A recent Center for Medicare and Medicaid Services proposal weakens a federal hospital price transparency rule that took effect in January 2021 by entrenching and expanding hospitals’ use of cost estimates instead of actual prices.
The 2024 Outpatient Prospective Payment System proposal fails to close a loophole in the price transparency rule that allows hospital estimates. It also expands their use by requiring them for hospital price disclosures displayed as algorithms or formulas.
Only actual hospital prices, displayed as dollars and cents, not estimates, formulas, or algorithms, protect patients from outrageous bills and hold hospitals accountable for overcharges, errors, and fraud. Accepting these substitutes instead of actual prices undermines broader efforts to make hospital price transparency a reality for American patients and healthcare consumers.
Policymakers can usher in a pro-consumer healthcare marketplace that significantly lowers costs by eliminating estimates, formulas, and algorithms in the final CMS order or in future rulemaking.
The vast majority of American hospitals offer cost estimator tools, which skirt the spirit but not the letter of the price transparency rule. Unfortunately, estimates do nothing to prevent final hospital bills that are far higher. Estimates are especially problematic in healthcare given the well-documented wide price variations of ten times or more for the same care, even at the same hospital.
For example, the price of a C-section at one Northern California hospital ranges from $6,200 to $60,600. A price estimate that is an average of such ranges provides healthcare consumers with no financial certainty. The lowest estimate may turn out to be the highest price on the final bill. It is impossible to know what prices are even inside the black box of estimates.
For instance, Dani Yeungling, a patient in South Carolina, received a $1,400 estimate from a local hospital for a breast biopsy. But her actual bill was $8,424, $5,170 of which she owed out of pocket.
In addition, formulas and algorithms obscure actual prices. Anyone can read real prices, but formulas and algorithms are complicated and require math that many consumers can’t perform. Formulas and algorithms necessitate potentially expensive middlemen to interpret the data, implementing another barrier to accessing prices before care.
Estimates and other price substitutes are faux transparency. They are just more pricing games from hospitals. They allow hospitals to continue blinding patients to prices, then blindsiding them with final bills that are far higher. In contrast, real transparency offers consumers actual, upfront prices, including in-network and out-of-network rates and itemized claims payment receipts, allowing auditability and accountability.
Only actual prices that are machine and human-readable empower consumers to choose care at affordable prices with peace of mind that the final bill will match the quoted price. Patients need actual prices to defend themselves against predatory hospital billing practices such as high-interest loans, wage garnishments, and home liens.
Real prices will improve healthcare access and equity by providing financial certainty to the nearly two-thirds of Americans who delay or avoid care for fear of financial ruin. It’s no surprise 88% of registered voters believe hospitals should be required to post all actual prices, not estimates, in advance of planned care.
Employers and unions will then be able to spot wide price variations for the same care, steer employees to affordable options, and share savings in the form of higher wages and lower premiums.
Consumers would never accept price estimates in any other part of the economy. Imagine shopping for your groceries or a new car like this. We shouldn’t tolerate estimates or other price substitutes like those entrenched by the flawed OPPS rule in healthcare either.