned with the care-provider with the best reputation.
Disclaimer: the content presented in this article are for informational purposes only, and is not, and must not be considered tax, investment, legal, accounting or financial planning advice, nor a recommendation as to a specific course of action. Investors should consult all available information, including fund prospectuses, and consult with appropriate tax, investment, accounting, legal, and accounting professionals, as appropriate, before making any investment or utilizing any financial planning strategy.