The White House released an executive order Monday afternoon intended to require insurance companies, doctors and hospitals to give patients more information about precisely what their care will cost before they get it.
“We’re taking power away from bureaucrats, taking it away from insurance companies and we’re giving it back to patients,” President Trump said at a signing ceremony, flanked by doctors and patients who had been surprised by huge medical bills. “We’re taking one more giant step towards a health care system that is going to be great.”
Consumers typically know the price of something before they make a purchase, but health care prices have typically been shrouded in secrecy. Insurers and medical providers negotiate discounted prices in private, and neither party wants competitors to know the details of the deals they’ve struck. The result is a market that can be opaque and surprising to consumers.
White House officials say that eliminating that secrecy could be a truly disruptive change that could lower health care prices and reorder the health care system by wresting power away from industry and into the hands of patients. This emphasis on transparency, some advisers say, could allow the president, who is seeking re-election, to point to strong action on health care despite falling short in his effort to repeal the Affordable Care Act.
Exactly what information hospitals and insurers will have to disclose is not specified in the executive order, which has no force of law on its own. White House officials said the details would be worked out during the rule-making process. Hospitals and insurance companies are likely to lobby to make any disclosures as general as possible.
The health care industry has reacted to the president’s plan with alarm. Both hospital groups and insurance companies have written letters expressing their displeasure with an earlier request for comments about requiring broader price transparency. Their reaction to Monday’s executive order was equally negative.
Hospitals and insurers have both argued that forcing them to disclose negotiated prices could have the paradoxical effect of increasing costs, not lowering them. Many economists have similar concerns. “We would be very much opposed to disclosure of privately negotiated rates,” said Tom Nickels, an executive vice president at the American Hospital Association, in an interview before the executive order was issued.
Forcing the hospitals and insurers to disclose their agreements “has a chilling effect on negotiation — it could create a race to the top,” he said.
The executive order will follow earlier administration actions to improve the transparency of health pricing data, including new requirements that drug companies disclose their list prices in consumer advertisements and that hospitals publish on their websites the prices they charge uninsured patients. (The drug companies are fighting the advertising rule in court.)
“Every day American patients are being taken advantage of by a system that keeps information from them,” Alex M. Azar, Health and Human Services secretary, said, describing how he was unable to get accurate information about the price of a heart test he received.
The data described in the executive order is different from hospital list prices made public earlier this year. Currently, hospitals must disclose what they charge, which represents the price they would like to receive. But the executive order asks for more transparency about the actual prices insurance companies have agreed to pay health care providers for care. In many cases, patients themselves don’t pay that amount directly. But as health plans with high deductibles have become more common, patients are increasingly exposed to these negotiated prices until their insurance kicks in.
Health care providers say those prices may be misleading to patients, who often are responsible only for a small co-payment when they seek medical services. They argue that it would be more helpful to provide information about what patients may owe, not the total amount the insurance company will pay. The executive order calls for patients to get an estimate of their out-of-pocket costs before they get care.
Both hospital and insurer groups say that making prices public could lead to undesirable consequences. Hospitals argue it could threaten hospitals’ financial security, while insurers say it could drive health care prices higher, not lower.
It remains unclear just how far the administration will go in making all negotiated prices public. A senior administration official said that whether patients would have access to a full database of specific prices or something closer to a range of prices would be decided during the regulatory process. But the order will also call for a public database of anonymous insurance claims information, with protections to keep individual patient information private. This data could be useful to researchers, but probably less helpful for patient health care shopping.
The order will also call for health care agencies to simplify the system of measuring and publicly reporting the quality of health care provided by hospitals, doctors and other health care providers, Mr. Azar said.
Enthusiasts for greater price transparency say that bringing cost information into public could increase market — and social — pressure on health care providers to lower prices. Some patients might be able to use the information to shop for their own care, when seeking a blood test or an X-ray, for example.
“I really firmly believe that once we get this transparency in place, the dominoes will fall for better quality, better price and better access,” said Cynthia Fisher, a health care entrepreneur and the founder of the group Patient Rights Advocate, who became interested in the issue after learning about friends and acquaintances who were harmed by high medical bills. Her group has produced videos of their stories, which the president has watched.
Government officials hope the data will also be useful to employers, who typically rely on insurance companies to arrange their benefits without knowing all the details of the deals those insurance companies have cut. Even large employers with many workers have said that their insurance contracts have made it hard for them to see detailed pricing information or to be able to steer their workers to doctors and hospitals that are of high quality but cost less.
The hospital and insurance industries are likely to fight the legal basis for any changes in court.