President Trump’s Welcome Embrace of Healthcare Price Transparency

Will Flanders, Research Director

Fear of surprise medical bills is a dominant concern for millions of Americans. A 2018 poll by the Kaiser Family Foundation found that 67 percent of Americans live in fear of a medical bill they will not be able to afford, and many Americans even forgo care because of the cost. As Democratic presidential candidates offer solutions that involve greater government intervention, the Trump Administration announced a broad rule Friday that, when enacted in 2021, would inject greater market forces into the healthcare industry. As a result, the research suggests consumers can expect lower healthcare prices.

What Is It?

The new Trump administration rule would require health insurance companies and healthcare providers to disclose the final, out-the-door prices that patients are likely to pay. This would represent a sea-change in the health insurance industry. The negotiated rates between healthcare providers and insurers are generally treated like state secrets. The information made public are called “chargemasters,” and they bear little resemblance to what healthcare consumers actually pay. The current system often leaves consumers in the dark until the day a bill arrives.

Why Does It Matter?

Information about prices is important because, as Nobel Prize-winning free market economist Milton Friedman noted, prices are a central component of a free market system. If consumers can view and understand healthcare prices ahead of time, consumers will have the ability to “shop around” for the best combination of quality and price. While shopping for healthcare may not be possible when it comes to emergency care, there are all sorts of medical procedures — such as a knee replacement or long term cancer treatment — that consumers deserve the opportunity to shop and choose the best care at the best price.

What Does the Research Show?

Fortunately, we don’t have to rely on economic theory to make these claims. Two studies have taken advantage of variation between states in the extent to which they already enforce price transparency to see if has, in fact, made a meaningful impact on consumers. A 2019 study by a University of Michigan scholar found that price transparency laws in New Hampshire — which has been at the forefront of this movement — lowered patient spending by about 4.3% from 2007 to 2011, resulting in $7.9 million in savings to patients. A first-of-its-kind national study by WILL found that states with better transparency laws reduced the number of people who could not access healthcare due to cost by about 7%. By moving forward with price transparency nationwide, the Trump administration is working towards a day when all Americans can enjoy options and savings.

A Step in Right Direction

Price transparency changes are by no means a silver bullet. The problems that plague America’s healthcare system are far-reaching and longstanding. But it does represent an alternative vision for the future of American healthcare. One that looks to the free market, that engine of innovation that continues to increase quality and lower costs, and away from the wholesale government takeover proposed by Democratic candidates like Elizabeth Warren and Bernie Sanders.