Price data published by CMS: 'Payer Power Plan'

• Abstract
• Purpose of health policy or idea
• Characteristics of this policy
• Political and economic background
• Purpose and process analysis
• Expected outcome
• References

Featured in half-yearly report: G-politik in Industrieländern 7/8

Abstract

On June 1, 2006, the Centers for Medicare & Medicaid Services (CMS) published hospital price data on the internet for 30 common elective procedures such as hernia operations and hip replacement. Published prices include the sum of Medicare payments for the DRG, including allocated costs for teaching, disproportionate share, capital, and outlier payments for all cases.

Purpose of health policy or idea

On June 1, 2006, Centers for Medicare & Medicaid Services (CMS) published hospital price data on the internet for 30 common elective procedures such as hernia operations and hip replacement. Published prices include the sum of Medicare payments for the DRG, including allocated costs for teaching,  disproportionate share, capital, and outlier payments for all cases.  Also included in Medicare payments are co-payments and deductibles paid by patients.The data were collated from Medicare claims information for fiscal year 2005. They show the interquartile range of what Medicare pays for each procedure by county and not by hospital. This does not give an indication of what those with private insurance or the uninsured might pay. 

The policy comes as part of a move to encourage price and quality transparency across health care aimed at helping consumers, providers and payers to make more informed health care decisions. This fits with the current US administration's drive towards increased consumerism in health care which it hopes will make care more affordable and accessible.

Critics have questioned the degree to which consumerism can in fact lead to lower costs where the causes of increased costs are diverse and include many factors which are not influenced by consumers.

Main points

Main objectives

To increase price data availability for consumers in order that they might put pressure on providers to reduce costs.

Type of incentives

Incentivize competition via increased transparency of price information.

Groups affected

Providers, consumers, payers (insurance carriers), purchasers (employers purchasing insurance for workers)

Innovationsgrad	traditionell		innovativ
Kontroversität	unumstritten		kontrovers
Strukturelle Wirkung	marginal		fundamental
Medienpräsenz	sehr gering		sehr hoch
Übertragbarkeit	sehr systemabhängig		systemneutral

In the past access to price data of any sort by the public has been limited. Awareness of the prices paid for medical care has therefore been low, in particular amongst the insured. Especially in an emergency situation, uninsured patients have been unaware of the likely cost of their care until after the event when they receive a bill. Promoting awareness of prices in health care is therefore an innovation. 

Because the CMS data is published only on a county basis it is likely to have very little impact and is not particularly controversial. Were CMS to publish data at hospital or doctor level this would be more controversial, and have some impact.

Political and economic background

Consumer directed health care has been central to health care reform under the Bush Administration. Government policy makers have recently turned to the consumer as a source of cost control, emphasizing personal responsibility with consumer choice. The Administration is pushing for hospitals and doctors to publish their own 'walk in' prices to all consumers, a move which they have suggested will eventually  be made mandatory via legislation (Bush 2006).

The publishing of price data by CMS is seen as a first step which sets a good example and provides some guidance to the uninsured or others negotiating with hospitals on the cost of their care. Under traditional insurance coverage the insurance company pays the provider directly and the patient is only aware of copayments and deductibles for which they are responsible. Other key Bush administration policies  such as increased provision of provider quality information and the promotion of high deductible health insurance plans (HDHPs) with Health Savings Accounts (HSAs) fall under the consumer directed health care banner alongside the publishing of price data.

Purpose and process analysis

Current Process Stages

	Idee	Pilotprojekt	Strategiepapier	Gesetzgebung	Umsetzung	Evaluation	Veränderung/Richtungswechsel
Implemented in this survey?

Origins of health policy idea

The idea that greater price transparency may encourage consumers to shop around, reducing costs over time is based on economic theory which suggests that better information facilitates competition which should lead prices to be reduced. HHS Secretary Michael O Leavitt has argued along these lines that "Once people get better information, they become better consumers of health care and that helps get health care costs down and quality of care up." 

International evidence: greater transparency lowered hospital charges in Singapore

The idea of using competition in some form in order to reduce costs or raise quality in health care is not new or unique to the U.S. A recent example comes from Singapore where the Ministry of Health in 2003 started to publicize the average size of medical bills including ward charges, doctors' professional fees, and all ancillary charges for common medical conditions by individual hospital. There, greater transparency did seem to achieve its expected result, an immediate drop in hospital charges for some of the conditions listed (Lim 2004 and 2005)

Impact of consumer directed health care on low-income earners

The use of competition in a context where individuals are both payers and recipients of care is however unusual amongst developed countries, in particular because of the ethical issues which arise; those with lower incomes are much more price sensitive and therefore more likely to cut back on necessary utilisation than those with higher incomes (Reinhardt 2006).

Small scale examples at the local level

Small scale examples of the publication of price data exist in the U.S. where insurers, employers, provider groups, commercial vendors, states or independent associations have provided such data (CMS 2006a). In some cases the data published covers individual providers and is therefore more detailed than the CMS data. However the number of providers is typically limited and the data may cover only expected out of pocket costs and not overall costs. An example is Minnesota where health insurers are increasingly publishing health care provider pricing data online. Minnesota-based PreferredOne provides cost ranges for hospitals and more specific pricing information for clinics and clinic groups on its Web site. For example, PreferredOne reports that the average clinic charges $138 to treat an ear infection, with prices ranging from $72 to $295. The tool also notes which clinics might have higher prices because they treat a larger volume of more seriously ill patients. Eugene Sako, PreferredOne's manager of product development, said the company does not publish the data to limit choices but to help consumers make informed decisions (Kaisernetwork 2005).

Initiators of idea/main actors

• Regierung

• Leistungserbringer

• Kostenträger

• Patienten, Verbraucher

Approach of idea

The approach of the idea is described as:
new:

Innovation or pilot project

Local level - See section "Origins of health policy idea"

Stakeholder positions

Opposition to the publication by CMS of the prices it pays for selected procedures by county is limited. The overarching policy of consumer-directed health care is much more controversial and has drawn more opposition. Leadership has come from the current U.S. administration and the Department of Health and Human Services, whose Secretary Michael O. Leavitt announced the policy in March 2006. In the following the positions of the main stakeholders are described in more detail.

Government: The government favours the publication of the total price of a given procedure. It hopes to encourage similar action by all hospitals and doctors and has indicated a future willingness to use legislation to these ends.

Providers: Provider organisation official statements have come out with qualified support, emphasising the importance of public-private partnership and the need for further research into what information consumers acutally want. For example, Tom Nickels, senior vice president of government relations at the American Hospital Association, said the information is "worth looking at, but it doesn't supplant the need to know what your co-insurance obligation is." He has also said that the federal government should focus on helping the uninsured obtain coverage rather than negotiating procedure costs. (AP/Albany Times Union, 6/2)

While the Bush administration wishes to make information available on the total price of care, the American Hospital Association is more supportive of the publication of out of pocket costs which it argues are more relevant to consumers. Reports in the media have characterised the AHA as being dragged by the administration 'kicking and screaming' to their position of qualified support. (Reichard 2006)

Patients / consumers: Patients paying out of pocket have usually had to pay higher prices than insurance carriers or Medicare would pay for the same care. It has been argued that the publication of prices paid by Medicare might give these individuals some increased leverage when negotiating with providers (Appleby 2006). However where their bargaining power as individuals remains very limited it is uncertain what benefit the increased information could bring. In addition, where quality varies by provider, patients need to compare this alongside prices in making their choices. Information about quality is starting to be produced but it is difficult for patients to assess and to trade against price.

Payers: Insurance carriers have an incentive to encourage their enrollees to shop around for a good deal from their health care providers. To this end large carriers are increasingly publishing some price data. Employers are being encouraged by the current US administration to require that insurers disclose prices on the most frequent medical procedures as a condition of doing business.

Actors and positions

Regierung
Bush Administration	sehr unterstützend		stark dagegen
Leistungserbringer
American Hospital Association	sehr unterstützend		stark dagegen
Federation of American Hospitals	sehr unterstützend		stark dagegen
Kostenträger
Insurance carriers	sehr unterstützend		stark dagegen
Employers	sehr unterstützend		stark dagegen
CMS	sehr unterstützend		stark dagegen
Patienten, Verbraucher
Patients paying out of pocket	sehr unterstützend		stark dagegen

Influences in policy making and legislation

The publication of price data by CMS on a county basis did not require legislation. Publication of Medicare price data on a hospital or doctor basis may also be possible without legislation but it would be politically more controversial.

Legislative outcome

n/a

Actors and influence

Regierung
Bush Administration	sehr groß		kein
Leistungserbringer
American Hospital Association	sehr groß		kein
Federation of American Hospitals	sehr groß		kein
Kostenträger
Insurance carriers	sehr groß		kein
Employers	sehr groß		kein
CMS	sehr groß		kein
Patienten, Verbraucher
Patients paying out of pocket	sehr groß		kein

Positions and Influences at a glance

Adoption and implementation

CMS published price data by county for 30 common procedures in June 2006 and plans to publish similar data for ambulatory surgery centers and for common outpatient and physician services in fall 2006. Hospitals are affected by the publication, in particular those in counties with few hospitals where the data give a more accurate picture of the position of individual providers. They are not active participants in the CMS publication. As CMS has acted unilaterally and are publishing data only by county they have met few obstacles and the publication has been enacted swiftly following announcement of the plans in March 2006.

Monitoring and evaluation

NA

Expected outcome

On its own, the policy of publishing Medicare hospital price data by county which CMS began in June is unlikely to have a noticeable effect on the U.S. health care system. Because prices are not given at a hospital or doctor level they will not facilitate use of the information as a tool to discriminate between providers on the basis of cost. It is possible  that the information could serve as a useful benchmark for those consumers who are purchasing care out -of-pocket or from an HSA, where they are involved in negotiations with a provider on the cost of their care, though this is debatable.

There are several reasons why increased information, even at provider level may not lead to competition and reduced prices as it does in markets for other goods and services. Hospitals vary in the quality of care they provide which means that consumers would not wish to choose only on the basis of price. They must also be informed about variation in quality and be able to trade off the two in a meaningful way in order to use price and quality information to their advantage. Transparency on quality is increasing alongside price transparency and this is seen by many as a positive development. An increasing proportion of patients are likely to use the data in deciding where to receive care and perhaps more importantly, transparency, in promoting peer comparison, is likely to motivate providers to improve quality and reduce prices. Despite this, some might argue that the impact of the policies is limited where much health care is purchased under conditions of emergency, pain or distress. It is likely that the areas in which price data at the provider level can be more useful in reducing costs will be limited to straightforward areas of care such as elective surgery and will exclude others such as care given in an emergency, for those with complex conditions or with comorbidities.    

Impact of this policy

Qualität

kaum Einfluss

starker Einfluss

Because the policy is limited to the publication of price data by county, the impact is likely to be limited. The publication of price data itself is unlikely to affect equity; however, the wider reforms which this policy is intended to support, that of consumer-directed healthcare, are likely to have the effect of making the system less equitable.

References

Sources of Information

Appleby, Julie. Medicare posts 30 Procedures' prices. USA Today, June 2, 2006. 

Bush, George President Discusses Health Care Initiatives. May 1st, 2006. Washington Hilton Hotel Washington, D.C. www.whitehouse.gov/news/releases/2006/05/20060501-5.html 

Centers for Medicare and Medicaid Services (2006a): Fact Sheet Helping Patients Get The Best Care For Their Needs. June 1, 2006. www.cms.hhs.gov/apps/media/press/release.asp?Counter=1872  

Centers for Medicare and Medicaid Services (2006b): Medicare Posts Hospital Payment Information. News release, June 1, 2006. www.hhs.gov/news/press/2006pres/20060601a.html  

Kaisernetwork: Minnesota Health Insurers Post Price Data Online to Meet Consumer Demand. Nov 9, 2005. www.kaisernetwork.org/daily_reports/rep_hpolicy_recent_rep.cfm?dr_cat=3&show=yes&dr_DateTime=11-09-05#33621  

Kaisernetwork: CQ HealthBeat Examines Bush Administration Plan To Improve Price Transparency; HealthGrades Offers Price Reports For A Fee. Mar 22, 2006. www.medicalnewstoday.com/medicalnews.php?newsid=39928  

Leavitt, Mike, Secretary of Health and Human Services, Remarks as Delivered, Commonwealth Club of California Washington, DC, March 14, 2006. 

Lim, Meng Kim: Transparency of Hospital Bills. Health Policy Monitor, October 2004. www.hpm.org/surveys/sg/a3/4

Lim, Meng Kim: Transparency of Hospital Bills. Health Policy Monitor, April 2005. www.hpm.org/surveys/sg/a5/3

Medical News Today: In Speech Before American Hospital Association, President Bush Discusses Rising Health Costs, Calls On Congress To Act. May 4, 2006. www.medicalnewstoday.com/medicalnews.php?newsid=42682 

Reichard, John. Medicare To Post Price Data on June 1 Under Transparency Plan. May 2, 2006. http://communityoncology.org/Default.aspx?tabid=82&ctl=Details&mid=404&ItemID=570 

Reinhardt, Uwe: Transcript from "Where are HSAs and High-Deductible Health Plans Headed?" Alliance For Health Reform and Kaiser Family Foundation, March 10, 2006. www.kaisernetwork.org/health_cast/uploaded_files/031006_alliance_HSA_transcript.pdf

Author/s and/or contributors to this survey

Emmi Poteliakhoff

Reviewed by Tony Shih

Empfohlene Zitierweise für diesen Online-Artikel:

Emmi Poteliakhoff. "Price data published by CMS: 'Payer Power Plan'". Health Policy Monitor, October 2006. Available at http://www.hpm.org/survey/us/c8/3