Price Transparency Works Better When Hospitals Obey the Law and Patients Have Incentives

P atients and policymakers across the political spectrum agree that we should know health-care prices before we receive care. In fact, the federal government requires hospitals to publish their prices so patients can know how much care will cost. But according to a brand-new report from Patient Rights Advocate, 75 percent of hospitals are not obeying the law. That means millions of patients can’t compare prices for their care before arriving at the hospital.

The Trump and Biden administrations both promoted price transparency through the CMS transparency rule and the No Surprises Act, but HHS is dragging its feet on enforcement, and hospitals that refuse to comply have faced only minimal penalties. As a result, many hospitals consistently fail to share their prices. And even when prices are available, most patients still have little incentive to interact with pricing data because of the way health insurance covers most of the cost-sharing in common preventive care and post-deductible medical bills.

Why does this matter? Imagine a grocery store without price tags, where the clerks tell you to fill your cart, and you’ll get a bill in the mail later. And if that’s not odd enough, what if the clerk told you someone else will pay for your order, but a month later, you received a $500 bill for a bundle of bananas because your HR department prefers Dole to Chiquita? Unfortunately, this is precisely how our health-care system works.

This strange system of health care wouldn’t exist if prices were relatively constant from one health-care provider to another. But that’s not the case. Prices for identical procedures can vary by as much as 1,600 percent in the same market. One study even found major price variation for CT scans, ranging from $134 to $4,065, in the exact same hospital.

But insurance does not usually pass these higher costs on to patients at the point of care. Instead, patients face higher premiums or increased cost-sharing requirements in the future; so patients who find a lower-cost option, or even negotiate for a cash price, may not save money or, worse, may face higher costs themselves.

That’s why price transparency alone isn’t enough. Patients need incentives to shop for better prices to save themselves money. The Cicero Institute has proposed and been advocating the Patient’s Right to Save policy reform to do just that. It takes price-transparency laws to the next level by rewarding patients who find high-quality care at a lower price.

Right now, if a patient finds a lower-price X-ray at an imaging center down the street from the hospital, the patient can’t go there unless the insurer includes the imaging center in its network. Patient’s Right to Save frees patients to visit any provider whose prices beat the insured rate and gives those patients deductible credit for the price they pay for care.

Similarly, dialysis centers can provide treatment for a fraction of a hospital’s cost if a patient will pay cash. But their insurance company won’t pay, even if the patient has exceeded their deductible or out-of-pocket maximum for the year. That’s why Patient’s Right to Save lets patients get in-network credit and share the cost savings with their insurer.

Some state policy-makers are already leading in this area. Senator Shamp from Arizona sponsored S.B. 1603, which adds Arizona-specific penalties when hospitals violate the federal transparency rule to ensure that Arizonans can see the price of their care.

In Tennessee, Speaker Sexton and Senator McNally introduced H.B. 1213 and S.B. 1392, which direct health insurers to split savings with patients who find more affordable out-of-pocket prices for their own health care. Not only does this plan reward patients who take the time to find the best prices — as stated earlier — it also saves the insurance company money, too.

America needs more policy champions willing to reward patients who seek out the best services and to tear down the barriers that keep patients from knowing the price and cost of their care.

Health-care costs and hidden prices have plagued our system for years. Patients should not have to take out a second mortgage to pay for medical bills, and they need to know the price of their care. It’s time to add the missing pieces to price transparency and provider pricing accountability by giving patients the right to save.

Jonathan Wolfson is the chief legal officer and policy director at The Cicero Institute. Tanner Aliff is The Cicero Institute‘s health-care policy manager.