How do health care transparency laws work?

By shining a light on the discrepancies in prices, the Trump administration argues that hospitals will face pressure to compete for patients, eventually causing costs to drop

The Trump administration scored a major legal victory this week when a federal judge upheld a law that requires hospitals and insurers to publish their negotiated price for services — a rule intended to increase price transparency for patients shopping for coverage.

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Under the rule, announced in mid-November, hospitals will have to report the rates they strike with individual insurers for all services, including drugs, supplies, facility fees and care by doctors who work for the facility. If the hospitals fail to comply, they could be forced to pay a $300 per-day fine.

By shining a light on the discrepancies in prices, the Trump administration argues that hospitals will face pressure to compete for patients, eventually causing costs to drop.

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"Our goal was to give patients the knowledge they need about the real price of health care services, so they can shop for the highest quality care at the lowest cost," President Trump when introducing the proposal.

Critics suggest the opposite will happen: Lower-cost hospitals will try to compete with their higher-cost counterparts and raise prices.

Hospitals will now be required to disclose payer-specific charges for at least 300 shoppable services, 70 of which -- including vaginal birth, colonoscopy and joint-replacement surgery -- are mandated in the rule. Hospitals can select the other 230 services they post online.

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Prices charged for health care vary dramatically depending on several factors, including whether a patient is in or out of the patient's insurance network and what price the hospital negotiated with the insurance company. For instance, the cost of a mammogram ranges from $50 at a hospital in New Orleans, to $86,000 at a hospital in Massachusetts, according to Clear Health Costs, which publishes information on health costs.

The administration estimated the rule would cost hospitals more than $23 million annually in 2016.

In December, hospital groups sued to block the rule, saying it violated the First Amendment and went beyond the intent of the Affordable Care Act. They argued the rule was “unlawful, several times over.”

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Hospitals say price disclosure could result in higher costs. If rates are public, it would “undermine competition” and “blunt incentives for health insurers to participate in innovative arrangements,” the groups, which also include the Association of Medical Colleges, the National Association of Children’s Hospitals and the Federation of American Hospitals, which represent for-profit hospitals, wrote in the lawsuit.

“The rates negotiated between hospitals and commercial health insurers do not reliably predict the patient’s out-of-pocket costs, and there is no easy way to reverse-engineer one from the other to determine what the patient’s co-payment and deductible will be or even if the service is covered at all,” the suit said. “The rule will generate confusion about patients’ financial obligations, not quell it.”

But on Tuesday, U.S. District Court Judge Carl Nichols disagreed.

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In his decision, Nichols said the hospital groups were "attacking transparency measures generally, which are intended to enable consumers to make informed decisions; naturally, once consumers have certain information, their purchasing habits may change, and suppliers of items and services may have to adapt accordingly."

Still, New Hampshire, which has one of the oldest and most comprehensive transparency laws in the country, demonstrates efforts to force hospitals to publicize prices that have mixed results.

The disclosures helped to lower costs, though not substantially, and only a minority of the state's residents are taking advantage of them, according to The Wall Street Journal.

Twenty states have laws similar to New Hampshire's, but only six operate consumer-price websites, the Journal reported. Few publish as many prices by provider and health plan, compared to New Hampshire.

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