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Transparency in Health Care: Pros and Cons

In July, the Trump administration proposed
an initiative requiring greater transparency in health care pricing. Specifically,
the proposal would require hospitals to publish prices negotiated with insurers
for individual services. However, studies have shown that consumers seldom use
this type of information to shop for lower prices, presumably because their
insurance pays for a large portion of the expense. For people who might be inclined
to shop, it’s also unlikely they would — or could — do so in an emergency.

Insurers fear that such a policy
could potentially lead to higher hospitals costs as institutions begin
monitoring what their competitors are charging.1

While the federal government
continues to explore options to mandate affordability in the health care
industry, much of the financial burden still falls on consumers. It can be
especially difficult for those who would like to retire before age 65 — the
age at which one qualifies for Medicare benefits. If you’re looking for ideas
on how you can bridge that gap, please give us a call. We may be able to help
you develop a strategy.

Speaking of Medicare, one of the Affordable
Care Act’s cost-cutting test programs asked hospitals to bundle the Medicare
cost of treating a specific condition, such as a knee or hip replacement. Among
hospitals required to participate, about half saw savings by bundling the cost
of end-to-end services from surgical hospitalization to physical therapy and
recovery. While a roughly 50% success rate yielding about 5% comparative
savings may be considered a good result, the bundling concept may only work for
certain conditions and procedures. The Trump administration has expanded the
concept of bundled payments but has done so on a voluntary, rather than
mandatory, basis.2

Researchers from the Washington (State)
Health Alliance studied that state’s health care expenditures by looking at
spending on 47 specific tests and services. In 2018, the group reported that
more than a third of the money spent on those 47 tests or services went to
unnecessary care.3 If that is the case in Washington state, or
across the country, whose responsibility is it to consider how to control health
care costs?

While the idea of some form of
universal health care continues to be debated and will likely be a political
issue throughout the 2020 election year, the key components to consider are how
to achieve lower costs and higher quality outcomes. By addressing the problem
of unnecessary care and expenses, some argue that it’s possible any cost
savings generated by a more efficient health care industry could be funneled
into other aspects of the economy, thus driving growth.4

Content prepared by Kara Stefan

1 Knowledge@Wharton. July 2, 2019. “Will Price
Transparency in Health Care Lower Costs or Backfire?” Accessed Aug. 12, 2019.

2 Knowledge@Wharton. May 21, 2018. “Can Bundled Payments
Help Control Health Care Costs?” Accessed Aug. 12, 2019.

3 Marshall Allen. NPR. Feb. 1, 2018. “Unnecessary
Medical Care: More Common Than You Might Imagine.” Accessed Aug. 12, 2019.

4 Insurance News Net. April 26, 2019. “Econometer: Would
Universal Health Care Help The U.S. Economy?” Accessed Aug. 12, 2019.

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