New Federal Rule Aimed At Creating Health Care Cost Transparency Might Not Do Much

Jan 2, 2019

Starting January 1, a new federal rule is requiring hospitals to publish online their official charges for different medical services, like diagnostic tests or surgeries.

The Centers for Medicare and Medicaid Services said this policy change will increase cost transparency for patients, especially those, "surprised by out-of-network bills for physicians, such as anesthesiologists and radiologists, who provide services at in-network hospitals, and by facility fees and physician fees for emergency room visits."

But these rule changes are unlikely to help most people, said Carnegie Mellon University health care economist Martin Gaynor. In-network consumers rarely pay the whole list price for a service beccause health insurers pick up a portion of the cost after negotiating service prices with hospitals. Due to those behind-closed-doors negotiations, patients have a hard time predicting their care costs or shopping around for the best deal.

“[List price] information could actually be misleading,” said Gaynor. “In that sense, we could be moving in the wrong direction.”

That’s because hospitals with high list prices might also negotiate very reasonable bills with insurers, and hospitals with low list prices might still charge patients and their insurance for the full amount of a service.

“What CMS is having the hospitals make public is not going to tell people very much about how much things are really going to cost,” said Gaynor. “And it certainly won’t tell people much of anything about how much they might be on the hook for.”

Gaynor says what would really benefit patients are competitive health care markets, where people can easily choose from multiple service providers.