Put prices on the shelf: A simple prescription to reduce the cost of healthcare

Every day, Americans buy gas, groceries, and household essentials knowing the price upfront and knowing it applies equally to everyone. Competition benefits the customer. People compare options and choose what best fits their budget. Sellers have to keep prices reasonable or risk losing business.

Healthcare is a glaring exception.

Two people can walk into the same hospital for the same MRI or surgical procedure and pay wildly different prices — not because of quality, but because insurers negotiate separate, opaque rates with each health system. Prices can vary two- or three-fold across hospitals in the same city, with no reliable way for patients or employers to easily compare them. These rates are negotiated behind closed doors, benefiting insurers and health systems while leaving employers and patients uninformed. The lack of a standard, clear approach to present prices to consumers is a big reason why healthcare costs keep rising.

The good news is that lawmakers can fix this broken market with a straightforward rule.

Require each hospital and care provider to post a single commercial (private insurance) price for each care location, expressed as a simple multiple of the price Medicare pays.

Medicare already has a known price for thousands of services. Every hospital and healthcare provider would choose how much more than Medicare it wants to charge people with private insurance. That chosen level would be public and apply to everyone with commercial insurance receiving care at that location — no hidden side deals or payment carveouts.

Standardizing the presentation of prices as a percentage of what Medicare pays would allow patients and employers to compare prices and the relative cost of services. This new system would finally create real competition on price. Employers could steer members to high-value providers through tiered benefit design, and patients could finally make care decisions with price in mind. Billions of dollars in wasted administrative overhead could be eliminated. For the first time, hospitals and other providers that innovate, streamline operations, and deliver great care at lower cost will attract more patients. This action would usher in a new era of competition among hospitals and health systems — on both price and quality — and result in dramatic reductions in the prices we pay for health care without restricting access to the best doctors and hospitals

We already require clear and understandable prices be published on nearly everything we buy. Healthcare should not be the exception. Requiring healthcare providers to post a single, transparent commercial price – expressed as a multiple of Medicare – would give employers and patients a clear way to compare options, drive down prices through competition, and cut massive administrative waste.

It’s time to put healthcare prices on the shelf. Employers and patients deserve nothing less.

Shawn Gremminger is president and CEO of the National Alliance of Healthcare Purchaser Coalitions. Shane Cerone is president and CEO Kada Health.