trump budget drug prices
Here's why drug prices are so high (2018)
01:45 - Source: CNN Business

Editor’s Note: Carrie Sheffield, a conservative commentator, is the founder of Bold, a digital news network committed to bipartisan dialogue. She is also national editor for Accuracy in Media, a conservative media watchdog organization. The views expressed in this commentary are her own. View more opinion at CNN.

CNN  — 

It’s all too common to get slammed with a medical bill far above what you anticipated, from a pricey routine surgery to a shockingly high co-pay for a simple checkup.

Carrie Sheffield

Hospitals and doctors often themselves don’t know what the final price of health care will be, keeping everyone in the dark until the patient gets the bill in their mailbox. This astronomical sticker shock can shatter a life and further erode physical and mental health, even sparking bankruptcy, home foreclosure or worse.

Making health care prices transparent is a priority for the Trump administration. As first reported by the Wall Street Journal, President Trump’s Department of Health and Human Services is seeking public comment on the idea of requiring “hospitals, doctors and other health care providers to publicly disclose the secretly negotiated prices they charge insurance companies for services, a move that would expose for the first time the actual cost of care.”

The Journal reported, “Mandating public disclosure of the rates would upend a longstanding industry practice and put more decision-making power in the hands of patients. Hospitals and insurers typically treat specific prices for medical services as closely held secrets, with contracts between the insurers and hospital systems generally bound by confidentiality agreements.” DHHS’ public comment period on the proposed rule change ends Friday.

Economists know that information asymmetry, in which one side has more knowledge than another, tilts the playing field toward the advantaged player. Information is knowledge, and knowledge is power.

Without price transparency, right now the balance of power in our health care system is tilted in favor of health care providers and away from patients. This is unconscionable, especially when the majority of health care costs are generated by the oldest, sickest patients. As a country, we have constantly improved our ability to protect the most vulnerable, and arming elderly and ill patients with the information they need to stabilize health care spending continues this legacy.

Health insurance adds a layer of bureaucracy and opaqueness to this process. As Sen. Rand Paul, R-Kentucky – a Duke-trained ophthalmologist – points out, Lasik eye surgery, which is not covered by many insurers, is a strong case study of consumer power increasing over time because of price transparency that drives the price down.

A Mises Institute study pointed out that, “In 1997, a precursor to LASIK surgery that involved the surgeon wielding a knife cost $8,000. In 2012, a safer laser-guided surgery cost only about $3,800. Prices halved in 15 years even as quality rose.” The same is true for other types of elective, cosmetic surgeries not covered by insurance, reports economist Mark J. Perry from the American Enterprise Institute.

The Trump administration has made lowering the cost of prescription drugs a priority, including helping speed generics to market, and an update to Medicare’s drug-pricing dashboard to increase transparency. President Trump’s Council of Economic Advisers reported, “The prices for prescription drugs fell 0.6% during the 12 months 2018. This is the largest decline in prescription drug prices in almost half a century (46 years).”

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    Transparency would empower patients and their families by allowing them to shop around and compare pricing. This would introduce greater competition in the health care sector, something we need, particularly as our country ages. The health care system is complex, but that’s no excuse not to chip away at the obstacles that impede lower costs. And we’ve seen progress in some areas. Steve Delaronde from 3M Health Information Systems is right to applaud the moves toward transparent pricing. “Ultimately, it is impossible to fix a problem that one cannot see. Price transparency is a critical step to addressing the high cost of health care in the United States.”

    Americans have always valued choice and competition in order to shop for everything from a car to a vacation. There’s no reason we can’t achieve this in health care as well.