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New Rule Forces Upfront Disclosure of Health Care Costs

The Trump administration on Thursday finalized a health care transparency rule requiring insurers to disclose up front the real cost of common medical procedures and tests.

WASHINGTON (CN) — The Trump administration on Thursday finalized a health care transparency rule requiring insurers to disclose up front the real cost of common medical procedures and tests.

The Department of Health and Human Services said the rule means all insurance companies and self-insured health plans must provide personalized and easily understandable information on health care costs. Insurers are also required to disclose how much they pay for specific services.

Insurers must have publicly available data on costs for certain procedures under their plans beginning on Jan. 1, 2022. By 2023, they must disclose cost-sharing details for 500 specified services and medical equipment. And by 2024, insurance companies must provide cost-sharing information for everything they cover.

The disclosure requirements will support a shopping tool made available by the insurers or plans that gives patients an accurate out-of-pocket estimate for their treatment, along with drug and medical equipment pricing and the cost of any other item or service associated with their care.

Pricing information would come before patients make their final choice on treatments, which is largely the opposite of what currently happens in the health care system.  

The Department of Health and Human Services says tech companies can create more price comparison tools that will further spur competition using the data that insurers are required to disclose. The new rule will also boost transparency by opening the door for unprecedented research and analysis on health care prices, according to the Trump administration.

HHS Secretary Alex Azar said in a statement Thursday that the change “may be the single most pro-patient, pro-consumer reform American healthcare has ever seen.”

“We want every American to be able to work with their doctor to decide on the healthcare that makes sense for them, and those conversations can’t take place in a shadowy system where prices are hidden,” Azar said. “With more than 70 percent of the most costly healthcare services being shoppable, Americans will have vastly more control over their care, delivering on the president’s vision of better care, lower costs, and more choice.”

Howard Forman, a practicing diagnostic radiologist who is also faculty director of finance at Yale University, said in an email that Azar’s hyperbole is not helpful but any move towards greater transparency is a good thing.

“But in an era of surprise billing that is often surrounding emergency encounters, this would do little to nothing to reduce the financial challenges faced by beneficiaries,” Forman wrote. “And the complexity of medical encounters makes it very difficult, even with access to co-pay amounts, etc., to know the precise costs that could be encountered in a typical complex visit.”

He added, “I think this probably has little to no immediate effect but might open the doors to some decision-making tools for patients that would be helpful.”

The new rule and a related one aiming to force hospitals into publicly disclosing the costs of their procedures, tests, shots and other treatments were first announced in November 2019, five months after President Trump signed an executive order aimed at transparency in hospital costs.  

The American Hospital Association said immediately after the announcement that it would challenge the administration on the basis that it was overreaching its authority.

“Instead of helping patients know their out-of-pocket costs, this rule will introduce widespread confusion, accelerate anticompetitive behavior among health insurers, and stymie innovations in value-based care delivery,” the group said.

A federal judge in Washington ruled in June that the association’s legal challenge failed for a myriad of reasons. U.S. District Judge Carl Nichols, a Trump appointee, noted in his opinion that HHS had not definitely proven that the changes would increase competition, but ultimately sided with the government and found the rule is constitutional.   

“CMS [Centers for Medicare & Medicaid Services] concluded that similar measures in Maine and New Hampshire have resulted in increased competition,” the judge wrote. “While those examples do not prove that the final rule will be successful, the agency reasonably concluded they are more persuasive than a decades-old case study involving Danish ready-mixed concrete contracts and research predating the transparency measures promulgated at the state level.”

In a statement Thursday, CMS Administrator Seema Verma said Trump is solving longstanding problems in the health care system through the rule change.  

“Price transparency puts patients in control and forces competition on the basis of cost and quality which can rein in the high cost of care,” she said.

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