On January 1, New Jersey hospitals responded to guidelines from the Centers for Medicare and Medicaid Service (CMS) and posted healthcare pricing information on their websites for consumers to access. While this mandate is well-intentioned, a hospital’s pricing information alone is woefully insufficient for a consumer to make an educated decision. Simply put, the price a hospital charges is meaningless to most patients if they do not know how much their insurer will pay.
Indeed, the true cost is not only what hospitals charge, but what insurers agree to pay. For decades, insurance companies and providers have succeeded in keeping their rates hidden from consumers by using nondisclosure agreements and restrictive gag clauses in their contracts. In a volume-driven market, it is these unpublished rates that dictate co-pay amounts for the public and contribute to skyrocketing insurance premiums every year.
$458 or $56,000 for an appendectomy
In fact, in-network rates paid by insurers to providers can vary by as much as 300 percent today for the same procedure. According to a national study by George Washington University, a patient on a silver plan under the Affordable Care Act could be responsible for $458 or $56,000 for an appendectomy, depending on where the procedure takes place.
These rates are not a reflection of quality, patient safety or outcomes. In fact, many of the most cost-effective hospitals outrank the most expensive providers on these quality metrics. Rather, the negotiated insurance rates are often the result of a hospital system’s size and negotiating power in a volume-driven healthcare system. Insurance companies not only keep their reimbursement rates confidential, but they also impose a benefit design that often steers unsuspecting consumers to the most expensive systems.
No consistency in hospital billing
New Jersey consumers currently do not have enough information to determine how efficiently their healthcare dollars are being spent. Moreover, there is no consistency in how hospitals bill their patients. Every charge master posted by a provider today is unique to that provider, so consumers can’t even compare Hospital A to Hospital B. (A charge master is a list of items billable to a hospital patient or a patient’s health insurance provider.)
The Catalyst for Payment Reform, a group that ranks states based on their price transparency policies, gave 43 states, including New Jersey, an “F” grade on price transparency. While there are several tools publicly available to learn about the quality and safety of providers, information about costs and reimbursement rates are still complex and hidden from consumers.
Consumers deserve to know how they’re spending their healthcare dollars, and that means providing transparency in quality, safety, and costs in a publicly accessible format. You wouldn’t shop for a new car or other major purchase without knowing the price, so why is it acceptable that healthcare costs remain hidden from consumers?
Transparency for insurers too
Recent polls have shown that the majority of consumers support greater transparency in the healthcare market. A national poll conducted by the Robert Wood Johnson Foundation revealed that 69 percent of those surveyed want insurance companies to disclose what they pay physicians and hospitals for procedures. The New Jersey Hospital Association also conducted a poll that showed only 41 percent of participants with an in-patient hospital stay felt like the hospital was transparent on the expected costs of the stay.
If we want to effectively lower the cost of healthcare in New Jersey, we need transparency and consistency on both sides of the equation. Rates paid by insurers to each contracted provider should be published so New Jersey consumers can make educated decisions on how they spend their healthcare dollars. Medicare and Medicaid need to comply as well.
And requiring transparency for insurers will not only reduce healthcare costs for consumers, it will also save tax dollars when implemented in the state’s public health benefits plan. This month, the State Health Benefits Quality and Value Task Force released its recommendations to Gov. Phil Murphy and recognized the need for greater transparency and vendor accountability in the public health insurance plan.
When it comes to healthcare costs, do consumers really get what they pay for? This is an important question that healthcare leaders and policymakers must address as we look to lower healthcare costs in New Jersey.