Warren Buffett, CEO of Berkshire Hathaway, attends the 2019 annual shareholders meeting in Omaha, Nebraska, May 3, 2019. (Photo by Johannes EISELE / AFP)        (Photo credit should read JOHANNES EISELE/AFP/Getty Images)
Buffett on health care initiative: We'll do our best
01:34 - Source: CNN
CNN  — 

President Donald Trump has repeatedly taken aim at drug makers for contributing to the nation’s runaway health care spending.

Now he’s setting his sights on insurers, hospitals and other providers as a way to achieve one of his top promises – lowering costs for consumers.

The administration is considering requiring these players to disclose the rates they privately negotiate, an idea that has sparked a backlash from the influential industry.

The Department of Health & Human Services touched on the concept in a proposed rule released in March, noting that making such information public could drive health care prices down.

Now, the administration is preparing an executive order that could require greater disclosure of negotiated health prices, a move first reported by the Wall Street Journal.

Trump teased the effort earlier this month, saying that his administration plans to announce a new transparency effort in coming weeks.

“I think, in a way, it’s going to be as important as a healthcare bill,” he said in a press conference on surprise medical bills. “But this could be something that will have a tremendous impact … the numbers you’re talking about through transparency are tremendous.”

While the President and administration officials often say they want to reduce government regulation on businesses to unleash more economic power, they acknowledge it doesn’t mean hands off completely.

“We don’t have a competitive market because we are not requiring price transparency,” Seema Verma, administrator of the Centers for Medicare & Medicaid Services, told CNN. “That’s where the government has a role to play – in ensuring that we have a competitive free market and to make sure there’s a level playing field so providers can compete for patients on the basis of price and quality. That’s what we are trying to drive towards.”

Just how transparent health care prices should be, however, remains a point of contention. The executive order has been delayed by internal disputes over how aggressively to mandate disclosure, according to the Journal.

Asked what type of disclosure she is focused on, Verma said: “Those are some of the things we are grappling with internally. At the end of the day, we want patients to understand what they are going to pay in advance.”

Officials have already taken some initial steps to require drug makers and medical providers to release more cost information, though it has generally focused on the industry’s list prices rather than the negotiated rates or what consumers are actually billed. Some experts question how much this will actually achieve, especially, they say, since most Americans don’t shop when it comes to health care.

Earlier this month, Health Secretary Alex Azar announced that drug makers will have to start including the list price of any medication costing more than $35 for a month’s supply or usual course of treatment in their television ads. The effort is the first rule implemented from the administration’s blueprint to lower drug costs, which was released a year ago.

“Requiring the inclusion of drugs’ list prices in TV ads is the single most significant step any administration has taken toward a simple commitment: American patients deserve to know the prices of the healthcare they receive,” Azar said.

And starting this year, the Centers for Medicare & Medicaid Services is requiring hospitals to post their standard charges for their services on their websites in a format that can be imported into a computer system. It plans to do more in this arena to allow patients to more easily compare prices, as well as quality, said Verma, who believes consumers are interested in prices – especially when they are still subject to deductibles – and do have to power to influence what providers charge.

Lawmakers on both sides of the aisle in Congress are also working together in hopes of increasing awareness of pricing and of the behind the scenes tactics that keep costs high.

So far, however, the administration’s efforts will likely do little to help consumers or to rein in health care spending, some experts said. Most people don’t pay the list price for drugs or the full cost for hospital services so this information will not tell them much about what they are on the hook for and could even dissuade them from pursuing care.

The majority of Americans have health insurance, so what they pay is typically based on the deals the carriers work out with the health care providers and on their particular policies. What consumers are more interested in is their out-of-pocket costs for a medication or medical service.

That’s why policy experts were more encouraged by a new rule that would require insurers in the Medicare Part D drug program to provide doctors with real-time information on patients’ prescription benefits, including what a particular medication would cost them.

Still, even when consumers have tools to give them pricing information, they don’t really shop around for health care, said Lynn Quincy, director of Altarum Healthcare Value Hub, a non-profit research firm. And they don’t have the muscle to get doctors and hospitals to lower their charges.

“The people with the power to put pressure on providers is not the patient – that’s just really a ridiculous notion,” Quincy said. “But the health plan who is at the point of contracting with providers for the next year, they’re the ones who can say whether or not a given rate is out of line with the market.”

Releasing details about the negotiated rates between specific insurers and hospitals, however, could reveal which providers are charging high prices. That could prompt insurers – and large employers – to try to get a better deal.

For instance, California Public Employees’ Retirement System, which manages health benefits for more than 1.5 million members and their families, saw its spending drop after it set a maximum reimbursement level of $30,000 for hip and knee replacements in 2011, Quincy said. Patients, who had to foot the bill for any amount above this reference price, flocked to lower-priced hospitals, prompting some costlier institutions to lower their charges.

But some worry that more information could actually lead to higher prices. If the secret negotiations in the drug supply chain became public, for example, it might prompt those who charge less to demand more, said Ian Spatz, a senior adviser at Manatt Health, a consulting firm.

“It’s great politics, but bad public health policy and bad economics,” Spatz said.

Health care industry associations are already lining up to quash the idea of disclosing contracted rates, which they argue could cause more harm than good. The insurers’ trade group pointed to a 2015 Federal Trade Commission blog post that said too much transparency can interfere with competition in the medical market.

“If every contract and every negotiated rate were public, no doctor or hospital would want to be paid the lowest rate – they would all be motivated to demand higher payments,” said Matt Eyles, CEO of America’s Health Insurance Plans.

The main hospital lobbying organization also opposes this type of disclosure, saying that patients are more interested in their out-of-pocket costs.

“Disclosing negotiated rates between insurers and hospitals could undermine the choices available in the private market,” Tom Nickels, executive vice president at the American Hospital Association said in March when the Centers for Medicare & Medicaid Services first broached the idea. “While we support transparency, this approach misses the mark.”