Price transparency is a clear win for consumers

In a victory for consumers, D.C. District Court Judge Carl Nichol just upheld a Trump administration executive order requiring doctors, hospitals, and insurance companies to be transparent about the prices they negotiate for healthcare services. Previously, those prices were closely held secrets. The lack of transparency contributed to the relative dysfunction of the healthcare market.

Consumers were unable to shop around for care. Patients and third-party observers couldn’t question why one hospital was charging twice as much for a given procedure as its competitor across town. By giving consumers and payers more information, the Trump administration’s price transparency order will yield a more efficient healthcare market, with lower prices and higher-quality services.

President Trump first announced the executive order last fall. It required hospitals to publicly post their negotiated prices in a user-friendly format. Providers and insurers, meanwhile, had to disclose estimated out-of-pocket costs to patients before they receive care.The American Hospital Association and other hospital groups sued to block the order, claiming it violated the First Amendment and would confuse patients. As the District Court’s ruling makes clear, such lawsuits have no basis in truth. The president’s order will empower patients to take control of their healthcare spending. And when patients have the necessary tools to seek out cost-effective care, everyone in the system benefits.

Consider the case of the Surgery Center of Oklahoma. On the facility’s website, potential patients can find a menu with the price of every service offered. Due to the ease of navigating the cost of care and comparatively low prices, patients have flocked to the center for their healthcare needs. These patients include a California resident who needed his patellar tendon repaired. In his home state, he would have paid approximately $30,000 for the surgery. Instead, he traveled to the Surgery Center of Oklahoma to have the operation, where it carried a price of $5,700. Such massive price discrepancies are routine in the U.S. healthcare system.

On average, Americans can expect a nearly 300 percent difference between the lowest and highest sticker prices for individual healthcare services. Fortunately, under the recently upheld executive order, patients will finally be on more equal footing with providers. To attract business, hospitals and more conventional healthcare providers will have to compete against lower-cost retail health and urgent care clinics. Such market competition will yield lower prices and better value throughout the healthcare system.

Critics of President Trump’s executive order don’t have as much faith in the average consumer. Many argue that patients are not well-informed enough to weigh pricing discrepancies across providers — or that they don’t want the responsibility for making decisions about their care.But consumers themselves beg to differ.

Recent polling from the Foundation for Government Accountability found that 82 percent of voters want to know the cost of healthcare services before they actually receive them. Patients want to shop around, whether to choose the most affordable provider or the one that’s best for their particular health issue. It’s never made sense that consumers could instantly compare the prices of dozens of televisions — but could not get a straight answer about how much their knee replacement would cost. The D.C. District Court’s ruling recognizes that fact — and will allow the Trump administration’s executive order to deliver on its promise for consumers.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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