President Joe Biden is reinforcing the need to follow an executive order from the Trump era that directs hospitals to disclose rates they privately negotiate with insurers. According to CNN, “A large number of hospitals have yet to comply with that historic rule, which went into effect January 1 and also requires them to provide in an online, searchable way the rates for 300 common services, such as X-rays, outpatient visits, Cesarean deliveries and lab tests.”
This is part of Biden’s efforts to stem the rising cost of hospitalization services that make hospital bills unaffordable for the average American and are based on broader principles embedded in his Executive Order on Promoting Competition in the American Economy, which states:
Hospital consolidation has left many areas, especially rural communities, without good options for convenient and affordable healthcare service. Thanks to unchecked mergers, the ten largest healthcare systems now control a quarter of the market. Since 2010, 138 rural hospitals have shuttered, including a high of 19 last year, in the middle of a healthcare crisis. Research shows that hospitals in consolidated markets charge far higher prices than hospitals in markets with several competitors.
The Biden administration is working with the Centers for Medicare and Medicaid Services and seeks to use the big stick of government to prevent hospitals from engaging in the deceptive practices that are associated with escalating prices.
As reported in The Hill, “A proposal released Monday by the Centers for Medicare and Medicaid Services would raise the maximum penalty to $2 million a year for large hospitals that don’t post online the secret prices they have negotiated with insurance companies for 300 common services and procedures that can be planned in advance. The proposal represents a sharp increase from the current maximum penalty of only $109,500 a year for large hospitals, which are those with more than 30 beds.”
HHS Secretary Xavier Becerra stated that “With today’s proposed rule, we are simply showing hospitals through stiffer penalties: Concealing the costs of services and procedures will not be tolerated by this administration.”
However helpful these efforts may be, they will likely fall short of addressing the multiple factors that cause the price of medical care to skyrocket. The Bipartisan Policy Center (BPC) released a report in 2012 that found structural and systemic flaws with our health-care system as a whole. Chief among these flaws is the very nature of health insurance. The report states, “Reimbursement under the fee-for-service (FFS) model generates a strong incentive to perform a high volume of tests and services, regardless of whether those services improve quality or contribute to a broader effort to manage care.”
Of course, there are others that disagree with this analysis. Stephen Kemble, M.D., former president of the Hawaiian medical Association and currently a member of the Hawaiian Health Authority Board, writes that “While there are certainly some doctors providing unnecessary procedures due to fee-for-service financial incentives, it is extremely unlikely that this is the root of our health care cost problem. The argument that fee-for-service incentives are the driver of excess health care cost is based on a fundamental misdiagnosis of the reasons for unsustainable cost escalation in U.S. health care.”
Instead, Kemble posits that there are two primary drivers of medical care inflation. First, a lack of doctors to treat patients, and second, a lack of access to medical care for a large portion of the American public. Yet, even Kemble finds flaws in our current FFS system, but warns us about the use of medical organizations as means to lower cost:
“Part of the problem is indeed the imbalance in pay between certain specialties and primary care, rooted in the flawed Medicare SGR physician fee schedule, and we do need to re-think how the money is distributed between “cognitive services” and procedures. Increased payment for primary care and care-coordination is part of the solution, but does not require shifting insurance risk onto doctors via HMOs or ACOs.”
So kudos to the Biden administration for taking a step in the right direction. However, as indicated by the BPC and Dr. Kemble, the bigger issues remain unresolved, and is making the patient ill.
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