In 2021, a federal rule came into effect that requires hospitals to post prices so that patients can know what they are being charged for their medical services. In 2019, President Trump issued executive order 13877 to “increase the transparency of health care price and quality information on negotiated rates and for common or shoppable items and services.”This directs hospitals to post commonly accessed services in an easily readable format as well as provide patients with access to a machine-readable comprehensive list of all charges. Hospitals can be fined if they do not comply.
Initial noncompliance with the rule has triggered federal sanctions against hospitals as well as activating state laws to add additional teeth to regulations aimed at empowering patients with price transparency. In 2022, Colorado state Rep. Patrick Neville (R-District 45) passed legislation to do just that. HB22 limits the ability of hospitals to collect medical debt if they are not in compliance with federal price transparency laws.
In Ohio, state Rep. Ron Ferguson (R-District 96) recently introduced similar legislation. House Bill 49 would codify federal price transparency laws at the state level, while providing additional sanctions if hospitals do not follow.
If hospitals don’t properly post their pricing, Rep. Ferguson said that his bill “prohibits hospitals from referring, assigning or selling medical debt to debt collectors. It prohibits hospitals from accessing the state court system to obtain judgment for an outstanding medical debt. It prohibits hospitals from filing negative credit reports against patients for outstanding medical bills.”
Legislators in a similar position to Ferguson are likely responding to complaints from constituents that their medical bills are causing financial stress and bankruptcy. According to a 2022 report from the Consumer Financial Protection Bureau, Americans owed $88 billion in outstanding medical debt, accounting for 58 percent of all third-party debt collection. Medical debt contributes to the majority of all personal bankruptcies according to a three-year study of post Obamacare pre-pandemic years (2016 to 2019).
Hospital debt disproportionately impacts low and middle-income earners who are less likely to have health insurance. A recent study published in The Wall Street Journal found that 21 percent of hospitals billed cash-paying patients at the highest rate for the majority of services when compared to bills paid through third-party insurance.
Rapid changes in hospital networks and affiliations have caused skyrocketing debt through “surprise billing,” which causes patients to receive out-of-network bills. For example, a patient may undergo surgery in an in-network facility, but unknowingly be treated by an out-of-network anesthesiologist. The “No Surprises Act” has responded to this effort, but several states are also proposing additional protections against surprise billing.
Hospitals emerged from the pandemic with the confidence that they are finally able to transition back to “normal” patient care. They are doing so, however, without the federal funding that’s been keeping the doors open for the past three years during COVID-19.
Hospitals struggled to comply with price posting as the transparency law took effect. Systems struggled with the technical realities of sharing costs, their pricing complexity, and the history around not sharing patient and plan-specific pricing arrangements that had been traditionally regarded as “trade secrets.”
The Center for Medicare and Medicaid Services (CMS) found that only 27 percent of hospitals were complying with the new posting mandates in the first year of the mandate. CMS then began issuing correction letters and assessing fines for noncompliance. CMS also notes that almost all flagged hospitals have corrected deficiencies. Some hospitals have, however, begun to suffer stiff penalties and public disclosure of fines. Agency leaders now report that the second year of price transparency has gone much smoother, with 70 percent of hospitals in compliance.
Bringing health care prices out of the dark and into the sunlight is helping to protect the consumer. Policy makers should, however, consider the unintended consequences that can turn that sunlight into sunburn. The Mercatus Center’s “do no harm” call for balance and caution in applying mandated pricing would be an excellent place to start for any legislator looking to help constituents through new sunlight laws.
The following resources provide additional information about medical price transparency
“Ohio bill would require hospitals to post prices and limit collections if they don’t” https://www.statenews.org/government-politics/2023-03-03/ohio-bill-would-require-hospitals-to-post-prices-and-limit-collections-if-they-dont Jo Ingles of Statehouse News details Ohio’s new bill aimed at codifying federal transparency rules for hospitals.
“Price transparency in healthcare, apply with caution” https://www.mercatus.org/research/research-papers/price-transparency-healthcare-apply-caution Robert Graboyes and Jessica McBirney of the Mercatus Center provide a favorable and balanced approach to cost control through public pricing.
“Price transparency will lower healthcare costs” https://www.texaspolicy.com/price-transparency-will-lower-health-care-costs/embed/#?secret=Mw3kQEgje8 Kevin Roberts, Ph.D. and Brooke Rollins of the Texas Public Policy Foundation provide additional support for the need to control costs through empowering patients.
“Hospital price transparency, feds suggest more aggressive steps could be coming” https://www.chiefhealthcareexecutive.com/view/hospital-price-transparency-feds-suggest-more-aggressive-steps-could-be-coming Ron Southwick writes in Chief Healthcare Executive about the possibility of tougher sanctions for hospitals who don’t comply with transparency laws.
“Hospital price transparency: progress and commitment to achieving its potential” https://www.healthaffairs.org/content/forefront/hospital-price-transparency-progress-and-commitment-achieving-its-potential Meena Seshamani and Douglas Jacobs provide robust support for transparency in medicine for Health Affairs
“Medical bankruptcy still common despite the Affordable care Act” https://ajph.aphapublications.org/doi/abs/10.2105/AJPH.2018.304901 The American Public Health Association details the prevalence of financial problems and bankruptcy for those with hospital debt.
“Medical debt burden in the United States” https://files.consumerfinance.gov/f/documents/cfpb_medical-debt-burden-in-the-united-states_report_2022-03.pdf Consumer Financial Protection Bureau’s Comprehensive review of indebtedness and financial impacts on US patients.
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