America heads closer to medical price transparency with new rule

It is official that health insurance companies will soon be mandated to disclose the real prices of their covered medical treatments and procedures. The new rule marks a huge step forward in medical price transparency and is estimated to assist over 200 million Americans.

Health and Human Services Secretary Alex Azar said that Americans should be “able to work with their doctor to decide on the health care that makes sense for them” and that “those conversations cannot take place in a shadowy system where prices are hidden.” He added that Americans will have “vastly more control over their care” with lower costs and more choices as promised by the president.

One upshot of the rule is no more surprise medical bills. Almost all health insurance companies will be mandated to disclose prices to enrollees for medical services and prescription drugs. They will have to post that information on an accessible and simple online public platform. This will allow consumers to access prices, including an estimate of their liability. The health insurance companies will also be mandated to disclose in network negotiated rates, or what they pay to practitioners, and allowed amounts paid to out of network doctors and other medical services.

The rule also covers the prices and uncovered costs of prescription drugs. Consumers will also be able to receive this information in paper form. The transparency coverage program will be rolled out over three years. During this period, the health insurance companies must make information on uncovered costs available for 500 medical items and services. They will have to make such information available for all medical items and services by the end of the three years.

This public data will be invaluable to consumers. It will also be useful to health policy researchers who examine the effects of different insurance benefit designs, provider payments, and delivery innovations on health care. This latest initiative comes as part of a broader initiative of the administration for reform of the system and medical price transparency. It follows the hospital price transparency rule that will start in January.

Markets for both health insurance and the delivery of medical services have been distorted for decades. It has led to rising costs, uneven care, and, most importantly, individuals and families unable to wield the kind of economic power they routinely exercise as consumers in other sectors of the economy.

Government policy, both at the federal and state level, has contributed to, and in some cases directly caused, these market distortions. Individuals and families have paid a high price in declining personal choice and competition, broken and concentrated markets, and mysterious and sometimes shocking medical bills.

Price transparency will not solve every problem in America’s health care markets. It will, however, provide some welcome relief for individuals and families, especially from the threat of surprise medical bills. More importantly, it will empower consumers to secure the best value for their health care dollars, and compel medical professionals to compete in delivering high quality medical care at competitive rates.

As Secretary of Labor Eugene Scalia has observed, “American workers in employer-sponsored health plans will now have access to real-time, personalized cost-sharing information that empowers them to shop and compare costs between specific providers before receiving care.” It is a refreshing change when federal officials promote, rather than restrict, the free market principles of consumer choice and competition.

Robert Moffit is a senior fellow in domestic policy at Heritage Foundation.