Jeanne Schulte Scott

OK, readers, take note: The healthcare buzzword for the rest of this year is transparency.

Transparency in both quality reporting and pricing for healthcare services may well be the key to the success, or failure, of President Bush's effort to make affordable health care available to more Americans. Without it, consumer-directed health care would never work-and so the president's hopes for an "ownership society" in health care would be dashed.

"Instead of allowing government [to set prices], which is essentially the case for the great majority of medical procedures, the role of the government should be to make transparent the pricing of these procedures."

-Scott Atlas, MD, senior fellow at the Hoover Institution and Stanford University School of Medicine professor, supporting price transparency by physicians

Industry Groups: No Easy Consensus

Conservative think tanks such as the Hoover Institution, the Heritage Foundation, and the Cato Institute have been beating the bandwagon in support of consumer-directed healthcare proposals. To a group, they have argued for a broadening of the public's access to healthcare information, especially with regard to pricing and-perhaps more important-quality.

This support for transparency is driving many healthcare community leaders up the wall. The American Medical Association finds itself at odds with many of its traditional conservative allies over the issue. Instead, the AMA has been forced to consider compromises and other face-saving ways to minimize the potential damage to physician prerogatives.

The AMA argues that physicians have been whipsawed by the megamergers in the health insurance industry. Faced with the market power of these new insurance behemoths, physicians feel they are forced to sign up with the biggest health plan in town-take it or leave it. And the big health plans see no problem in publishing the physicians' fees.

Meanwhile, it seems unlikely that the big hospitals' pricing will be so easily accessible. And it's not just hospital pricing that needs to be transparent, says the AMA, but also pricing for things such as health technology, equipment, supplies, drugs, office materials, and rent. So, the AMA argues, to focus just on physician fees doesn't go far enough. Unless all prices for health care, not just physician fees, are made open and available to patients, physicians will be singled out to face consumer pressure. The AMA says that the enemy is the third-party payer system, government and commercial, arguing that payers are trying to maximize their profits (even the government in holding down costs) while paying physicians as little as they can get away with.  To which the payers reply that the AMA's motivation is for its members to pay as little as they have to while making as much for themselves as they can.

Congress: The Usual Partisan Split

The Republican-controlled House Energy and Commerce Subcommittee on Health has been holding hearings on the potential effects of increased price transparency for healthcare providers. Supporters said that increased price transparency will help consumers make healthcare decisions and lead to reduced costs. However, leading Democrats have countered that increased price transparency by itself will not address the issues of high healthcare costs and the uninsured. They suggest that individuals enrolled in group health plans already receive lower prices than those who purchase health care on their own. Pricing transparency, they argue, might actually end up shifting more healthcare costs to individuals.

Bush's Payer Power Plan

Nonetheless, the pressure to post physician and hospital pricing is building, and the Bush administration has posted online the rates that Medicare pays for common medical procedures. The published rates are part of a larger initiative, which the administration calls its "Payer Power" plan, to disclose price and quality data from hospitals. The administration says this plan will allow consumers to compare prices at different hospitals and decrease costs.

In the next few months, the government also will post online rates negotiated by the Defense Department, the Federal Employees Health Benefits Program, and private health plans in six communities. Advocates for the poor say these published prices will exert pressure on hospitals to give uninsured patients the same discounts that people with insurance enjoy.

Bush's plan raises the hackles at the American Hospital Association, which says that Medicare is already paying less than the cost of delivering most hospital services. Making third-party negotiated insurance rates widely available, suggests the AHA, will simply drive artificially set government-controlled prices lower, exacerbating hospital losses. Hospitals are far less capable, suggests the AHA, than physicians in resisting artificial price pressures.

"Instead of a marketplace, we have a system that prevents patients from seeing how much their healthcare services actually cost. The healthcare system hides prices, and it blurs quality."

-Joe Barton, R-Texas,  chairman of the House Energy and Commerce Committee, during hearings of the committee into healthcare pricing and quality transparency.

Undeterred by the AHA's arguments, the Bush administration is pushing ahead. According to Mike Leavitt, secretary of the Department of Health and Human Services, price and quality data will soon be available for each hospital and physician. The initiative aims to publish the total costs of procedures, although insured patients pay a fraction of the costs posted on the Medicare website.

HHS also will analyze six metropolitan markets, after which Leavitt will ask the markets' largest employers to join the federal government's program to try to influence healthcare providers to provide pricing and quality information. Healthcare providers and insurers would have to disclose the quality and prices of their care for 20 of the most common medical procedures to conduct business with the participating employers. The program, which aims to promote health savings accounts, also will try to persuade providers to adopt health IT.

Bush administration officials have repeatedly urged hospitals and physician groups to move quickly to give consumers more data. The administration has made it abundantly clear that it will push for legislation requiring healthcare providers to supply the information if they do not take it upon themselves to do so. Congress, too, appears to be receptive to such legislation, and appears not to be in the mood to listen to arguments from the provider industry. It will move quickly, if the industry does not.

"Consumers' experiences with markets for self-pay services ... have been romanticized and do not offer much encouragement as a model of effective shopping for healthcare services."

-Paul Ginsburg, president of the Center for Studying Health System Change, suggesting that "provider-only" pricing transparency doesn't go far enough.

The Bottom Line ...

... is that President Bush has staked his healthcare domestic policy future on the success of consumer-directed health savings accounts. Without real pricing and quality consumer information readily available to the purchaser of healthcare services, however, that effort is doomed to failure. Congressional Republicans and Democrats alike, eager for a leg up in this fall's elections, will be testing the waters over this issue. Expect to hear more about it in the coming months.

Jeanne Schulte Scott, JD, is a healthcare lobbyist in Washington, D.C. (

Publication Date: Saturday, July 01, 2006

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