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Our Opinion: Online price lists a first step toward health care reform

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Past and prospective hospital patients will have an extra reason to celebrate when the clock strikes midnight and the date changes from Dec. 31 to Jan. 1.

A Centers for Medicare and Medicaid Services rule enacted in April requires every American hospital to publish its standard price list online in 2019. While that won’t make scheduling a surgery as simple as ordering a pizza, it’s an important first step in bringing price transparency to the notoriously opaque and byzantine health care bureaucracy.

The figures you’ll see aren’t likely to correlate with those on your hospital bill even if you’re uninsured and paying out of pocket. That’s because hospital price schedules, called chargemasters, generally contain the kind of inflated base costs that no one really pays. It’s akin to the manufacturer’s sticker price for a new car before rebates, discounts and dealer incentives are added.

“The list prices are so high that the vast majority of hospitals don’t even try to collect list prices from uninsured patients,” Benedic Ippolito of the American Enterprise Institute told the Journal-News of Middletown, Ohio.

Those prices sometimes rear their ugly heads, however, when an insured patient visits an out-of-network hospital or clinic. Those health care providers may charge you the difference between what your insurance company pays and its full list price, a practice known as balance billing.

Federal regulations already require hospitals to make prices available, the Associated Press notes, but the April rule ensures that the information will be placed online “in machine-readable format that can be easily processed by computers.”

We wouldn’t be surprised if that leads to a cottage industry of comparison websites that break down the data and allow patients to see how much a common procedure could cost from providers within a 50-mile, 100-mile or 300-mile radius of their home address. Without the prices that hospitals charge insurers, that information may have little real-world value. But it could still nudge health care closer to the world of free-market price competition.

Perhaps insurance companies can use the public data as leverage to reduce costs for their in-network patients. Lower costs, in theory, would then lead to lower premiums.

Patients could augment the chargemaster data dump by anonymously revealing what they and their insurers paid in the same way that websites like Glassdoor and PayScale aggregate average salary information to give job-seekers an estimate of the pay range for their position within a company, industry and region.

James C. Capretta, a scholar who holds the Milton Friedman Chair at the American Enterprise Institute, wrote in May that the insurer-as-broker system keeps health care costs artificially high.

“Price transparency does not exist today because medical care isn’t bought and sold in a typical market,” Capretta explains. “Because hospitals and physicians get so little of their revenue directly from consumers, they have no need to compete on price, and thus no need to make meaningful prices publicly available. Patients paid directly for only 11 percent of the services provided to them in 2016.”

Dale Folwell, North Carolina’s elected state treasurer, wants to enlist each government worker and retiree on the state health plan in the effort to push providers toward lower prices. In a symbolic but meaningful change, he redesigned enrollees’ insurance cards to bear the message: “Paid for by you and taxpayers like you.” In doing so, he deputized everyone on the state’s plan as a watchdog on the lookout for inflation, waste and fraud.

No one expects doctors and nurses to work for free or hospitals to compromise quality in a race to the bottom on price. But when true costs are clear as mud, it’s crystal clear that a whole lot of middlemen have found ways to wedge themselves between physician and patient and extract a tidy profit.

Health and Human Services Secretary Alex Azar cites price transparency and cost competition as key planks in his platform to make health care more affordable.

“America’s health care system has to change, and President Trump’s administration recognizes that,” Azar said in a prepared statement. “This payment proposal takes important steps toward a Medicare system that puts patients in charge of their care and allows them to receive the quality and price information needed to drive competition and increase value.”

Azar’s vowed to “disrupt our existing system” of health care, and every patient stuck with a barrage of bills for basic procedures knows it needs some serious disruption. We hope he is successful.

Online price lists won’t fix health care overnight, but as the calendars change to 2019, patients will have more information available at their fingertips than they did the year before. That merits a champagne toast.

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