Healthcare Policy Analysis

Reference & Education

  • Author Winnie Melda
  • Published December 24, 2018
  • Word count 2,292

Introduction

Health care price transparency policy is a discussion that comprehensively focuses on enabling the patient to have access to information about their out of pocket health care costs. However, the focus is the narrow thereby necessitating inclusion of other audiences that include physicians, employers, health plans, and policymakers. Each of the audiences has different needs and uses for price information about the healthcare. The increase in the price transparency can reduce healthcare spending in the United States. For example, the country can save up to $100 billion over the next decade if it could undertake three select interventions. However, it is worth to note that most of the anticipated savings result from availing the price information to the physicians and the employers according to a recent study.

Based on the existing and modest impact of plan-based price transparency tools, demanding that all the private plans avail personalized out of pocket price data to all the enrollees would lead to a reduction in total health spending by over $15 billion in the next ten years. $15 billion is a significant amount of dollar. However, it is less than a tenth of a percentage of the $40 trillion of the total anticipated healthcare spending over the same period. Contrastingly, using the state all-payer claims databases to collect and report prices specific to the hospital might lead to a reduction in spending by $60 billion in the next decade.

The impacts of price transparency depend largely on the intended audience, the context of decision-making, and the presentation of the prices. The impact can be amplified if the target audiences can act on the information. Dictating prices may not be sufficient to control spending without other changes in healthcare financing. The impact of price transparency can also be amplified by moving from fee-for-service payments that rewards healthcare providers for volume to payment methods that leaves providers at risk for spending for care or certain patient populations. Price transparency alone may not transform the healthcare system. However, it can play the required role in bringing effective reforms.

The State of Play of Price Transparency in Healthcare

Studies and policy experts have shown that health spending in the United States is inappropriately high while at the same time the healthcare system is inefficient. Most of the analysts have shown that high prices in the medical care result from spending problem. However, the patients under private insurance should have very little to worry about because insurance coverage protects them. History has shown that patients seeking transparency in price information would have to pass through the thickets of secrecy and technicalities surrounding healthcare prices. Knowledge of questionable healthcare pricing practices has continued to grow with the diminishing of comprehensiveness of private healthcare coverage, and patients continued shouldering most of the cost of care directly through increased cost sharing (Neel, 2013).

Today, people are discussing health spending with more questions related to medical prices more than in the past. An increasing body research has made it clear that prices received by providers from the private health plans have a wide variation within and across the markets. However, the wide variations in the unit prices for particular services are the tip of the iceberg because clinicians have different practice and treatment courses for similar medical conditions. Visiting a clinician who recommends an aggressive course of medical care beyond the normal guidelines may raise the costs.

Price transparency means to readily availing price data to enable the clients to do a comparison shopping. The discussion of price transparency in healthcare mainly focuses on the patients and availing them with comprehensive information on out-of-pocket costs. However, the focus is narrow. Shopping for healthcare is an involving process comprising five key audiences that are the patients, physicians, employers, health plans, and policymakers. Each of the audiences has different requirements and uses for price information. This analysis with giving descriptions of different audiences needs for price information and evaluates the extent the extent of the meeting of the needs. It also explores the options for the policy for promoting the price transparency. It also quantifies three samples of various possible of interventions of policy related to price transparency and how they impact the healthcare spending over the next decade (Laugesen & Glied, 2011).

Patient-Targeted Price Transparency

Patients play a greater role in the process of healthcare shopping such as the health plan in which to enroll, the primary specialist from which to seek care, and in some cases the treatment to receive and where. The above decisions have different relevance at each decision point. During selection of the plan, useful price data include the premium the enrollee pays and the level and range of out-of-pocket payment they are likely to be charged at the point of care such as copayments, coinsurance, and applicable deductibles. The Affordable Care Act (ACA) has elements of price transparency because it requires health plans available on exchanges to have standardized benefits and cost-sharing tiers (bronze, silver, gold, or premium).

Patients should have the information about the out-of-pocket cost of visiting a physician before they select a physician. However, the detailed price of seeing the physician depends on the practice of the physicians and the recommendations of the treatments. Patients would know the efficiency of the physicians. The out-of-pocket payments of visiting a physician are less than the costs of follow-up services recommended by the physicians. Before patients selecting treatment path and from where to receive it, they should know the out-of-pockets costs for different treatments options and the providers (Wall, 2013).

Comparing shopping by patients could reduce healthcare spending in two ways. The first way is the direct impact of some patients moving from higher-price to lower-price providers. The other way is the strategic impact on high-priced providers. It high-priced providers starts losing patient volume they may change their price patterns. Greater price transparency is essential because patients are being requested to be responsible for their healthcare decision-making. The ACA has built on this trend. Most of the plans in the bronze tier have high deductibles whereas plans in the silver are the most popular.

The role of patients’ decision-making is essential and growing, but it has several limits. Although high-deductible plans have become common, enrollees are still paying more than 15 percent of total spending out-of-pocket of the point of medical care thereby limiting their incentives to shop on price. Much of the payment goes to services such as emergency care and other necessary services that cannot be shopped. Secondly, patients and providers do not have knowledge of the services required for choosing a provider thereby complicating the comparison of shopping. Thirdly, most patients reject the idea of price shopping for health care and insist on getting the best healthcare regardless of the costs.

Physician-Targeted Price Transparency

The physician’s pen is the most expensive piece of medical technology according to many people. Physicians earn a little income compared to what the overall healthcare gets. However, their ordering behavior has a great impact on the delivery of healthcare and spending trends. Patients require the expertise and judgment of physicians to guide their treatment, hospitals, specialists, and other medical facilities. The decision making of the physician is a representation of the sophisticated combination of professional ethics, financial self-interest, guesswork, and the rule of thumb. According to the history, both ethical and financial considerations encourage expensive patterns healthcare. Physicians have the capability of using price information in guiding the patterns towards higher-value treatment choices and healthcare providers. Physicians would not do so without embracing frugality as a value. Furthermore, they require data and information on the cost of the healthcare system of treatments they order and cost differences between different treatment options. They would also have ideal information about the patients’ out-of-pocket fulfillment (Ubel, Abernethy, & Zafar, 2013).

Professional societies have been in the frontline to encourage physicians to become cost-conscious. Most physicians accept such responsibilities because according to them, it is part of the work. Others gain motivation to have this information in responding constructively to reformations in patients’ payment methods such as bundling of the episode and Accountable Care Organizations (ACOs) that risk the physician financially for the costs of care. Most insurance firms with contracts with ACOs consider delivering real-time claims data as important in ensuring the success of these payment approaches.

Many physicians and patients reject the idea that price shopping makes up their role because of principle and time constraints. Also, when physicians are ordering services, they do not know costs and their impact on patients. Financial incentives for the shared-saving arrangements have the capabilities to change this trend. However, cultural change in the medical practice is required.

Employer and Health Plan-Targeted Price Transparency

Employers play a significant role in providing medical coverage to privately insured people in the United States under the age of 65 years. They are also critical players in the process of healthcare shopping. Large employers consider buying healthcare in bulk for their employees as important in giving them essential potential coverage over their health plans and providers. However, others argue that employers fail in using their buying leverage and finance an inefficient and dysfunctional healthcare market.

Employers leave the task of price negotiation and contracting providers to health plans. The negotiated prices have a significant impact on the premiums that employers pay. Recent studies have shown that negotiated prices should be scrutinized closely. The prices negotiated between private health plans, and the providers are more than the prices paid by public payers and international benchmarks. There are also big variations in private prices between markets, physician groups, and hospitals (Albaek, Mollgaard, & Overgaard, 1997).

Competition among private health plans should encourage price negotiations with healthcare providers. However, negotiated prices are reflections of a tangled web of imperfections in the market that include:

• Power of the market provider where health plans are unable to negotiate competitive healthcare prices

• Power of the health plan market where dominant health plans have the power to maintain share even if they do not enter negotiations of competitive prices

• Historical carryovers where standardized yearly updates perpetuate some healthcare providers

• Mixed allegiances where medical providers started some health plans and still have the ties.

• Perverse incentives where plans can satisfy minimum loss ratios through payment of high prices and high claims costs.

In general, private health plans hope there will be no conflicts between them and the providers, and each of the plans requires negotiating prices that enable it to compete with other private health plans even if both are paying high prices. There are variations at how the employees’ access and use negotiated price information. At one end are the purchasers who are self-funded and have access to their enrollees’ comprehensive claim records. At the other end are the small employers who buy fully insured health plans. Therefore, the lack access to their claim data and, therefore, no information about their carriers’ negotiated prices. Between the two ends are the mid-sized employers who are self-funded, but they do not have adequate resources for their data analysis and are, therefore, dependent on carriers and brokers.

Policy-Targeted Price Transparency

There are disagreements on the nature of healthcare systems dysfunction and the roles of both private and public sectors. Highlighting these debates are the questions about the healthcare prices. Do public and private plans pay different prices? Do some hospitals have too much market influence? Do some health plans have excessive market influence? The healthcare market in the United States sees public and private payers apply different approaches to the establishment of medical services prices. Private plans apply market-based approach and enter into negotiations on prices and other terms of contracts with providers. Public plans such as Medicare and Medicaid apply administered pricing where they set prices using statutory formulas and regulations at either state or federal levels. Public plans offer uniform price schedules within local healthcare markets. In the current terms, the total health spending in the United States is split equally between the two pricing arrangements (Ginsburg, 2007).

Policymakers require price data at an aggregate level for the purpose of comparing prices with the costs of production of medical services and evaluate the operation of public and private mechanisms for price determination. If they are not working properly, the policymakers may decide ways and means of supporting better price-setting either through competitive forces enhancement of price regulations. Price transparency has the capability to promote discussion at the level of policymaking about the organization and regulation healthcare market. However, some experts warn that publicizing price negotiations could bring about anti-competitive behavior depending on the circumstances.

Conclusion

This healthcare policy analysis focuses on various approaches to price transparency. It, therefore, leads to various broad conclusions. One of the conclusions is that the he reductions in healthcare spending are substantial regarding dollar. Secondly, there is a wide range of estimated impacts partly because there are no wide implementations of these interventions while others have not been evaluated. Thirdly, the impact of price transparency depends largely on the context of the price presentation. Price transparency can have a major effect only if it is joined with other movements within the health care financing.

References

Albaek, S., Mollgaard, P., & Overgaard, P. B. (1997). Government assisted oligopoly coordination? A concrete case. Journal of Industrial Economics, 45 (4), 345-367.

Ginsburg, P. B. (2007). Shopping for price in medical care. Home Affairs, 26 (2), 34-39.

Laugesen, M. J., & Glied, S. A. (2011). Higher fees paid to U.S. physicians drive higher spending for physician services compared to other countries. Home Affairs, 30 (9), 23- 37.

Neel, S. T. (2013). A role of physicians: An observation on cost amendments. American Journal of Preventive Medicine, 44 (1), 89-109.

Ubel, P. A., Abernethy, A. P., & Zafar, Y. S. (2013). Full disclosure: Out-of-pocket costs as side effects. New England Journal of Medicine, 369 (16), 102-123.

Wall, J. K. (2013). Doctors, as well as patients, in the dark about prices. Indianapolis Business Journal, 11 (2), 45-56.

Sherry Roberts is the author of this paper. A senior editor at Melda Research in nursing paper writing service if you need a similar paper you can place your order for a custom research paper from custom research paper writing.

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