Over the past few weeks, we saw what the future of American health care could look like. It’s okay if you missed it — there was no big announcement, nothing was repealed, and no bills were signed. Instead, a series of developments within the Trump administration and Congress pulled back the curtain to give us a glimpse of a better health care system that emphasizes competition, price transparency, and patient autonomy.
It started on March 5, when Secretary of Health and Human Services Alex Azar outlined his vision for “the value-based transformation of our entire health care system.” Azar declared our health care system “unsustainable,” invoking his own experience to prove this point.
Like nearly 40 percent of Americans, Azar is enrolled in a high-deductible health plan, which requires patients to pay for a significant amount of their health services out of pocket before their insurance kicks in. In theory, this is supposed to incentivize patients to find the best value for their money — but in practice, it often leads to frustration, as Azar came to discover.
After his doctor ordered a routine test, Azar attempted to find out what it would cost. After initially being told that information was unavailable, he discovered it would be $5,500. Reeling from sticker shock, he did some digging and found out he could receive the same test elsewhere for just $550.
“A series of developments... pulled back the curtain to give us a glimpse of a better health care system that emphasizes competition, price transparency, and patient autonomy.”
If it was this difficult for Azar — a former pharmaceutical executive — to “shop” for health care, he noted, it must be downright impossible for someone who isn’t a health care expert. His proposed solution to this problem: the creation of a “consumer market when it comes to healthcare,” driven by the notion that “you ought to have the right to know what a healthcare service will cost — and what it will really cost — before you get that service.”
Believe it or not, this simple idea has the potential to solve some of our biggest health care problems — and it points to what’s causing them. As premiums continue to rise under the Affordable Care Act, Americans will continue to enroll in high-deductible plans, which will increase their out-of-pocket costs for everything from MRIs to prescription drugs.
However, as these patients try to shop for value, they will more often than not arrive at the same unfortunate conclusion: the American health care system is designed to be profitable for the middlemen. So long as insurers and pharmacy benefit managers (PBMs) obscure prices to the point where the top ranking health official in the nation can barely understand them, “value” is nothing but a dream.
For example: a week after Azar’s speech, a study published in the Journal of the American Medical Association (JAMA) found that 23 percent of prescriptions filled with insurance would have cost less if the customer had simply paid with cash. Of course, no one would willingly pay $130 for a drug if they knew they could just as easily pay $18 — which is why the middlemen take every step to ensure they never know.
Insurers and PBMs routinely write “gag clauses” into their contracts with pharmacies, prohibiting pharmacists from telling customers that paying out of pocket would save them money. It should come as no surprise that the JAMA study also found these so-called “overpayments” netted the middlemen $135 million in 2013.
Fortunately, Azar isn’t the only one who thinks you ought to have a right to know what a health care service will cost: a few days after the report was released, a bipartisan group of senators led by Susan Collins (R-Maine) introduced a bill that would prohibit gag clauses. And, in a speechdelivered days after Azar’s, FDA Commissioner Scott Gottlieb chided insurers and PBMs for their “Kabuki drug-pricing constructs.”
Imagine what American health care could look like in 10 years if every reform proposed over these past few weeks had taken effect. Perhaps, with encouragement from HHS, someone would develop an app that lets you compare the true cost of health services in your area. With gag clauses gone, it could also compare the list prices for your prescriptions at local pharmacies.
If you had a high-deductible plan, the ability to actually shop for value in a competitive market would let you realize the savings potential of your plan. Even going to the doctor would be easier if you could access all of your medical data on an app like the one currently being developed by the White House’s MyHealthEData Initiative, which CMS Administrator Seema Verma announced the same week as Azar and Gottlieb’s speeches.
The reforms introduced over the past few weeks aren’t perfect, and they’re not going to cure every ailment besetting American health care. But taken together, they send a clear signal that administration and members of Congress from both parties understand the need to make health care operate like the rest of our economy. Taken together, they represent a significant step toward a health-care system that favors competition over monopoly, transparency over confusion, and patients over profits.
This piece originally appeared at The Hill
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Tim Rice is project manager for health policy at the Manhattan Institute.
This piece originally appeared in The Hill