Price Transparency Press Call Remarks by Administrator Seema Verma
Price Transparency Press Call Remarks by Administrator Seema Verma
(As prepared for delivery – October 29, 2020)
Price Transparency Press Call Remarks by Administrator Seema VermaToday’s price transparency announcement marks the culmination of four years of groundbreaking reforms. When I started as Administrator back in 2017, I worked with President Trump to set the commonsense goal of reducing health care costs. We set out to do so not by setting prices and taking over the health care system as had failed so often in the past, but by introducing free market principles – using competition to drive costs down.
From the first day the President took office, CMS pushed to empower patients to be value conscious healthcare consumers by making quality and cost data transparent.
We made price transparency one of our major strategic initiatives, and I’m grateful for the dedicated and talented CMS team that found the legal path forward to develop this rule and spearheaded efforts across the federal government to deliver price transparency to the American people. Years of work are paying off for American patients.
This effort has required President Trump to stand up to special interests, which for decades have enjoyed the luxury of a healthcare system that catered to their interests but left patients out in the cold – and in the dark.
So I want to thank President Trump for empowering us to disrupt this broken status quo by advancing quality and price transparency at levels never before seen.
CMS has redesigned the Medicare Plan Finder, brought quality transparency to the exchanges, launched Care Compare, an online provider quality comparison tool, required Part D plans to provide tools making drug pricing information available at the time of prescribing, and even introduced transparency to the Medicaid program through our Scorecard.
In 2018, CMS issued a rule requiring hospitals to post their chargemasters. This was our signal to the healthcare industry that we were serious about price transparency. Last year, CMS went further, requiring hospitals to publicly post their negotiated rates, or the prices insurers actually pay for services. This rule will go into effect on January 1, 2021.
The hospital transparency rule was a sea change by itself. But hospitals are just one part of the healthcare system. What a patient pays depends largely on their personal healthcare plan, where they are in their deductible, and other factors. Today’s final rule fills in those gaps and ushers in a new era of price transparency and patient empowerment in this country.
Under this policy, more than 200 million Americans will gain access to real-time, personalized price information, enabling them to know how much their care will cost before going in for treatment.
Self-insured employers across the country will also be able to use this data to make sure they’re getting the best deal possible for their employees.
Specifically, the rule requires most health plans, including plans offered in the individual market and by employers, to provide personalized information on cost-sharing through an internet-based shopping tool. This will allow plan participants to enjoy a cost estimate of the services they may receive.
This requirement will first apply to a list of the 500 most shoppable services, starting January 1, 2023, and exactly one year later, it will apply to every item and service. This will give patients a full view of what their expenses would be and allow them to compare costs between providers and services, so they can choose the one that offers the best value.
In addition to the shopping tool, the rule also requires that health plans make pricing information publically available through three data files starting on January 1, 2022. The first file will show the in-network price for all items and services and across all providers. The second file will show pricing for out-of-network providers. And the third file will advance drug pricing transparency by requiring the posting of in-network prices for all prescription drugs, as well as their historical net price, which takes into account any rebates or concessions that a health plan receives after the point of sale.
Making these data files publicly available will create incredible opportunities for detailed research studies and allow third-party developers and innovators to create new tools for patients to help them make better, more informed decisions.
Finally, starting in 2021, the rule makes it easier for certain types of health plans to encourage patients to shop for services from lower-cost, higher-value providers by sharing the savings with patients. The rule allows health plans to take credit for “shared savings” payments in their medical loss ratio calculations. This in turn would create incentives for health plans to encourage people to shop around for the best deal.
Price transparency, brought to fruition in this historic rule, represents the single-most consequential market-driven healthcare reform this administration has advanced – and perhaps the most consequential healthcare reform of any kind in decades. It represents a new era of patient empowerment, one capable of finally driving down America’s healthcare costs.
Healthcare is one of the most expensive purchases American families make, and they deserve to know their costs ahead of time. There isn’t a patient in America that wouldn’t want this information today, and the Trump Administration believes each and every one has a right to it. Today, we are making good on that right.
Special interests will complain that price information is proprietary. But this information is already available to patients in their Explanation of Benefits. We are simply requiring that it be made available before they get their care instead of after.
They’ll complain that transparency will take away negotiating power and increase health care prices. Don’t be fooled. This rule merely requires that health insurance companies share the same information as companies in virtually every other industry.
Such complaints are all about protecting the considerable profits special interests reap from business as usual. It’s disappointing, but hardly surprising, that they have shown such eagerness to protect their business model from the disruption our policies have brought.
In industry after industry, upfront pricing is standard business practice — and rightly so. That’s because it’s essential to an efficient and effective free market. It feeds the competitive forces that drive down prices and increase quality. Critics made similar spurious arguments in the 1950’s when car dealerships were required to show stickers with recommended retail prices, or in the 1980’s when de-regulation in the airline industry brought about price transparency, resulting in a 50 percent decline in ticket prices over 30 years.
The same economic principles apply in health care. When New Hampshire launched a website with health care prices for everyone with private insurance, prices for imaging services dropped, saving patients millions of dollars.
With the healthcare system now going in this new direction, it’s clear that this administration did not come into office looking merely to tinker around the edges; rather, led by a President not beholden to a calcified Washington status quo, we set out to make consequential, lasting changes to our healthcare system, ones that would wrest control from special interests and return it to patients. This rule does exactly that.