CMS’ plan to stop requiring hospitals to report their median payer-specific negotiated charges with Medicare Advantage insurers is a win for hospitals.
Experts said that it’s an easy way for the Biden administration to reduce administrative work for providers without giving up much in price transparency. But it probably doesn’t say much about the Biden administration’s thoughts on price transparency, according to Avalere Health consultant Tom Kornfield.
“I wouldn’t read anything more into this than a push for some administrative simplicity,” Loren Adler, associate director of the USC-Brookings Schaeffer Initiative for Health Policy, said in an email.
Price transparency policies concerning Medicare Advantage rate information wouldn’t do much to affect healthcare costs or spending because Advantage plans pay nearly the same rates as Medicare fee-for-service with little variation within or across metro areas, experts said. According to a 2018 study, the average Advantage price per discharge across all hospital stays was $10,667 or nearly identical to the average Medicare fee-for-service price of $10,716.
Price transparency was central to the Trump administration’s healthcare agenda, as CMS included such requirements throughout its policies. And while there continues to be bipartisan support for greater transparency, many experts thought the Medicare Advantage requirements were misguided from the start.
“This was not a well-thought-out policy in the first place. It was really a waste of everybody’s time in the name of transparency,” Federation of American Hospitals CEO Chip Kahn said.
Hospitals strongly opposed the policy, in part, because Trump’s CMS didn’t do a comprehensive analysis of how a market-based pricing approach would affect the diagnosis-related group payment system or explain why it would be beneficial to the healthcare system as a whole, said Molly Smith, group vice president of policy for the American Hospital Association.
“CMS was really conflating market-based prices with costs,” she said.
Dan O’Neil, an independent healthcare consultant, said there was a strong ideological belief inside the Trump administration that Advantage plans must be getting better prices than traditional Medicare because they’re market-based.
“But the empirical data says the markets are not really doing anything different or better than Medicare Advantage. They’re taking the same prices. What’s the point of collecting the data when it’s just going to be the same as the number you already know?” he said.
While Advantage plans may offer improved care coordination and management, there’s little evidence they do better on hospital pricing. That’s mainly because Advantage plans are more tightly regulated than typical commercial health plans, which offer little protection against surprise billing. Medicare fee-for-service providers are more willing to accept similar rates from Advantage plans because there are fewer financial rewards to remaining out-of-network since they can’t effectively balance bill patients.
Hospitals are hopeful that the coming surprise billing regulations from CMS will allow the agency to pull back other price transparency requirements that don’t directly help consumers understand their financial obligations, Kahn and Smith said.
But O’Neil warned that CMS and states shouldn’t rely on patient disclosures about network status or pricing as their primary solution to surprise billing.
“It would suggest that regulators have not understood the problem, are not serious about solving it or have caved to lobbying pressure from the financially motivated actors who created the problem in the first place,” O’Neil said.
The Biden administration could simplify the Trump-era transparency rules since the hospital-facing and insurer-facing rules are somewhat duplicative of each other, Adler said.
“But I’d bet on them moving forward with some form of these all-payer transparency efforts,” he said.
Experts said it makes far more sense to focus price transparency efforts on commercial health plans since there’s much greater variation in the rates providers negotiate with them. That’s why they expect the Biden administration to largely uphold and enforce price transparency rules affecting hospitals’ negotiated rates with commercial health insurers. CMS recently published guidance, saying that insurers shouldn’t use special computer coding to block price information from appearing in search engine results.
“With all these other transparency efforts already out in the world, the case for a national all-payer claims database becomes even more clear-cut,” Adler said. “A national (all-payer claims database) could prove useful over time for identifying issues in the health care system and crafting reforms.”
And while the Biden administration will continue price transparency initiatives, they probably won’t drive its healthcare agenda, experts said. Biden’s administration is likely more willing than its predecessor to pursue other legislative or regulatory changes to rein in healthcare costs, including price setting.