The healthcare industry operates in a nebulous space of conflicting jurisdictions and regulations. It has learned the value of lobbying Congress, the White House, State Governments and regulators. While it’s easy to find fault in these practices, the industry is rationally responding to political pressures and incentives. Government laws, regulations, and reimbursement (payment) practices incentivize political lobbying, sometimes at consumer expense.
White House comments on healthcare and medical billing - May 9, 2019
Part of the problem is that negotiations between the industry and government programs like Medicare take place behind closed doors. In this environment, industry lobbyists work hard to influence elected officials and legislation. Unfortunately, consumers are usually not present when these powerful interests negotiate some of the most important, intimate aspects of our lives.
President Obama initially included greater transparency in the Affordable Care Act (ACA/Obamacare). The industry objected the reformers sacrificed transparency to secure their support. As usual, the negotiations and final agreements were cemented away from public scrutiny.
President Trump took steps last week to unravel some of these agreements by proposing legislation to increase pricing transparency in medical services and prescription drugs. He also proposed regulations to prevent abusive billing practices and expressed support for broader prescription drug importation[1]. Specifically, the Administration’s regulatory and legislative policies targets four industry practices:
Greater price transparency for medical services – This is a core principle of free market competition. How can consumers make informed decisions on services and providers without clear pricing information?[2]
Greater prescription drug pricing transparency – Pharmaceutical companies use a complicated system of pricing, incentives, coupons, and other tactics to promote sales and protect profit margins. Consumers have been kept in the dark when it comes to prescription drug costs and the availability of less expensive alternatives
Reduced drug importation barriers – The Federal government has prevented State governments, drugstores, and patients from importing lower priced prescription drugs. The impacts on individual patients can be dramatic. A disabled woman I know was prescribed drugs costing over two-thousand dollars per month, more than two-thirds her monthly income. She began buying her medicines through Canada Pharmacy at an 85% discount. The President’s decision to back State importation of prescription drugs and the FDA’s unstated policy of allowing patients to import medicines for personal use should stimulate price competition. Historically, greater competition results in significantly lower costs[3].
Elimination of the In-Out-of-Network Two-Step – Insurance companies lower their costs by negotiating rates with health service providers, including hospitals. Their contracts specify how much they will pay for doctors, nurses, specialists, etc. It stands to reason that if we go to an in-network hospital, our charges will reflect those negotiated by our insurance company – Not necessarily! Hospitals frequently hire out of network doctors, who are free to charge higher rates. Guess who pays the difference? Patients do. It happened to me and I got stuck with thousands in unexpected, uncovered charges. The President’s initiative should protect patients from these practices.
The President’s announcements will disrupt some agreements negotiated by his predecessor and the healthcare industry. We should expect lobbyists to descend on Congress to stop or at least weaken his legislative proposals. This President relishes a public fight, so this round of lobbying will be more transparent than usual. Greater transparency will make it more difficult for elected officials to protect the industry at consumer expense. Stay tuned for the fireworks.
Image references
White House image in the public domain
References
[1] President Donald J. Trump wants to protect patients and their families from surprise billing, White House, May 9, 2019, https://www.whitehouse.gov/briefings-statements/president-donald-j-trump-wants-protect-patients-families-surprise-billing/
[2] Stephanie Armour, White House wants patients to know health-care practices up front, May 15, 2019, Wall Street Journal, https://www.wsj.com/articles/white-house-pushes-for-more-transparency-on-health-care-prices-11557945220
[3] Tammy Luhby, Trump bucks his own party again. This time is on importing drugs from Canada, May 15, 2019, CNN, https://www.cnn.com/2019/05/15/politics/trump-drug-importation-florida/index.html