Runaway prices are devaluing workers’ paychecks and reducing Americans’ standards of living. Consumer prices are rising at a 41-year high of 8.5%, and wholesale prices that businesses pay are increasing at a record 11.2%.
According to a recent Gallup survey, people cite the high cost of living as by far their biggest economic problem. One way to address this inflation is by tackling its longest-running source: healthcare overcharging.
Since 2000, U.S. healthcare spending per capita has nearly tripled, rising more than twice as fast as inflation. The United States spent 19.7% of its gross domestic product on healthcare in 2020, approximately twice the developed-world average, with no better health outcomes. The average annual family premium for employer-sponsored health insurance was $22,221 in 2021 — 61% more than in 2010. Nearly two-thirds of the public avoid healthcare due to a fear of financial ruin.
Healthcare price transparency can reverse these cost trends by empowering us with the information we need to identify the best care at the best prices. Armed with actual, upfront prices, people can avoid healthcare overcharging and reduce their healthcare bills through choice and competition.
Under the status quo, hospitals, health insurers, and countless middle players blind consumers to prices and then blindside them with outrageous bills they often would never have agreed to if actual prices were known. Johns Hopkins University research estimates American hospitals charge, on average, seven times their cost of care. Existing law gives consumers the right to see real hospital prices, including discounted cash and all negotiated rates by insurance and employer plan. Hospitals sued in 2020 to block the hospital price transparency rule from taking effect on Jan. 1, 2021, but federal courts ruled against them.
However, hospitals continue to break the law and hide their prices to profiteer off of patients’ misery. According to a recent PatientRightsAdvocate report, only 14.3% of hospitals nationwide are complying with the rule. Most are not publishing their negotiated rates by payer and plan as required by law. By keeping consumers in the dark, hospitals can overcharge, upcode, and even commit billing fraud without accountability. Approximately 3 in 4 medical bills include errors.
Emerging price disclosures from compliant hospitals reinforce why transparency is needed immediately. They reveal how healthcare costs vary wildly for the same care, even at the same hospital. The Wall Street Journal reports a C-section at the same California hospital ranges from $6,200 to $60,600, depending on the payer. Contrast these extreme price variations with the declining inflation-adjusted prices in the corners of the healthcare market, such as plastic surgery and Lasik, where price transparency and competitive markets exist.
Innovative employers, who have been able to access real healthcare prices, have saved 30% to 50% on their healthcare costs by steering their employees to price-transparent, less-expensive alternatives. These employers are sharing their savings with employees in the form of lower premiums and higher wages, helping workers in today’s high-inflation environment.
For instance, the Osceola School District in central Florida has reduced its annual healthcare claims costs by nearly 30%, from $60 million to $44 million, in just two years by partnering with price transparent providers. These savings have resulted in teacher pay increases and more money for classrooms. When all hospitals comply with the law and post their real prices, many more employers can follow this district’s lead. When actual prices are known, no employer will tolerate paying 10 times more than their competitor for the same care.
Another federal price transparency order called the Transparency in Coverage rule takes effect in July. It requires health insurers to share historical claims data and their actual prices so consumers can know prices wherever they receive care. Employers, who provide health coverage for most people, can survey this data to avoid price-gouging providers systemwide in favor of those that offer a fair market price.
While historic inflation burdens everyday Americans, the coming healthcare price transparency revolution will significantly alleviate its effects. The Biden administration cannot allow the healthcare industrial complex to halt this consumer power shift by continuing to obfuscate its actual prices in violation of the law.
Cynthia A. Fisher is a life-science entrepreneur, founder and chairman of PatientRightsAdvocate.org, and founder and former CEO of ViaCord.
