How Trump Is Reforming Medicare, Part II

As we wrote on Monday, the Trump administration is making fundamental changes to the Medicare program, and the changes initiated so far may be just the beginning. In this post we look at new rules requiring hospital price transparency, drug advertising price transparency, paperwork reduction, the advent of concierge medicine, and the administration’s effort to eliminate drug rebates and gag clauses.

Hospital Price Transparency. When customers pay for goods and services out of their own pockets, price transparency is never a problem. This is just as true in health care as it is in any other market. For cosmetic surgery or Lasik surgery, for example, patients are never unsure what the cost will be. Similarly, in the market for medical tourism, patients are almost always given an upfront package price, or a reasonably good estimate. When Canadians come to the United States for joint replacements, for example, they not only know the price, they usually pay in advance.

For ordinary Americans, however, the U.S. hospital sector is completely dominated by third party payment. As a result, hospitals don’t compete for patients on price. And has been previously argued, when providers don’t compete on price, they don’t compete on quality either. Hospital competition is mainly competition on amenities.

The Trump administration would like to change that. As of January 1 of this year, every hospital in the United States is required to post its standard price for the procedures it performs. Unfortunately, that may not help patients as much as might be hoped. It appears that many hospitals are meeting this requirement from the Centers for Medicare and Medicaid Services (CMS) by posting their charge master numbers.