hospital hallway STOCK

Editor’s Note: Theo Merkel is a special assistant to President Trump serving in the White House’s National Economic Council. The opinions expressed in this commentary are his own.

In June, President Donald Trump signed an executive order aimed at helping patients navigate the complex world of healthcare: “We believe the American people have a right to know the price of services before they go to visit the doctor,” the President said at the time.

To follow through on this pledge, President Trump recently announced two new rules to put this information at the fingertips of patients. First, hospitals will be required to display their prices publicly online in a way that is easily accessible for consumers by 2021. Next, the administration is issuing a proposal to require insurance companies and group health plans to provide their enrollees with estimates of out-of-pocket costs and the payment their provider would actually receive. This is the type of information typically given to a patient in an explanation of benefits after the service, but it will now be available on request, prior to care.

Together, these rules will usher in a new era of healthcare transparency. Patients will be able to actually shop for value, employers will be able to provide more cost-effective care for their workers and increased competition between providers should drive quality up and costs down. But perhaps most significantly, these rules will unleash our country’s greatest asset, the American people themselves, as agents of reform in healthcare.

The current system, with its hidden prices, is failing patients. Erika Jay, a cancer patient who spoke at the signing of President Trump’s executive order on price and quality transparency, told the audience how she found out she was charged three times more for a biopsy at one facility than she was for an identical one she had received 11 days prior at a facility 17 miles away. That is not the news someone is looking for when battling a life-threatening illness. These new rules will ensure that unpleasant surprises like this will become a thing of the past, and people like Erika will be able to more easily discern which providers are high-value, low-cost.

Employers and the nearly 160 million Americans they provide coverage for also have a lot to gain. Repeated studies have shown that when employers give their workers proper incentives to shop around and the price and quality information needed to do so effectively, it can produce big savings for both employers and employees. While this typically has only been an option for the largest of companies with the most sophisticated human resource departments, the administration’s actions will empower employers of all sizes.

As patients and employers become more able and willing to shop around for care, providers will be forced to compete on price as well as quality. Early research from state-level experiments in transparency suggests this could lead to significant declines in price and out-of-pocket costs.

This approach to improving healthcare by empowering the average American is different from the Washington-centric reforms of past administrations. Politicians typically prefer approaches that keep them in control, such as coverage mandates, price controls and lots of government-directed spending of other people’s money. The medical industry usually goes along because they have direct lines of communication to policymakers and can easily influence outcomes in their favor. But with these actions, President Trump is once again demonstrating his instinct to push reforms that make the healthcare industry more responsive to actual patients instead of entrenched interests and bureaucrats.