U.S. GOVERNMENT PUBLISHING OFFICE

35–432 WASHINGTON : 2019

EXAMINING STATE EFFORTS TO IMPROVE 

TRANSPARENCY OF HEALTHCARE COSTS FOR 

CONSUMERS 

HEARING 

BEFORE THE

SUBCOMMITTEE ON OVERSIGHT AND 

INVESTIGATIONS 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FIFTEENTH CONGRESS 

SECOND SESSION 

JULY 17, 2018 

Serial No. 115–151 

( 

Printed for the use of the Committee on Energy and Commerce 

energycommerce.house.gov 

(II) 

COMMITTEE ON ENERGY AND COMMERCE 

GREG WALDEN, Oregon 

Chairman 

JOE BARTON, Texas 

Vice Chairman 

FRED UPTON, Michigan 

JOHN SHIMKUS, Illinois 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

STEVE SCALISE, Louisiana 

ROBERT E. LATTA, Ohio 

CATHY MCMORRIS RODGERS, Washington 

GREGG HARPER, Mississippi 

LEONARD LANCE, New Jersey 

BRETT GUTHRIE, Kentucky 

PETE OLSON, Texas 

DAVID B. MCKINLEY, West Virginia 

ADAM KINZINGER, Illinois 

H. MORGAN GRIFFITH, Virginia 

GUS M. BILIRAKIS, Florida 

BILL JOHNSON, Ohio 

BILLY LONG, Missouri 

LARRY BUCSHON, Indiana 

BILL FLORES, Texas 

SUSAN W. BROOKS, Indiana 

MARKWAYNE MULLIN, Oklahoma 

RICHARD HUDSON, North Carolina 

CHRIS COLLINS, New York 

KEVIN CRAMER, North Dakota 

TIM WALBERG, Michigan 

MIMI WALTERS, California 

RYAN A. COSTELLO, Pennsylvania 

EARL L. ‘‘BUDDY’’ CARTER, Georgia 

JEFF DUNCAN, South Carolina 

FRANK PALLONE, JR., New Jersey 

Ranking Member 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

DIANA DEGETTE, Colorado 

MICHAEL F. DOYLE, Pennsylvania 

JANICE D. SCHAKOWSKY, Illinois 

G.K. BUTTERFIELD, North Carolina 

DORIS O. MATSUI, California 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

JERRY MCNERNEY, California 

PETER WELCH, Vermont 

BEN RAY LUJA ́ N, New Mexico 

PAUL TONKO, New York 

YVETTE D. CLARKE, New York 

DAVID LOEBSACK, Iowa 

KURT SCHRADER, Oregon 

JOSEPH P. KENNEDY, III, Massachusetts 

TONY CA ́ RDENAS, California 

RAUL RUIZ, California 

SCOTT H. PETERS, California 

DEBBIE DINGELL, Michigan 

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

GREGG HARPER, Mississippi 

Chairman 

H. MORGAN GRIFFITH, Virginia 

Vice Chairman 

JOE BARTON, Texas 

MICHAEL C. BURGESS, Texas 

SUSAN W. BROOKS, Indiana 

CHRIS COLLINS, New York 

TIM WALBERG, Michigan 

MIMI WALTERS, California 

RYAN A. COSTELLO, Pennsylvania 

EARL L. ‘‘BUDDY’’ CARTER, Georgia 

GREG WALDEN, Oregon (ex officio) 

DIANA DEGETTE, Colorado 

Ranking Member 

JANICE D. SCHAKOWSKY, Illinois 

KATHY CASTOR, Florida 

PAUL TONKO, New York 

YVETTE D. CLARKE, New York 

RAUL RUIZ, California 

SCOTT H. PETERS, California 

FRANK PALLONE, JR., New Jersey (ex 

officio) 

(III) 

C O N T E N T S 

Page 

Hon. Gregg Harper, a Representative in Congress from the State of Mississippi, opening statement ................................................................................. 1 

Prepared statement .......................................................................................... 3 

Hon. Kathy Castor, a Representative in Congress from the State of Florida, 

opening statement ................................................................................................ 4 

Prepared statement .......................................................................................... 5 

Hon. Greg Walden, a Representative in Congress from the State of Oregon, 

opening statement ................................................................................................ 6 

Prepared statement .......................................................................................... 7 

Hon. Frank Pallone, Jr., a Representative in Congress from the State of 

New Jersey, opening statement .......................................................................... 17 

Prepared statement .......................................................................................... 18 

WITNESSES

Jaime King, Ph.D., Professor, UC Hastings College of Law ................................ 20 

Prepared statement .......................................................................................... 23 

Michael Chernew, Ph.D., Professor, Department of Health Care Policy, Harvard Medical School ............................................................................................. 59 

Prepared statement .......................................................................................... 62 

SUBMITTED MATERIAL

H.R. 5547, submitted by Mr. Burgess .................................................................... 9 

Subcommittee memorandum .................................................................................. 95 

Report of Texas Hospital Association, submitted by Mr. Burgess ....................... 106 

Blog on Health Affairs, submitted by Mr. Burgess ............................................... 108 

Statement of the National Community Pharmacists Association, submitted 

by Mr. Carter ........................................................................................................ 116 

(1) 

EXAMINING STATE EFFORTS TO IMPROVE 

TRANSPARENCY OF HEALTHCARE COSTS 

FOR CONSUMERS 

TUESDAY, JULY 17, 2018 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS, 

COMMITTEE ON ENERGY AND COMMERCE, 

Washington, DC. 

The subcommittee met, pursuant to call, at 10:15 a.m., in room 

2322 Rayburn House Office Building, Hon. Gregg Harper (chairman of the subcommittee) presiding. 

Members present: Representatives Harper, Griffith, Barton, Burgess, Brooks, Collins, Walberg, Walters, Costello, Carter, Walden 

(ex officio), DeGette, Schakowsky, Castor, Tonko, Clarke, Ruiz, and 

Pallone (ex officio). 

Staff present: Jennifer Barblan, Chief Counsel, Oversight & Investigations; Lamar Echols, Counsel, Oversight & Investigations; 

Ali Fulling, Legislative Clerk, Oversight & Investigations, Digital 

Commerce and Consumer Protection; Jennifer Sherman, Press Secretary; Austin Stonebraker, Press Assistant; Hamlin Wade, Special 

Advisor, External Affairs; Jeff Carroll, Minority Staff Director; 

Chris Knauer, Minority Oversight Staff Director; Miles Lichtman, 

Minority Policy Analyst; Kevin McAloon, Minority Professional 

Staff Member; C.J. Young, Minority Press Secretary; and Perry 

Lusk, Minority GAO Detailee. 

OPENING STATEMENT OF HON. GREGG HARPER, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MISSISSIPPI 

Mr. HARPER. I call to order the hearing of the subcommittee on 

Oversight and Investigations. 

Today, the Subcommittee on Oversight and Investigations is 

holding a hearing entitled, ‘‘Examining State Efforts to Improve 

Transparency of Healthcare Costs for Consumers.’’ We are here 

today because healthcare costs continue to rise in the United 

States and many Americans are struggling to budget and pay for 

their healthcare expenses. 

According to the Centers for Medicare and Medicaid Services, we 

spent $3.3 trillion on healthcare costs in 2016, which means that 

nearly 18 percent of the overall share of gross domestic product 

was related to healthcare spending. About 32 percent of healthcare 

spending in 2016 was on hospital care, 20 percent was on physician 

2 

and clinical services, and about 10 percent of the spending was on 

prescription drugs. 

The Committee has been actively looking at these concerning 

trends and has held a number of hearings examining some of the 

causes of increased healthcare costs, and increasing healthcare 

costs. Last year, the Oversight and Investigations subcommittee 

held two hearings on the 340B Drug Pricing Program and issued 

a report with the findings from our investigations. In February, the 

subcommittee held a hearing examining consolidation in the 

healthcare market, and examined the impact of consolidation on 

healthcare competition and innovation. 

As healthcare costs continue to rise, many Americans still have 

no idea how much something will cost them before they receive 

care. Oftentimes, they only know their out-of-pocket costs once they 

have gotten the care and get their bill weeks, sometimes months 

later. The purpose of today’s hearing is to examine state laws and 

policies that have an impact on healthcare costs and what can be 

done to lower costs for all Americans through more transparency 

of healthcare costs. 

These transparency efforts have generally attempted to provide 

consumers information about different types of healthcare costs, including information about the cost of healthcare services and the 

cost of prescription drugs. In our work, we have heard that there 

are a number of issues that make it difficult for some of these efforts to be effective. 

For example, sometimes there may be contractual provisions that 

limit the sharing of certain price information or concerns that the 

sharing of certain price information may be anti-competitive. Moreover, healthcare billing is complex and it can be difficult to provide 

the information to consumers in a meaningful way that is useful 

to them. Similarly, only a small percentage of healthcare services 

may be ‘‘shoppable.’’ I hope to hear more about some of the barriers 

to transparency and what, if anything, Congress can do to help. 

Unfortunately, early evidence suggests that some price transparency tools have not helped facilitate price shopping and lower 

consumer costs. I, therefore, look forward to hearing more from the 

witnesses about why this is the case, and what forms of transparency might help consumers as they budget for their care and 

make better healthcare decisions. For example, do we need to pair 

transparency with some other mechanism for it to be most effective? 

The cost of certain healthcare services can vary significantly in 

the same geographic region at different sites of care. For instance, 

a 2014 study by the U.S. Government Accountability Office found 

that the estimated cost of maternity care at select, high-quality 

acute care hospitals in the Boston area ranged between $6,834 and 

$21,554, over a 200 percent difference. 

A more recent 2018 study found that median price of magnetic 

resonance imaging, an MRI, of the spine ranges from $500 to 

$1,670 in Massachusetts, also over a 200 percent difference. 

Empowering consumers with more information about the cost 

and quality of their care helps to reduce wasteful spending and 

save families money. 

3 

As we move forward, we have to keep in mind that there is a 

delicate balance between beneficial transparency and transparency 

that ultimately harms competition and consumers. The Federal 

Trade Commission has highlighted that it is important to give consumers the precise information they need to make better 

healthcare decisions. The agency also has cautioned, however, that 

it is important to avoid broad disclosures that may chill competition in the healthcare market. 

I welcome and thank the witnesses for being here today. I look 

forward to their testimony. 

And I will now recognize Ms. Castor for purposes of an opening 

statement. 

[The prepared statement of Mr. Harper follows:] 

PREPARED STATEMENT OF HON. GREGG HARPER

Today, the Subcommittee on Oversight and Investigations is holding a hearing entitled, ‘‘Examining State Efforts to Improve Transparency of Healthcare Costs for 

Consumers.’’ We are here because healthcare costs continue to rise in the United 

States and many Americans are struggling to budget and pay for their healthcare 

expenses. 

According to the Centers for Medicare and Medicaid Services, we spent $3.3 trillion on healthcare in 2016, which means nearly 18 percent of the overall share of 

gross domestic product was related to healthcare spending. About 32 percent of 

healthcare spending in 2016 was on hospital care, 20 percent was on physician and 

clinical services, and about 10 percent of the spending was on prescription drugs. 

The Committee has been actively looking at this concerning trend and has held 

a number of hearings examining some of the causes of increasing healthcare costs. 

Last year, the Oversight and Investigations subcommittee held two hearings on the 

340B Drug Pricing Program and issued a report with the findings from our investigation. In February, the subcommittee held a hearing examining consolidation in 

the healthcare market and examined the impact of consolidation on healthcare competition and innovation. 

As healthcare costs continue to rise, many Americans still have no idea how much 

something will cost them before they receive care. Oftentimes, they only know their 

out of pocket costs once they have gotten the care and get their bill weeks, sometimes months, later. The purpose of today’s hearing is to examine state laws and 

policies that have an impact on healthcare costs and what can be done to lower costs 

for all Americans through more transparency of healthcare costs. 

These transparency efforts have generally attempted to provide consumers information about different types of healthcare costs, including information about the 

cost of healthcare services and the cost of prescription drugs. In our work, we’ve 

heard that there are a number of issues that make it difficult for some of these efforts to be effective. For example, sometimes there may be contractual provisions 

that limit the sharing of certain price information or concerns that the sharing of 

certain price information may be anti-competitive. Moreover, healthcare billing is 

complex and it can be difficult to provide the information to consumers in a meaningful way that is useful to them. Similarly, only a small percentage of healthcare 

services may be ‘‘shoppable.’’ I hope to hear more about some of the barriers to 

transparency and what, if anything, Congress can do to help. 

Unfortunately, early evidence suggests that some price transparency tools have 

not helped facilitate price shopping and lower consumer costs. I therefore look forward to hearing more from the witnesses about why this is the case, and what 

forms of transparency might help consumers budget for their care and make better 

healthcare decisions. For example, do we need to pair transparency with some other 

mechanism for it to be most effective? 

The cost of certain healthcare services can vary significantly in the same geographic region at different sites of care. For instance, a 2014 study by the U.S. Government Accountability Office found that the estimated cost of maternity care at select, high-quality acute care hospitals in the Boston area ranged between $6,834 and 

$21,554—over a 100 percent difference. A more recent 2018 study found that the 

median price of magnetic resonance imaging (MRI) of the spine ranges from $500 

to $1,670 in Massachusetts-also over a 100 percent difference. Empowering conVerDate Nov 24 2008 13:10 Mar 20, 2019 Jkt 037690 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 U:\MY DOCS\HEARINGS 115\HEARINGS\115-151 CHRIS
4 

sumers with more information about the cost and quality of their care could help 

to reduce wasteful spending and save families money. 

As we move forward, we have to keep in mind that there is a delicate balance 

between beneficial transparency and transparency that ultimately harms competition and consumers. The Federal Trade Commission has highlighted that it is important to give consumers the precise information they need to make better 

healthcare decisions. The agency also has cautioned, however, that it is important 

to avoid broad disclosures that may chill competition in the healthcare market. 

I welcome and thank the witnesses for being here today, and I look forward to 

their testimony. 

OPENING STATEMENT OF HON. KATHY CASTOR, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF FLORIDA 

Ms. CASTOR. Well, thank you, Mr. Chairman. Thank you for calling this important hearing. I think it is a worthy topic. 

But, I wanted to note at the outset it has been almost 1 month 

since the Democrats on this committee have requested an oversight 

hearing on the Administration’s family separation policy. The Energy and Commerce Committee has primary responsibility for oversight of the Department of Health and Human Services. We have 

had over the last month a number of hearings on many varied topics, but none are as important as what is happening as children 

who are ripped away from their family. Now, courts have ordered 

reunification. 

It is our responsibility as Members of Congress, especially in the 

Oversight Committee of Energy and Commerce, to have an oversight hearing to get to the bottom of this. We hear horrifying stories every day about the impact on children. 

And so at this time I am going to renew the request of the Democrats on Energy and Commerce to schedule an oversight hearing as 

soon as possible on the family separation policy. 

Now, healthcare costs, also a very worthy topic. And if we were 

to schedule another important oversight hearing, it certainly 

should be on the impact of the Trump administration’s lawsuit that 

where they claim that preexisting conditions should not be a right 

of American families, especially in their healthcare policy. That 

would be another very worthy oversight hearing. But, right now we 

are here on transparency, so let’s talk about that. 

I understand that every family feels a very significant impact of 

rising prices. And part of the problem is the fact that healthcare 

consumers often have no visibility into how much services are actually going to cost. 

And depending on multiple factors, such as where you live, your 

insurance, the type of provider, costs can vary greatly and are unpredictable. That makes healthcare unlike virtually any other purchase, and it makes it more difficult to constrain costs. 

There are all sorts of reports out there—many of you all have experienced this—of outrageously high bills received by unsuspecting 

consumers. Plus, it is darn confusing sometimes. You get a bill and 

it says this is your responsibility, this is what is paid, and people 

simply don’t, don’t, get it. 

There was a couple in California recently who were reportedly 

charged over $18,000 for a 3-hour visit to an emergency room 

where their baby was examined, took a nap, and drank formula. 

5 

And another patient received two CT scans that varied between 

$268 and $9,000. 

These shockingly high bills are frustrating and can devastate a 

family’s finances. For that reason, greater transparency can theoretically provide consumers with more information to make decisions and to predict the costs that they are going to incur. 

To that end, many states have taken some action to bring more 

transparency to healthcare. But it isn’t always easy. My home 

State of Florida, for example, established a website that allows consumers to search for healthcare prices at hospitals and outpatient 

surgery centers in 2007, but consumers don’t know about it. And 

one of the problems is it doesn’t even contain all of the hospitals 

that are in your market, and it doesn’t contain a lot of the leading 

health insurers’ information in our state. 

So there, Florida is currently struggling with trying to launch 

another healthcare transparency website but now the cost is really 

escalating. It has been $4 million to get that up and running, and 

we don’t have a lot to show for it. 

Other states now require pharmaceutical companies to publicize 

and provide information related to large increases in prices for certain drugs. And here in the House I am a proud cosponsor of Congresswoman Schakowsky’s Fair Accountability and Innovative Research Drug Pricing Act, which would require drug companies to 

report an increase in certain drug prices by more than 10 percent 

in a year to HHS, and submit transparency and justification reports before they increase the price of certain drugs by 10 percent. 

We should move initiatives that can help consumers control their 

healthcare costs. But transparency in our healthcare system 

shouldn’t be the only tool in our tool box. It has to be accompanied 

with other improvements to have a meaningful impact on the actual cost of care. 

So, I am looking forward to hearing the witnesses today. I look 

forward to hearing from you on how we can use healthcare transparency to lower costs for our neighbors back home. 

Thank you, and I yield back. 

[The prepared statement of Ms. Castor follows:] 

PREPARED STATEMENT OF HON. KATHY CASTOR

Thank you, Mr. Chairman. Healthcare costs continue to account for a large portion of our economy, and every family feels the impact of rising prices. Part of this 

problem is the fact that healthcare consumers often have no visibility into how 

much services are actually going to cost. 

Depending on multiple factors such as the geographical area, a patient’s insurance, and the type of provider, costs can vary greatly and seem unpredictable to the 

consumer. That makes healthcare unlike virtually any other commodity, and makes 

it more difficult to constrain costs. 

We have seen news reports of outrageously high bills received by unsuspecting 

consumers. There was the couple in California who were reportedly charged over 

$18,000 for a 3-hour visit to an emergency room, where their baby was examined, 

took a nap, and drank formula. And another patient received two CT scans that varied between $268 and nearly $9,000. 

These shocking bills are frustrating and can devastate a family’s finances. For 

that reason, greater transparency can theoretically provide consumers with more information to make decisions and predict the costs they are going to incur. 

To that end, many states have taken some action to bring more transparency to 

healthcare. My home State of Florida, for example, established a website that allows 

consumers to search for healthcare prices at hospitals and outpatient surgery cenVerDate Nov 24 2008 13:10 Mar 20, 2019 Jkt 037690 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 U:\MY DOCS\HEARINGS 115\HEARINGS\115-151 CHRIS
6 

ters. Other states now require pharmaceutical companies to publicize and provide 

information related to large increases in prices for certain drugs. 

These efforts are well-intended, and we should applaud any initiative that has the 

potential to help consumers control their healthcare costs. That being said, we also 

must keep in mind that transparency is not a panacea, and must be coupled with 

other improvements to have a meaningful impact on the actual cost of care. 

As we will hear from the witnesses today, transparency initiatives by themselves 

are not tremendously effective at bringing down consumer healthcare costs. What 

sounds like a straightforward solution in most markets does not always work in 

healthcare, for multiple reasons. 

For one thing, when people’s health is at stake, information on prices might not 

be relevant. People naturally trust their doctor and want the best care. And when 

we see greater consolidation in the healthcare industry, transparency cannot provide much help to consumers with no leverage to access lower prices. 

So we need to consider what the research says: what types of transparency reforms can work, what does not work, and how transparency needs to be combined 

with more meaningful actions. 

For instance, Mr. Chairman, a key part of bringing down costs for consumers is 

ensuring access to high-quality and affordable healthcare, including primary care. 

We need to give consumers more than just information—we need to bring relief 

from these rising costs in the first place. Without that, these transparency efforts 

will be in vain, and we’ll just be shining a spotlight on continuously increasing costs. 

That is not to say that transparency does not have a role. Instead, we should look 

to combine transparency initiatives with incentives to provide higher quality care 

at lower costs. I hope to hear the witnesses’ perspective on that today. 

I thank the witnesses for being here today, and I yield back. 

Mr. HARPER. The gentlewoman yields back. 

The chair will now recognize the chairman of the full committee, 

Mr. Walden, for 5 minutes. 

OPENING STATEMENT OF HON. GREG WALDEN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF OREGON 

Mr. WALDEN. Thank you very much, Mr. Chairman. I appreciate 

your holding this hearing on the various transparency efforts at the 

state level to engage patients in healthcare decision making processes. 

As Chairman Harper mentioned in his opening statement, 

healthcare costs are increasing and are expected to continue to rise. 

In 2016, the U.S. spent approximately $3.3 trillion on healthcare, 

and the Center for Medicare and Medicaid Services, CMS, estimates that spending will reach $5.7 trillion in 2026. 

Healthcare costs are having a substantial impact on the budgets 

of American families and individuals. In addition to health insurance premiums increasing, patients are also directly responsible for 

more of their healthcare costs. In 2016, about 11 percent of the 

$3.3 trillion spent on healthcare was paid for directly by consumers 

through out-of-pocket costs, which was about $352 billion. 

Unsurprisingly, as healthcare costs increase, most patients want 

to know more about how much different medical services and products are going to cost them. We all do. That is why we are having 

this hearing. I have heard numerous stories about individuals who 

were going to have a medical procedure or lab work performed, 

found it nearly impossible, and in some instances literally impossible, to learn how much it was going to cost them before they got 

the care. A lot of doctors don’t even know how much different services are going to cost. 

Many states have adopted policies to prohibit some types of ‘‘gag 

clauses’’ and help patients get access to the prices for prescription 

7 

drugs. Twenty-two states have passed legislation prohibiting 

clauses in contracts that prohibit pharmacists from telling patients 

price options for their prescription medicine. 

In addition to these recent efforts to encourage price information 

sharing with patients at the pharmacy counter, several states have 

engaged in efforts to provide patients with more information about 

the price and quality of different healthcare services. Some of these 

efforts include creating websites that give patients information 

about the prices of different procedures, requiring insurers to provide these tools to their members, and requiring providers to give 

patients information about the estimated prices for their treatment 

before they get the treatment. Unfortunately, to date, some of the 

preliminary evidence has shown that these tools haven’t been very 

effective in getting patients to price shop. 

If we are going to successfully reduce healthcare costs, we need 

to empower patients and we need to engage them in the decisionmaking process. So there needs to be greater transparency so patients can have more information about the prices for different 

medical products and services, and that information needs to be 

given to them in a meaningful way. 

Given that some of the existing price transparency tools are still 

able to be improved, I am eager to hear from our witnesses today 

about why there are some of these barriers, and then also what 

else we can do to empower patients with the information. I also 

want to hear about the role the Federal Government can play in 

promoting transparency and making patients more informed about 

the cost of their care. 

Patients should be able to learn about how much something is 

going to cost before they get it. This includes having information 

about different price options for prescription drugs at the pharmacy 

counter, and information about different procedures and lab work, 

among other things. 

So, we have got a lot of questions for our witnesses today. We 

really appreciate your being here. But one of my main questions is 

what is the best way for patients to get healthcare price information, and how can we empower the consumer? 

I am also interested in hearing about any market behaviors that 

work against transparency and ultimately harm any attempts to 

bring down healthcare costs. 

So, thanks for being here. This is a big priority for me and for 

the committee to look into all the costs of healthcare. 

With that I will just warn you, I have got another hearing going 

on downstairs so I have to bounce back and forth. But I will yield 

the balance of my time to Dr. Burgess, who chairs our Health Subcommittee. 

[The prepared statement of Mr. Walden follows:] 

PREPARED STATEMENT OF HON. GREG WALDEN

Thank you, Mr. Chairman, for holding this hearing on the various transparency 

efforts at the state level to engage patients in the healthcare decision-making process. 

As Chairman Harper mentioned in his opening statement, healthcare costs are increasing and are expected to continue to rise. In 2016, the U.S. spent approximately 

$3.3 trillion on healthcare, and the Centers for Medicare and Medicaid Services 

(CMS) estimates that spending will reach $5.7 trillion by 2026. 

8 

Healthcare costs are having a substantial impact on the budgets of American families and individuals. In addition to health insurance premiums increasing, patients 

are also directly responsible for more of their healthcare costs. In 2016, about 11 

percent of the $3.3 trillion spent on healthcare was paid for directly by consumers 

through out-of-pocket costs-which was about $352 billion dollars. 

Unsurprisingly, as healthcare costs increase, most patients want to know more 

about how much different medical services and products are going to cost them. We 

all do. I’ve heard numerous stories about individuals who were going to have a medical procedure or lab work performed and found it nearly impossible, and in some 

instances impossible, to learn how much it was going to cost them before they got 

the care. A lot of doctors don’t even know how much different services are going to 

cost. 

Many states have adopted policies to prohibit some types of ‘‘gag clauses’’ and 

help patients get access to the prices for prescription drugs. Twenty-two states have 

passed legislation prohibiting clauses in contracts that prohibit pharmacists from 

telling patients price options for their prescription medicine. 

In addition to these recent efforts to encourage price information sharing with patients at the pharmacy counter, several states have engaged in efforts to provide patients with more information about the price and quality of different healthcare 

services. Some of these efforts include creating websites that give patients information about the prices of different procedures, requiring insurers to provide these 

tools to their members, and requiring providers to give patients information about 

the estimated prices for their treatment before they get the treatment. Unfortunately, to date, some of the preliminary evidence has shown that these some of 

these tools haven’t been very effective in getting patients to price shop. 

If we’re going to successfully reduce healthcare costs, we need to empower patients and engage them in the decision-making process. There needs to be greater 

transparency, so patients can have more information about the prices for different 

medical products and services, and that information needs to be given to them in 

a meaningful way. 

Given that some of the existing price transparency tools are still able to be improved, I’m eager to hear from the witnesses today about why there are some of 

these barriers and then also what else we can be doing to empower patients with 

information. I also want to hear about the role that the federal government can play 

in promoting transparency and making patients more informed about the cost of 

their care. 

Patients should be able to learn about how much something is going to cost them 

before they get it. This includes having information about different price options for 

prescription drugs at the pharmacy counter and information about different procedures and lab work, among other things. 

I have a lot of questions for the witnesses today, but one of my main questions 

is what is the best way for patients to be getting healthcare price information and 

how can we help empower patients? I also am interested in hearing about any market behaviors that work against transparency and ultimately harm any attempts to 

bring down healthcare costs. 

I’d like to thank our witnesses for being with us today, and look forward to their 

feedback on those questions and others. There is clearly a lot to be discussed in regards to today’s topic, and I look forward to a robust dialogue. 

Mr. BURGESS. Well, thank you, Mr. Chairman. And, Mr. Chairman, it is my fondest wish that one day I will come into a hearing 

in the Energy and Commerce Committee and there will be five doctors at the witness table, and they are going to expound for us on 

how much economists should be paid. I am still waiting for that 

hearing. We haven’t had it yet. 

Thanks to our witnesses for being here today. And, Mr. Chairman, to you I have a couple of things that I would just like to place 

into the record. 

This is a copy of H.R. 5547, a bill that was introduced in the last 

Congress by Mr. Green and I that dealt with transparency. And, 

in fact, Mr. Green and I have been working on transparency for the 

past several years. And a version of this was actually included as 

an amendment in the Affordable Care Act, but I think it got lost 

on its way to the Senate. 

9 

Mr. HARPER. Without objection. 

[The information follows:] 


35432.055
10 


35432.056

2 

1 SEC. 2. INCREASING THE TRANSPARENCY OF INFORMA· 

2 TION ON HOSPITAL CHARGES AND MAKING 

3 AVAILABLE INFORMATION ON ESTIMATED 

4 OUT-OF-POCKET COSTS FOR HEALTH CARE 

5 SERVICES. 

6 (a) IN GENERAL.-Title XIX of the Social Security 

7 Act is amended8 (1) in section 1902(a) (42 U.S.C. 1396a(a)), by 

9 inserting after paragraph (77) the following new 

10 paragraph: 

11 "(78) provide that the State will establish and 

12 maintain laws, in accordance with the requirements 

13 of section 1921A, to require disclosure of informa14 tion on hospital charges, to make such information 

15 available to the public, and to provide individuals 

16 with information about estimated out-of-pocket costs 

17 for health care services;"; and 

18 (2) by inserting after section 1921 (42 U.S.C. 

19 1396r-2) the following new section: 

20 "INCRJ<JASING THE TRAl~SPARENCY OI<' INFORMATION ON 

21 HOSPITAL CHARGES AND PROV1DING CONSUMERS 

22 \YITH ESTIMATES OF OUT-OF-POCKET COSTS FOR 

23 HEALTH CARE SERVICES 

24 "SEc. 1921A. (a) IN GENER.\L.-The requirements 

25 referred to in section 1902(a)(78) are that the laws of a 

26 State must-

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35432.057

3 

1 "(1) in accordance with subsection (b)-

2 "(A) require the disclosure of information 

3 on hospital charges; and 

4 "(B) provide for access to such informa5 tion; and 

6 "(2) in accordance with subsection (c), require 

7 the provision of a statement of the estimated out-of8 pocket costs of an individual for anticipated future 

9 health care services. 

10 "(b) lNFORl\IATION ON HOSPITAL CHARGES.-The 

11 laws of a State must12 "(1) require disclosure, by each hospital located 

13 in the State, of information on the charges for cer14 tain inpatient and outpatient hospital services (as 

15 determined by the State) provided at the hospital; 

16 and 

17 "(2) provide for timely access to such informa18 tion by individuals seeking or requiring such serv19 ices. 

20 "(c) ESTIMATED OUT-OF-POCKET COSTS.-The laws 

21 of a State must require that, upon the request of any indi22 vidual with health insurance coverage sponsored by a 

23 health insurance issuer, the issuer must provide a state24 ment of the estimated out-of-pocket costs that are likely 

25 to be incurred by the individual if the individual receives 

•HR 5547 ill 
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35432.058

4 

1 particular health eare items and services within a specified 

2 period of time. 

3 "(d) RULES OF CONSTRUCTION.-Nothing in this 

4 section shall be eonstrued as5 "(1) authorizing or requiring the Secretary to 

6 establish uniform standards for the State laws re7 qui red by subseetions (b) and (c); 

8 "(2) requiring any State vvith a law enacted on 

9 or before the date of the enactment of this section 

10 that11 "(A) meets the requirements of subsection 

12 (b) or subsection (c) to modify or amend such 

13 law; or 

14 "(B) meets some but not all of the requireIS ments of subsection (b) or subsection (c) to 

16 modify or amend such law except to the extent 

17 necessary to address the unmet requirements; 

18 "(3) precluding any State in which a program 

19 of voluntary disclosure of information on hospital 

20 charges is in effect from adopting· a law codifying 

21 such program (other than its voluntary nature) to 

22 satisfy the requirement of subsection (b)(l); or 

23 " ( 4) guaranteeing that the out-of-pocket costs 

24 of an individual will not exceed the estimate of such 

25 costs provided pursuant to subsection (c). 

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35432.059

5 

1 "(e) DEI<'INITIONS.-For purposes of this section: 

2 "(1) The term 'health insurance coverage' has 

3 the meaning given such term in section 279l(b)(l) 

4 of the Public Health Service Act. 

5 "(2) The term 'health insurance issuer' has the 

6 meaning given such term in section 2791(b)(2) of 

7 the Public Health Service Act, except that such term 

8 also includes9 "(A) a Medicaid managed care organiza10 tion (as defined in section 1903(m)); and 

11 "(B) a Medicare Advantage organization 

12 (as defined in section 1859(a)(l), taking into 

13 account the operation of section 201(b) of the 

14 Medicare Prescription Drug, Improvement, and 

15 Modernization Act of 2003). 

16 Section 1856(b)(3) shall not preclude the application 

17 to a Medicare Advantage organization or a Medicare 

18 Advantage plan offered by such an organization of 

19 any State law adopted to carry out the requirements 

20 of subsection (b) or (c). 

21 "(3) The term 'hospital' means an institution 

22 that meets the requirements of paragraphs (1) and 

23 (7) of section 1861(e) and includes those to which 

24 section 1820(c) applies.". 

25 (b) EFFECTIVE DATE.-

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35432.060

6 

1 (1) IN GI<JNERAL.-Except as provided in para2 graph (2), the amendments made by subsection (a) 

3 shall take effect on October 1, 2017. 

4 (2) EXCEPTION.-In the case of a State plan 

5 for medical assistance under title XIX of the Social 

6 Security Act which the Secretary of Health and 

7 Human Services determines requires State legisla8 tion (other than legislation appropriating funds) in 

9 order for the plan to meet the additional require1 0 ments imposed by the amendment made by sub11 section (a), the State plan shall not be regarded as 

12 failing to comply with the requirements of such title 

13 solely on the basis of its failure to meet these addi14 tiona! requirements before the first day of the first 

15 calendar quarter beginning after the close of the 

16 first regular session of the State legislature that be17 gins after the date of the enactment of this Act. For 

18 purposes of the previous sentence, in the case of a 

19 State that has a 2-year legislative session, each year 

20 of such session shall be deemed to be a separate reg21 ular session of the State legislature. 

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15 


35432.061

7 

1 SEC. 3. RESEARCH ON INFORMATION VALUED BY CON2 

3 

SUMERS ON CHARGES AND OUT-OF-POCKET 

COSTS FOR HEALTH CARE SERVICES. 

4 (a) RESEAIWII ON lNFORl\IATION VALUED Al'\fD USED 

5 BY CONSUMERS.-The Director of the Agency for 

6 Healthcare Research and Quality (in this section referred 

7 to as "AI-IRQ") shall conduct or support research, pursu8 ant to section 901(b)(l)(D) of the Public Health Service 

9 Act (42 U.S.C. 299(b)(l)(D)), on1 0 ( 1) the types of information on the charges, and 

11 out-of-pocket costs, for health care services that in12 dividuals find useful in making decisions about 

13 where, when, and from whom to receive care; 

14 (2) how the types of information valued by indi15 viduals for making such decisions vary by whether 

16 they have health benefits coverage and, if they do, 

17 the type of such coverage they have, such as tradi18 tiona! insurance, health maintenance organizations, 

19 preferred provider organizations, and high deductible 

20 plans coupled with health savings accounts; and 

21 (3) ways in which such information may be 

22 made available on a timely basis and in easy-to-un23 derstand form to individuals facing such decisions. 

24 (b) REPORT.-The Director of AHRQ shall report to 

25 the CongTess on the results of such research not later than 

26 18 months after the date of the enactment of this Act, 

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35432.062

8 

1 together with recommendations for ways in whieh the Fed2 eral Government can assist the States in achieving the ob3 jective specified in subsection (a)(3). 

4 (c) AUTHORIZATION OF APPROPRIATIONS.-There 

5 are authorized to be appropriated such sums as may be 

6 necessary to carry out this section. 

0 

•HR 5547 IH 
17 

Mr. BURGESS. Also, I would like to place for the record, I printed 

off some sheets from a website called txpricepoint.org. Texas 

PricePoint is a website that is at the least sponsored by the Texas 

Hospital Association, and it is useful information for your county 

or for your city, for the hospital in your county or for your city. 

For example, I printed off a sheet that I will, I will leave for the 

record that deals with the cost of an uncomplicated cesarean section in the hospital where I used to practice. And I note that although my hospital is a little lower than some of the other hospitals in the area, it is higher than other hospitals in the State. 

And as a physician, I also will submit to you that is useful information. And if recognizing the decision that a patient makes to go 

to a hospital is likely driven by the physician, making this type of 

information more available to physicians perhaps could help with 

physician behavior as far as directing the course for hospital care. 

So, I ask unanimous consent to place this into the record, and 

look forward to hearing from our witnesses. 

Ms. DEGETTE. Mr. Chairman, I reserve the right to object till I 

review the documents, although I am sure they will be fine. If I 

could just review the documents. 

Mr. HARPER. Well, as we review that we will come back to approving the entering that into the record as soon as Ms. DeGette 

has had an opportunity to review that. 

I will now recognize Mr. Pallone, the Ranking Member, for purposes of an opening statement. 

OPENING STATEMENT OF HON. FRANK PALLONE, JR., A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW JERSEY 

Mr. PALLONE. Thank you, Mr. Chairman. 

The cost of healthcare is consistently a top concern for American 

families. But all too often, consumers face an initial problem before 

they even receive care, knowing how much a certain healthcare 

service is going to cost them. And that is because there are so 

many players in the healthcare industry making it difficult to bring 

clear cost transparency to the consumer. 

Two different patients can receive the same service from a doctor 

but end up being charged starkly different prices. And this makes 

it difficult for a patient to make an informed decision about their 

care. 

There are multiple factors contributing to this lack of transparency in healthcare. For example, a provider may have a set of 

rates it changes for private-pay customers, but depending on a person’s insurance and deductible, their price could vary greatly. 

This differs from most other markets the consumer has a clear 

understanding of how much a product or service will cost, and can 

shop around to obtain the best deal. The nature of healthcare 

makes this more complicated. And it is particularly noticeable in 

emergency situations where a patient’s top concern is receiving the 

lifesaving care they need, rather than what the care will cost. In 

other expensive specialties such as oncology, patients trust their 

doctors to provide them with referrals based on quality of care. 

With that being said, consumers can certainly benefit from more 

information, and there are opportunities to bring more transVerDate Nov 24 2008 13:10 Mar 20, 2019 Jkt 037690 PO 00000 Frm 00021 Fmt 6633 Sfmt 6633 U:\MY DOCS\HEARINGS 115\HEARINGS\115-151 CHRIS
18 

parency to the healthcare industry. As we will hear from the witnesses today, just about every state has implemented some type of 

transparency initiative. For instance, my home State of New Jersey 

recently passed a law requiring providers to notify patients if they 

are out-of-network, helping to avoid surprise bills for patients. 

Many states have also created websites that post the prices of 

common procedures, and allow consumers to browse the prices of 

various providers. And this kind of reform can empower consumers 

just by giving them greater access to information. 

So, I look forward to hearing from the witnesses what the research says about these efforts, and what other reforms are being 

attempted in other states. However, we should be cautiously optimistic about greater transparency, as we have seen only modest results in actually bringing down costs. Some studies have found an 

increase in prices with more transparency, so we should be mindful 

of these results before considering any reforms. 

I also think it is important that we keep the big picture in mind 

here. It is one thing to bring more transparency to healthcare, and 

give consumers information on what they are being charged, but 

we should also encourage meaningful efforts to actually reduce 

healthcare costs for American families. 

And one of the primary ways to do that is by ensuring access to 

affordable health coverage. Whether it be Medicaid, essential 

health benefits in private insurance, or a robust marketplace for individuals who shop for insurance, transparency matters only if consumers have access to high-quality, affordable healthcare. 

And, finally, while I appreciate the efforts of this subcommittee 

to explore these issues, I would be remiss if I did not note that 

there is an emergency taking place right now within HHS that this 

committee should be holding an oversight hearing on. Today, there 

are still more than 2,500 children in the custody of HHS who have 

yet to be reunited with their families after being forcibly separated 

by the Trump administration. This committee has a responsibility 

to conduct vigorous oversight of the Federal Government, and 

today would have been a perfect day to have HHS Secretary Azar 

and Scott Lloyd, the Director of the Office of Refugee Resettlement 

to be here. 

So, I again urge the Republican majority to schedule a hearing 

as soon as possible so we can work to fix this crisis, and so we can 

finally get some answers. 

I don’t know if anybody wants my time. If not, I will yield back. 

Thank you, Mr. Chairman. 

[The prepared statement of Mr. Pallone follows:] 

PREPARED STATEMENT OF HON. FRANK PALLONE, JR. 

The cost of healthcare is consistently a top concern for American families. But all 

too often, consumers face an initial problem before they even receive care, knowing 

how much a certain healthcare service is going to cost them. That’s because there 

are so many players in the healthcare industry making it difficult to bring clear cost 

transparency to the consumer. 

Two different patients can receive the same service from a doctor but end up 

being charged starkly different prices. This makes it difficult for a patient to make 

an informed decision about their care. 

There are multiple factors contributing to this lack of transparency in healthcare. 

For example, a provider may have a set rate it charges for private-pay customers, 

but depending on a person’s insurance and deductible, their price could vary greatly. 

19 

This differs from most other markets, where the consumer has a clear understanding of how much a product or service will cost, and can shop around to obtain 

the best deal. The nature of healthcare makes this more complicated. And it’s particularly noticeable in emergency situations where a patient’s top concern is receiving the lifesaving care they need, rather than what that care will cost. In other expensive specialties such as oncology, patients trust their doctors to provide them 

with referrals based on quality of care. 

That being said, consumers can certainly benefit from more information, and 

there are opportunities to bring more transparency to the healthcare industry. As 

we will hear from the witnesses today, just about every state has implemented some 

type of transparency initiative. For instance, my home State of New Jersey recently 

passed a law requiring providers to notify patients if they are out-of-network, helping to avoid surprise bills for patients. 

Many states have also created websites that post the prices of common procedures, and allow consumers to browse the prices at various providers. This kind of 

reform can empower a consumer just by giving them greater access to information. 

I look forward to hearing from the witnesses what the research says about these 

efforts, and what other reforms are being attempted by the states. However, we 

should be cautiously optimistic about greater transparency, as we have seen only 

modest results in actually bringing down costs. Some studies have even found an 

increase in prices with more transparency, so we should be mindful of these results 

before considering any reforms. 

I also think it is important that we keep the big picture in mind here. It is one 

thing to bring more transparency to healthcare, and give consumers information on 

what they are being charged, but we should also encourage meaningful efforts to 

actually reduce healthcare costs for American families. 

And one of the primary ways to do that is by ensuring access to affordable health 

coverage. Whether it be Medicaid, essential health benefits in private insurance, or 

a robust marketplace for individuals to shop for insurance—transparency matters 

only if consumers have access to high-quality, affordable healthcare. 

Finally, while I appreciate the efforts of this subcommittee to explore these issues, 

I would be remiss if I did not note that there is an emergency taking place right 

now within HHS that this Committee should be holding an oversight hearing on. 

Today, there are still more than 2,500 children in the custody of HHS who have yet 

to be reunited with their families after being forcibly separated by the Trump Administration. This Committee has a responsibility to conduct vigorous oversight of 

the Federal Government, and today would have been a perfect day to have HHS 

Secretary Azar and Scott Lloyd, the Director of the Office of Refugee Resettlement. 

I again urge the Republican Majority to schedule a hearing as soon as possible 

so we can work to fix this crisis, and so we can finally get answers. 

Mr. HARPER. The gentleman yields back. 

Ms. DEGETTE. Mr. Chairman, I withdraw my right to object. I 

have no objection to these documents from Mr. Burgess. 

Mr. HARPER. The documents are so entered. 

[The information appears at the conclusion of the hearing.] 

Mr. HARPER. I ask unanimous consent that the members’ written 

opening, opening statements be made part of the record. 

Without objection, they will be entered into the record. 

Mr. HARPER. I would now like to introduce our witnesses for 

today. 

Today we have Dr. Jaime King, Professor at UC Hastings College 

of Law; and Dr. Michael Chernew, Professor at the Department of 

Health Care Policy at Harvard Medical School. 

Unfortunately, our third witness, Dr. Kavita Patel, was unable 

to be here today due to a family emergency. And Dr. Patel and her 

family will remain in our thoughts and prayers as we send them 

our best wishes. 

You are both aware that the committee is holding an investigative hearing, and when doing so has had the practice of taking testimony under oath. Do either of you have any objection to testifying 

under oath? 

20 

Mr. CHERNEW. No objection. 

Ms. KING. No objection. 

Mr. HARPER. Both witnesses have stated no. 

The Chair then advises you that under the rules of the House 

and the rules of the committee you are entitled to be accompanied 

by counsel. Do you desire to be accompanied by counsel during your 

testimony today? 

Mr. CHERNEW. No. 

Ms. KING. No. 

Mr. HARPER. Both witnesses have responded no. 

In that case, if you would please rise and raise your right hand 

and I will swear you in. 

[Witnesses sworn.] 

Mr. HARPER. You may be seated. 

You are now under oath and subject to the penalties set forth in 

Title 18, Section 1001, of the United States Code. You may now 

each give a five-minute summary of your written statement. And 

Dr. King, we will recognize you for 5 minutes. 

STATEMENT OF JAIME KING, PH.D., PROFESSOR, UC HASTINGS COLLEGE OF LAW; AND MICHAEL CHERNEW, PH.D., 

PROFESSOR, DEPARTMENT OF HEALTH CARE POLICY, HARVARD MEDICAL SCHOOL 

STATEMENT OF JAIME KING 

Ms. KING. Thank you. Committee Chairman Walden, Subcommittee Chairman Harper, Committee Ranking Members Pallone and DeGette, Subcommittee Chairmen Griffith and Castor, 

and members of the Subcommittee on Oversight and Investigations, I very much appreciate the opportunity to testify on price 

transparency in the healthcare market today. 

As you know, the cost of healthcare in the United States currently threatens the economic stability of our citizens, our businesses, and our nation. A 2018 Gallup poll found that more Americans worry about the availability and affordability of healthcare 

than any of the 14 other major social issues, like crime, the economy, and the availability of guns. 

Economic theory suggests that if consumers had better access to 

price information prior to choosing providers and receiving 

healthcare services that they would choose less expensive options, 

thereby lowering overall healthcare spending. As a result, states 

have been very active in this endeavor, introducing 163 price transparency bills so far in 2018. 

Historically, most state price transparency initiatives have focused on changing consumer behavior to encourage them to select 

providers and services that offer the greatest value at the lowest 

cost. Yet, health services research examining the impact of these 

efforts suggest that most of them have not engaged patients in a 

sufficient way to curb healthcare spending. Controlling healthcare 

spending requires engagement not just form patients but from all 

actors in the healthcare market: providers, payers, and policy makers. 

Twenty states, including Oregon, Maryland, Maine, and New 

Hampshire, have all developed All Payer Claims Databases which 

21 

collect information on both healthcare services Americans use, and 

amounts paid for those services. States can use these healthcare 

claims data to report better reporting to an All Care Claims Database, to inform patient and provider decisions regarding care; to 

allow payers to compare their rates to make sure that they are getting, you know, close to average or somewhere in there; and to 

allow policy makers to examine the drivers of healthcare costs over 

time; evaluate the effectiveness of various reform efforts; and measure the impact of mergers and acquisitions on healthcare price and 

quality. 

However, legal barriers including contractual provisions, ERISA 

preemption, and trade secret laws currently hinder the utility of 

many existing price transparency initiatives. 

So, what can Congress do? For transparency initiatives to 

achieve their full effect at the state level, changes are needed at 

the Federal level. And, fortunately, Congress has the ability to address some of the most significant barriers to price transparency. 

There are five things Congress can do to improve healthcare price 

transparency: 

Number one, and most important, address the ERISA preemption challenges. The main goal of ERISA is to promote uniformity 

in state regulations governing employee benefit plans. But over 

time, ERISA’s preemptive reach has expanded in ways that put 

this goal of uniformity for employers over transparency, competition, and affordability of healthcare for all Americans. 

The Supreme Court decision in Gobeille v. Liberty Mutual Insurance held that ERISA preempted state All Payer Claims Databases, preempted their reporting requirements as applied to self-insured employer plans. And this decision left state All Payer Claims 

Databases without healthcare claims data for about a third of their 

population, which greatly limits their accuracy and their utility. 

Essentially, trying to analyze the healthcare landscape using 

data from an All Payer Claims Database without the self-insured 

employer population is kind of akin to Google Maps, trying to use 

Google Maps without a third of the road; right? 

Enabling All Payer Claims Databases to collect the full set of 

healthcare claims data would dramatically increase the utility and 

reliability of these initiatives. While addressing ERISA preemption 

of state health reform laws is the most important thing that Congress can do to promote price transparency and bring down 

healthcare costs, additional actions by Congress could also help illuminate healthcare prices, which brings me to number two. 

Congress should seek to encourage price shopping incentives like 

reference pricing, rewards, and shared networks, through demonstration and pilot projects. 

Number three, Congress should create a public interest exemption to Defend Trade Secrets Act of 2016. Healthcare providers and 

insurers currently invoke trade secrets protection to avoid disclosing negotiated healthcare prices and other information to consumer, employers, researchers, and state officials. 

Trade secrets protections were designed to encourage and protect 

innovation, like the Coca-Cola formula, not to permit Coca-Cola 

and restauranteurs to hide its price on the menu and then after 

you eat your meal give you a bill for a $25 Coke. Right? 

22 

Number four, Congress should require manufacturers of electronic medical records and insurance companies to establish uniform standards of interoperability and standard bundles of care for 

billing purposes so that providers and patients can access meaningful and actionable information about the cost to the patient, who 

and what is in the patient’s network, and the quality of providers 

and services being offered to them when the provider is making referrals during appointments. 

And, number five, they should develop billing codes for a physician’s time spent in these efforts. 

Thank you. 

[The prepared statement of Ms. King follows:] 

23 


35432.001

Testimony of: 

Jaime S. King 

Examining State Efforts to Improve Transparency in Healthcare Costs for 

Consumers 

Subcommittee on Oversight and Investigations 

Committee on Energy and Commerce 

U.S. House of Representatives 

Tuesday, July 17,2018 
24 


35432.002

Summary of Tcstimonv 

The United States currently spends more than any other nation on healthcare, as a 

percentage of gross domestic product and per capita. Our healthcare markets suffer from high 

levels of consolidation, a lack of clear price and quality signals for consumers, and an inability to 

access price, utilization, and quality data. Price transparency initiatives, like all payer claims 

databases, can improve healthcare market functioning in all these areas by providing relevant 

information to decision-makers, including patients, providers, payers, and policymakers, at key 

decision points. Historically, most price transparency initiatives have focused on changing 

consumer behavior to encourage them to select providers and services that provide the greatest 

value at the lowest cost. Unfortunately, these initiatives have not been successful at bending the 

cost curve due to limited usage and mixed levels of effectiveness. Price transparency initiatives 

that provide patient, provider, procedure, and plan level of specificity on price and quality to 

consumers, accompanied by a financial incentive, like reference pricing or tiering, have proven 

more effective. However, even with these potential improvements, legal barriers including 

contractual provisions, ER!SA preemption, and trade secrets laws continue to hinder the utility 

of many existing price transparency initiatives. 

Congress, more than any other entity, has the ability to address the most significant 

barriers to price transparency in healthcare and maximize the tremendous untapped potential of 

existing state initiatives, in particular APCDs. To do so, Congress should narrow ERISA 

preemption to exclude state health reform efforts that do not unduly burden ERISA' s goal of 

uniformity for employer-based benefit plans, while also granting states sufficient flexibility to 

achieve their health reform goals. 

2 
25 


35432.003

Testimony of JaimeS. King 

Committee Chairman Walden, Subcommittee Chairman Harper, Committee Ranking 

Member Pallone, Subcommittee Ranking Member Degette, and Members of the Subcommittee 

on Oversight and Investigations, I very much appreciate the opportunity to testify on the role of 

price transparency in the healthcare market. I am a professor of law and the Bion M. Gregory 

Chair in Business Law at the University of California, Hastings College of the Law. I have 

written and taught in the field of health law and policy for the last ten years. I am also the 

Associate Dean and Co-Director of the UCSF/UC Hastings Consortium on Law, Science and 

Health Policy, and the Co-Founder and Executive Editor of The Source on Healthcare Price and 

Competition, a free and independent academic website that posts news, academic articles, 

legislative developments, litigation documents, original analysis, and guest commentary on 

healthcare price and competition. I owe a great deal of thanks to Katherine Gudiksen, Laura 

Hagen, Erin Fuse Brown, Anna Sinaiko, and everyone at The Source on Healthcare Price and 

Competition who contributed their time, effort, and research to this testimony. 

Introduction 

The cost of healthcare in the United States currently threatens the economic stability of 

our citizens, our businesses, our state and local governments, and our nation. The United States 

spends more on healthcare than on any other sector of the economy, including defense, 

transportation, education, or housing. A 2018 Gallup poll found that a greater percentage of 

Americans (55%) stated that they worry "a great deal" about the availability and affordability of 

healthcare than fourteen other major social issues, like crime, the economy, unemployment, 

terrorist attacks, and the availability of guns. 1 In 2017, projected U.S. spending on health care 

1 Jeffrey Jones, U.S. Concerns About Healthcare High; Energy, Unemployment Low, GALLUP (March 26, 2018). 

hti:J;ls://news .gall up.com/po 11123 !5 33/concems-healthcare-hi gh·energv-unemp loyment-low .aspx. 

3 
26 


35432.004

goods and services approached $3.5 trillion2 This amounts to more than any other economically 

developed country, both as a percentage of GDP and per capita. 3 Despite this, the health of 

Americans is not significantly better than that of our counterparts in countries like the U.K. or 

Canada. In fact, on many key metrics we are falling behind. 4 

When faced with how to address growing healthcare costs, academics and policymakers 

frequently focus on ways to address market inefficiencies and failures. One market failure that 

has received a great deal of attention in recent years is the lack of price transparency in the 

healthcare market. Nearly every day a news story reveals the plight of Americans facing 

astronomical heal the are bills that seem to have little to no relation to the cost of providing the 

services received and come as a complete shock to consumers. For instance, Peter Drier of New 

York was blindsided by a medical bill of about $117,000 from an "assistant surgeon" who the 

primary surgeon called in while Mr. Drier was receiving neck surgery. Each surgeon billed for 

each step of the procedure. The primary surgeon billed $74,000 for removing two disks and an 

additional $50,000 for placing the hardware, while the assistant billed $67,000 and $50,000 for 

those tasks. The primary surgeon accepted a negotiated fee determined through Mr. Drier's 

insurance company which was about $6,200. However, because the assistant surgeon was out-of~ 

network, he charged $117,000. Had Mr. Drier been a Medicare beneficiary, the assistant would 

have only been able to bill 16% of the primary surgeon's fee roughly $800, less than 1% of 

2 CENTERS FOR MEDICARE AND MEDICAJD SERVICES, NATIONAL HEALTH EXPENDITURES FACT SHEET, 

!illQ;;;i/www.cms.gov/rese~rch-statLs!ics-data:.'l.!]Jl.2Y,Stems/statistics-Jren<j§:and: 

r.<m-Ql1'lLlli!liQll<Jlhi'_a1thexg,t;Jlddatainhe-fact-sheet.htJ1]] (last modified Apr. 17, 20 18). 3 ORGANIZATION FOR ECONOMIC COOPERATION AND DEVELOPMENT, SPEI\DING ON HEALTH: LATEST TRENDS, June 

20 18, http://www .oecd .org/hea1th/hea1th-systems/health-data.htm. 4 Irene Papanico1as et al., Health Care Spending in the United States and Other High-Income Countries, 319 JAMA 

10, 1024-39 (2018); Austin Frakt, Medical Mystery: Something Happened to U.S. Health Spending After 1980, N.Y. 

TIMES (May 14, 20 18), https://www.nytimes.com/20 18/0511 4/upshot/medica1-mystery-health-spending-1980.html. 

4 
27 


35432.005

what the assistant surgeon was actually paid5 In an effort to protect patients like Mr. Drier from 

these astronomical fees, and twenty-four states enacted legislation prohibiting surprise billing of 

patients 6 

Economic theory suggests that if consumers had better access to price information prior 

to choosing providers and receiving healthcare services, they would choose less expensive 

providers and services, and thereby lower overall healthcare spending. Empirical studies on price 

transparency in other markets show that transparency initiatives tend to lead to more consistent, 

lower prices.7 As a result, price transparency has become a ''cornerstone of the consumerdirected healthcare model," with policymakers, insurers, private entities, state and local 

governments, and consumer advocacy organizations investing significant time, resources, and 

capital to promote consumer-focused price transparency in healthcare. 8 Yet, health services 

research examining the impact of these efforts suggests that most of them have not engaged 

patients in a sufficient way to curb healthcare spending. 9 

Controlling healthcare spending requires engagement from all stakeholders in the 

healthcare market patients, providers, payers, and policymakers. Price transparency initiatives, 

such as all payer claims databases (APCDs), have great potential to provide critical data to guide 

5 Elisabeth Rosenthal, After Surgery, Surprise $117.000 Medical Bill from Doctor He Didn't Know, N.Y. TIMES 

(Sept. 14. 2014 ), https://www .nvtimes.com/20 14/09/21 /us/drive-by-doctoring-surprise-medical-bills.html. 6 See Kevin Lucia et al., Balance Billing by Health Care Providers: Assessing Consumer Protections Across States, 

THE COMMONWEALTH FUND (June 13, 20 17), https://www.commonwealthfund.org/publications/issuebriefs/20 l7/jun/balance-billing~health-care-providers-assessing-consumer for a description of2l states that had 

balance billing laws in 2017. Since the report was issued. Tennessee (HB 1935/SB 1969), Minnesota (SF 3480), and 

Missouri (SB 982) have passed balanced billing laws and Colorado (SB 146/HB 1282), New Hampshire (HB 

1782/HB 1809), and New Jersey (AB 2039) have strengthened theirs. 7 D. ANDREW AUSTIN & JANE G. GRAVELLE, CRS Report for Congress: Docs Price Transparency Effect Market 

Efficiency? Implications of Empirical Evidence in Other Markets for the Hcalthcarc Sector (2008) (hereinafter CRS 

Report for Congress]. 8 A. Mchrotra ct al., Promise and Reality of Price Transparency, 378 N. ENGL. J. MED. 14, 1348 (20 18). 9 See. e.g., A. Mehrotra et al., Use Patterns of a State Health Care Price Transparency Web Site: What Do Patients 

Shop For?, 51 INQUIRY: THE J. OF HEAL Til CARE ORG., PROVISION, AND Ftt\ANCII'G, 0046958014561496 (2014); 

S. Desai et al., Association Between Availability of a Price Transparency Tool and Outpatient Spending, 315 JAMA 

17, 1874-81 (2016). 

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healthcare reform efforts, inform analysis on the drivers of health care costs, and help patients 

and providers choose high-value/lower-cost treatment options. However, currently the amount 

and quality of data available to patients and their doctors and laws restricting data collection 

limit even premier price transparency tools. 

My testimony today will provide an overview of existing price transparency tools, and 

then focus on how improved transparency can benefit healthcare decision-making by targeting 

different intormation to stakeholders. I will then discuss why many prior attempts at improving 

price transparency have not achieved their goals, and what Congress can do to promote price 

transparency in healthcare. 

Summary of Key Points 

Price transparency initiatives can improve healthcare market functioning by providing 

relevant information to decision-makers, including consumers, providers, insurers, 

employers, and policymakers, at key decision points. 

Historically, most price transparency initiatives have focused on changing consumer 

behavior to encourage them to select lower priced providers and services. These 

initiatives have had limited usage and mixed results. 

Price transparency initiatives that provide patient, provider, procedure, and plan level of 

specificity on price and quality to consumers, accompanied by a financial incentive, like 

reference pricing or tiering, have proven more effective. 

Legal barriers including contractual provisions, ERISA preemption, and trade secrets 

laws hinder the effectiveness of many existing price transparency initiatives. 

Congress has a range of options in how it can promote price transparency to improve 

healthcare decision-making and lower costs, but the most important and effective act it 

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could take is to leverage existing state efforts and resources by amending ERISA to 

narrow its preemption of state health refom1 efforts, especially those targeting 

transparency. 

Overview of State Price Transparency Initiatives 

Over the last ten years, states have passed laws to reduce the barriers to price 

transparency and developed statewide databases of healthcare claims data to allow for 

comparison and analysis ofhealthcare price, quality, and utilization data. State governments 

have refined their transparency tools over time to improve their utility and to respond to 

particularly pressing issues. So far in 2018, state legislatures have introduced 163 health care 

price transparency bills (see Appendix A). A large percentage of these bills focused on 

addressing transparency in pharmaceutical drug prices, but states have also introduced a wide 

swath of non-pharn1aceutical price transparency bills. Recent state-based efforts include 

implementing and expanding APCDs, giving consumers new tools to access and compare prices 

for both insurance plans and healthcare services, and incentivizing patients to shop for highervalue services. Finally, many states recently passed laws protecting patients from surprise or 

balance billing practices, and laws prohibiting anti-competitive contract terms like gag clauses 

and anti-tiering/anti-steering clauses. This section will highlight some of the most common state 

transparency initiatives. 

All Payer Claims Databases 

All Payer Claims Databases (APCDs) arc the cornerstone of many comprehensive price 

transparency initiatives. Their importance to developing consumer shopping tools, public 

informational tools, healthcare cost control etiorts, and overall competition in healthcare markets 

cannot be overstated. An APCD is a comprehensive collection of medical claims data from both 

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public and private payers with information specific to individual plans, patients, and procedures. 

Consumers can usc the data in APCDs to shop for higher value health services or providers. In 

addition, data from APCDs can be used to inform state policymakers about the operation of 

healthcare markets in the state. 

While APCDs are instrumental tools for consumer shopping, they typically collect 

information on the services provided and the amounts paid for those services, rather than the fees 

charged. Insurance companies negotiate significant discounts from retail or "chargcmaster" 

rates, and so such rates rarely provide the critical pricing information that patients and 

policymakers need. Providing both negotiated prices and amounts paid, on the other hand, paints 

a much clearer picture, though they are notoriously difficult to access. 

To obtain such information, many states have mandated health plans to report their prices 

to the state APCD, while others permit them to submit the information voluntarily. Maine 

established the first statewide APCD in 2003, and twenty states now have or are implementing 

statewide APCDs with mandatory submission, and seven more states have APCDs. with 

voluntary submission. 10 States with mandatory reporting requirements have more comprehensive 

data. States with only voluntary reporting mechanisms only receive a portion of the picture, 

which will, almost assuredly, not prove representative of the entire population. For example, 

Oklahoma's voluntary APCD covers only 1 million people, or approximately 25% of the 

population, 11 and therefore risks giving misleading information. 

The demand for more reliable information about costs is growing and experts predict that 

over half the states will have an APCD or APCD-likc database by 2022 that will cover at least 

10 The states with APCDs that require submission are: AR, CO, CT, DE, FL, Hl, KS, ME, MD, MA, MN, NH, NY, 

OR, R!, TN, UT, VT, WA, WV. The states with voluntary APCDs are: CA, Ml, OK, SC, VA, WI, WY. 

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two-thirds of their populations. 12 States will continue to improve and refine their APCDs. 

However, the reliability and utility of state APCDs arc compromised by their inability to obtain a 

comprehensive set of claims data because ERISA preempts any state law requiring self-insured 

employers to submit hcalthcare claims data. Nonetheless, the experience of many states 

demonstrates the power of APCDs to both help patients shop for higher value care and 

strengthen analysis of a state's healthcare market. 

Price Comparison Tools 

Once established, states can use the data collected in their APCD to create price 

comparison tools and incentives for patients to find the best value providers. For example, NH 

Health Cost, New Hampshire's APCD-based consumer-facing website, allows consumers, health 

plan enrollees, and employers to select different carriers while comparing prices. 13 Importantly, 

because NH Health Cost has access to the insurer's negotiated prices with in-network providers, 

it can provide consumers with personalized out-of-pocket cost information for a particular 

procedure with a particular provider. New Hampshire's website is also one of the few publicly 

available sites that allows employers or payers to compare their rates to the median rate for a 

given service at a particular provider (e.g., a colonoscopy at the same hospital for each major 

insurer). Even with the desire and expertise, New Hampshire has struggled to offer this level of 

detailed information for each patient as benefit designs evolve to include options like valuebased payments. 14 

12 Joel Ario & Kevin MeA vey, Transparency in Health Care: Where We Stand And What Policy Makers Can Do 

Now, HEALTH AFFAIRS BLOG (July II, 20 18), 

https:l/www.healthaffairs.org/do/l 0.13 77 /hblog20 180703.549221 /full/. 13 NH HEAL Til COST, https://nhhealthcost.nh.gov/ (last visited July 11, 2018). 14 Ario & McAvey, supra note 13. 

9 
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Massachusetts, another pioneer in building and refining APCDs, also requires mandatory 

submission ofhealthcare claims data and records of services provided from public and private 

payers, including commercial health plans, Medicare, and MassHealth. 15 However, 

Massachusetts' APCD, maintained by the Center for Health Information and Analysis (CHIA), 16 

does not offer the same connectivity with specific insurance plans as New Hampshire's APCD 

does. Instead, CHIA's healthcare transparency tool, MassCompareCare, includes a procedure 

pricing tool. This tool uses data extracted from the state's 2015 APCD and displays, by insurer, 

the median payment to any provider for any of 295 services. Additionally, it supplies quality 

information about different providers. 

While these consumer-facing websites offer patients pricing information for different 

providers and services, few patients have engaged with them, for reasons I discuss below, and 

states have begun to try to incentivize patient engagement. 

Right to Shop Laws 

"Right to Shop" laws attempt to engage patients by giving them the ability to benefit 

financially when they choose lower-cost care. In New Hampshire, for example, consumers who 

successfully select a provider/service at a lower price receive a share of the savings in cash. 17 

Maine adopted a similar Right to Shop law in 2017 with transparency provisions that require 

insurers to give patients access to anticipated charges and estimated out-of-pocket charges in 

advance of receiving care. The law also requires carriers with small business group plans to offer 

plans that give financial incentives to patients who choose a high-quality, low-cost provider, and 

15 In Massachusetts, Medicaid and Children's Health Insurance Program (CHIP) are combined into one program 

called MassHealth. Mass Health, MASS.GOV, https://www.mass.gov/topics/masshealth (last visited July 11, 20 18). 16 CH1A, http://www.chiamass.gov/ (last visited July II, 2018). 17 N.H. REV. STAT. ANN.§ 420-G:II, G: 11-a (2018); Josh Archambault & Nic !lorton, Right to Shop: The Next Big 

Thing in Health Care, FORBES (Aug. 5, 2016, 12:12 PM), 

https ://www. forbes.com/sitcs/thcapothecary/20 16/08/0 5/ri ght -to-shop-the-next-big -thing-i n-hea!th-care. 

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to require all non-HMO plans to cover out-of-network providers with rates that are lower than 

the state averagc. 18 In order to implement Right to Shop laws, states and/or providers must first 

build comprehensive databases, such as APCDs, and implement shopping tools necessary to 

allow consumers to accurately and adequately shop between providers and services. 

Restrictions on Surprise and/or Balance Billing 

Other efforts to improve price transparency focus on providing patients access to prices 

when they seek care and protecting them from surprise bills. When an insured patient sees an 

out-of-network provider, the provider can bill the patient for the difference between the 

provider's charges and the insurer's payment. These surprise or balance billing practices can 

result in astronomical out-of-pocket costs for patients, as Peter Drier of New York found out 

when he got the bill for $117,000 from the assistant surgeon that he never met. These practices 

often affect patients in their weakest moments when they have little control over their care (e.g., 

in a hospital where they receive care from an out-ol~network doctor at an in-network facility). In 

response, states have begun taking action to restrict surprise and balance billing. 

Currently 24 states o!Ter some protection from balance billing, but only less than half 

offer comprehensive safeguards. 19 While some states, including Florida,2

° California,21 and, 

more recently, New Jersey,22 ban balance billing altogether, many states instead require some 

form of disclosure of potential balance or surprise billing. States have done this in different 

ways. For example, some states require providers to disclose that a patient might receive a bill 

18 L.D. 445, !28th Leg., Reg. Scss. (Me. 2018). 19 See footnote 6. According to Lucia 2017, some states prohibit provider balance billing, while others require 

insurers to hold enrollees harmless !Tom balance billing charges by paying the entire charge if necessary, and some 

do both. In states that have adopted both approaches, out-of-network providers are directly prohibited !Tom balance 

billing consumers for additional charges beyond what the health plan pays. In addition, insurers must guarantee that 

the consumer is held harmless !Tom, and is not liable for, balance billing charges. 20 H.B. 221, Reg. Sess. (Fla. 20 16). 21 A.B. 72, Reg. Sess. (Cal. 20 18). 

2

2 A.B. 2039. Reg. Sess. (N.J. 2018). 

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for charges from out-ot~network providers or that certain types of providers are not employed by 

the facility. For example, Tennessee requires health facilities to have patients sign the following 

statement before receiving care: "Anesthesiologists, radiologists, emergency room physicians, 

and pathologists are not employed by this facility ... Before receiving services, the patient should 

check with his or her insurance carTier to find out if the patient's providers are in-network. 

Otherwise, the patient may be at risk of higher out-of-network charges.'m These type of 

disclosure laws, however, do little more than cover the providers from liability, as patients often 

have little choice of emergency room physician or anesthesiologist. Without adequate 

information and viable options, patients have little ability to plan for or avoid such costs. The 

goal of price transparency initiatives is to reduce expenditures by allowing patients to shop for 

higher value care. Patients will be unable to meaningfully shop for care if they cannot know the 

prices before getting that care, they do not have a choice in providers, or if they may be charged 

excessively high fees that they could not anticipate. 

Some states require disclosure of cost estimates. Minnesota requires providers to give 

patients good faith estimates of the payment the provider has agreed to accept from the 

consumer's health plan and to disclose any fees, including facility fees, that an insurer does not 

typically pay24 Some states have gone a bit further and passed "hold harmless laws." For 

example, Colorado requires a provider to accept payment that is equal to the rate the insurer 

would pay to an in-network provider25 Colorado, however, does not prohibit providers from 

sending bills to patients who might not understand that they do not have a responsibility to pay 

23 H. B. 1935 & S.B. 1869, !lOth Leg., Reg. Sess. (Tenn. 2018) (codified at TENN. CODE ANN.§ 56-7-120 (2018)) 

requires written consent for both the charges and the out-of-network statement 24 Minnesota Senate Bill 3480, which recently passed, requires provider to provide the consumer with information 

regarding other types of fees or charges that the consumer may be required to pay in conjunction with a visit to the 

provider, including but not limited to any applicable facility fees. S.F. 3480, 90th Leg., Reg. Sess. (Minn. 20 18). 25 S.B. 06-213, 65th Leg., 2nd Reg. Sess. (Colo. 2006), 

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those bills 26 By prohibiting surprise billing practices and requiring providers and insurers to 

negotiate out-of-network rates, at least for emergency services, states can protect patients from 

financially devastating and unavoidable healthcare bills. 

Prohibitions on Anti-Transparency Contract Provisions 

States have also begun to prohibit insurers and providers from including certain types of 

provisions in their contracts that might prevent disclosure of health care prices or price shopping. 

First, non-disclosure provisions, also known as "gag clauses," often prohibit providers and 

insurers from disclosing negotiated prices, methods of cost-sharing, or more affordable treatment 

options. In 2017, Maine passed a law prohibiting gag clauses in pharmacy contracts, which states 

"if information related to an enrollee's out-of-pocket cost or the clinical efficacy of a prescription 

drug or alternative medication is available to a pharmacy provider, a carrier or pharmacy benefits 

manager may not penalize a pharmacy provider for providing that information to an cnrollee.'m 

In other instances, higher-priced providers have used anti-tiering or anti-steering contract 

provisions to prevent insurers from incentivizing patients to choose lower-cost providers. For 

example, insurers could signal which providers offer higher value care through the use of "tiered 

networks" by oficring lower copays or other cost-sharing reductions to patients who use 

providers in preferred tiers. Most famously, North Carolina and the Department of Justice 

recently sued the Carolinas HcalthCarc System in an antitrust suit, claiming that the provider's 

anti-tiering and anti-steering provisions violated Section 1 of the Sherman Act.28 California is 

currently considering a bill to ban these contract provisions, but it has not yet passed. 29 

26 Lucia, supra note 6. 

27 L.D. 6, !28th Leg., Reg. Sess. (Me. 2017) (codified at ME. REV. STAT. ANN. tit. 24-a, § 4317 (2018)). 28 United States and the State a{ North Carolina v. The Charlotte-Mecklenburg Hasp. Auth., d/b/a Carolinas 

Healthcare System, 248 F. Supp. 3d 720 (W.D.N.C. 2017). See also United States v. Am. Express Co., 838 F.3d 179 

(2d Cir. 20 !6). 29 S.B. 538. Reg. Sess. (Cal. 2018). 

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Naming and Shaming Laws 

In contrast to transparency laws that encourage or enable patients to make more costeffective decisions about healthcare, laws that publicly display and/or fine entities with high 

healihcare prices aim to alert the public as to which entities are charging the highest prices and 

potentially shame them into lowering prices. In "naming and shaming laws," states may also 

explicitly define price gouging, often saying if prices increase higher than some threshold 

without a reasonable justification, the state Attorney General can prosecute the entity for price 

gouging. In 2018, most naming and shaming laws focused on addressing drug prices; however, 

states could apply similar laws to non-pharmaceutical healthcare services in the future. 

The states have demonstrated a keen interest in addressing hcalthcare costs and 

promoting healthcare price transparency. State laws have evolved over time to better satisfy 

consumer and governmental needs to access healthcare pricing data, yet there is still a long way 

to go. 

The Unrealized Potential of Consumer-Focused Transparency Tools 

With all the interest in state price transparency initiatives, one would think they had been 

quite successful at lowering hcalthcare spending. Despite growing efforts at both the state and 

federal level to increase transparency as a means of facilitating price shopping, so far these tools 

have been ineffective at substantially reducing costs. Studies examining these tools repeatedly 

demonstrate that simply offering patients access to price transparency tools alone has little effect 

on healthcare spcnding.3°· 31 · 

32 

30 Ethan M.J. Lieber, Does It Pay to Know Prices in Health Care?, 9 AM. ECON. J.: ECON. POL'Y 1, 154-79 (2017). 31 Sun ita Desai el a!., Offering a Price Transparency Tool Did Not Reduce Overall Spending Among California 

Public Employees and Retirees, 36 HEALTH AFFAIRS 8, 1401-7 (2017). 32 Anna D. Sinaiko eta!., Association Between Viewing Health Care Price Information and Choice of Health Care 

Facility, 176 JAMA Internal Medicine 12, 1868-70 (2016). 

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Initially, price transparency tools offered patients provider retail rates, known as 

"chargemaster" rates. These provide little utility for insured patients attempting to know their 

out-of-pocket costs for a particular procedure by a particular provider within their particular plan. 

Patients also found the information on these websites confusing, as the terms and procedures 

were not standardized, the billing mechanisms were highly complex, and the prices often were 

broken out across a range of providers, services, and devices, making it impossible for a patient 

to fully anticipate his or her costs. Not surprisingly, consumers did not use these tools very often. 

Over time, states and insurers offering consumer-facing price comparison tools, like NH 

Health Costs or United Healthcare's MyUHC Cost Estimator,33 began to offer consumers 

information on their out-of-pocket prices that that were patient, provider, procedure, and plan 

specific. For a price transparency tool to be useful for consumers, it must tell them how different 

choices of providers will affect their costs. When a patient uses a price transparency tool, studies 

have typically found savings between 10 and 17% for that patient. 34· 

35 These results are 

promising, but research demonstrates that the effect on overall spending is minimal due to lack 

of consumer engagement with these tools. 

Overwhelmingly, studies reveal patients' reluctance to use price transparency tools when 

shopping for medical procedures, with approximately 2-20% of patients using available tools to 

33 MyUHC Cost Estimator, U"ITED HEALTHCARE, https:l/www.uhc.com/individual-and-family/mcmberresourceslhealth-care-tools/cost-estimator. (last visited July 14, 2018). 34 Lieber, supra note 3 I. 35 C. Whaley et al., Association Between Availability of Health Service Prices and Payments for these Services, 312 

JAMA 16, 1679-76 (20 14). 

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search for price information, depending on the intervention36· 

37· 

38· 

39• 

4

° For example, in a 2016 

study, only 3.5% of Aetna enrollees used an available online, personalized, episode-level price 

comparison tool, but costs for enrollees that used the tool to search for diagnostic services were 

12% less than those who did not use the tooL41 Further, a study by Desai et aL showed that 

access to a price transparency website led to only a I% decrease in medical spending because 

less than 10% of eligible patient~ even logged into the online tool to search for any procedure or 

provider.42 Mehotra et al. attempted to understand how patients seek out price information by 

interviewing 3,000 non-elderly Americans with recent out-of-pocket spending on medical 

services.43 The researchers found that 13% of the interviewees had searched for price 

information before their care, but in most cases the patients had only called their physician or 

plan to determine their out-of-pocket costs, rather than use the online tool to compare prices and 

select a provider. Specifically, only 3% of the interviewed patients compared prices between 

different providers. Because so few patients usc these tools, consumer-focused price 

transparency tools, even those that can provide provider specific and plan specific information, 

have generally demonstrated minimal savings 44 

The question is: why aren't these tools more widely used? First, most insurance benefit 

designs do not incentivize patients to shop for costs. For example, if a patient has a flat copay, 

36 Lieber, supra note 31. 37 Whaley et aL, supra note 36, at 1670-76. 38 Anna D. Sinaiko & Meredith B. Rosenthal, Examining a Healthcare Price Transparency Tool: Who Uses !t, and 

How They Shop for Care, 35 HEAL Til AFFAIRS 4. 662-70 (20 16). 39 Desai et aL, supra note 32. 40 A. Mehrotra ct aL, Americans Support Price Shopping for Health Care, but Few Actually Seek Out Price 

!njormation, 36 HEALTH AFFAIRS 8, 1392-400 (20 17). 41 Sinaiko et aL, supra note 33. 42 Desai et aL, supra note I 0. 43 Mehrotra et a!, supra note 41. 44 Mchrotra ct aL, supra note 9, at 1348-54. 

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she has little financial incentive to search for a cheaper providerY Second, decisions about 

medical care are critically important and patients are often forced to make these decisions at 

particularly vulnerable and challenging times. Patients often simply do not have the stamina and 

energy to track down different provider prices, identify those with the lowest cost rates, make 

numerous phone calls to see which ones are actually taking patients and still remain in their 

network, and then wait for their appointment. They would much prefer to receive a short list of 

providers recommended by their primary care doctor or loved one and seck treatment from them. 

Finally, since patients have so much at stake, price is often not the determining factor when 

making medical decisions. For shoppable services, i.e., non-urgent and interchangeable services 

like laboratory or diagnostic tests, patients are more willing to shop based on price, but patients 

are much less likely to do so for services where the quality is harder to assess, like provider 

selection. Detailed interviews with patients with access to the Castlight price transparency tool46 

highlighted that factors other than price are most important when choosing a provider; patients 

described how their relationship, trust, and loyalty to their current providers was more important 

than cost47 Patients also face significant switching costs associated with becoming a patient at a 

new practice, including long wait times for appointments, additional paperwork, having to 

recount their medical history, and loss of provider knowledge about the patient's personal and 

medical history. As a result, the most opportune time to otTer information about costs and value 

to patients is when they choose new insurance coverage or new providers. 

All these factors mean that healthcare services differ substantially from most other items 

individuals purchase. Choosing to compare prices and change providers is not like choosing to 

45 Lieber, supra note 31. 46 CASTLJGHT HEALTII, https://www.castlighthealth.com/ (last visited July 14, 2018). 47 H.L. Semi gran eta!., Patients' Views on Price Shopping and Price Transparency, 23 AM. J. OF MANAGED CARE 

6. e I 86-92 (20 17). 

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shop at a different car dealership or department store. The consequences of choosing a lower 

quality provider can be catastrophic and patients are often hesitant to shop for a better price, 

especially when making these choices without guidance and support. Furthermore, the lasting 

relationship patients often have with their primary care provider builds trust, and if their provider 

refers them to a particular specialist, patients often choose to see that particular provider without 

considering cost. Even individuals with high-deductible health plans (HDHPs), who seemingly 

have the highest financial incentives to shop for higher-value, lower-cost services, rarely switch 

providers or seek out lower-cost services. A study of people in the first two years of coverage 

under an HDHP found a 15% reduction on spending for healthcare services for these 

individuals 48 Detailed economic analysis, however, showed that nearly all the savings came 

from reducing the amount of care the individuals received, not from price shopping or switching 

providers 49 

Collectively, these studies provide evidence that, when used effectively, price 

transparency tools can reduce the cost of health services. These studies also show, however, that 

to broaden the use and impact of these tools, we need to do more than simply provide patients 

with access to lists of providers and prices. We must engage other actors in healthcare markets 

by providing them access to relevant healthcare pricing information at critical decision-making 

points. 

Maximizing the Potential of Price Transparency Tools 

The current lack of price transparency in healthcare not only confounds patient decisionmaking, it also hinders provider treatment decisions, payer price setting, and governmental 

48 Zarek C. Brat-Goldberg ct al., What does a Deductible Do> The Impact of Cost-Sharing on Health Care Prices, 

Quantities. and Spending Dynamics, 132 TilE Q. J. OF ECONS. 3, 1261-1318 (2017). 

49 Id 

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reform eJ:Torts and policy analysis. This section provides suggestions for how various price 

transparency initiatives can promote more cost effective decision-making and help bend the cost 

curve by providing patients, providers, payers, and policymakers essential information at critical 

decision points. 

Patients 

To maximize the e!Tectiveness of consumer-facing price transparency tools, patients need 

actionable information ti·om trusted sources and incentives to act on that information. For 

example, a study by Wu et al. demonstrated that when a representative of their insurer called 

patients, informed them about a lower-cost location for their MRI, and, if desired, helped 

reschedule their appointment at a high-value provider, the average cost for an MR!s decreased by 

18.7% as patients shifted away from more expensive hospital-based facilities 5 ° Furthermore, the 

authors found that prices at hospital-based facilities dropped over I 0% and price variation in the 

metropolitan regions studied decreased by 30%, indicating that price transparency also 

encouraged providers to lower their price to remain competitive 51 Perhaps most encouragingly, 

the authors found that all patients in these areas experienced the benefits of lowered prices 

through competition52 Entire communities benefit when the market encourages high-cost 

providers to lower their prices or justify higher prices with higher quality for their services. 

Reference pricing provides another means of encouraging patients to use price 

transparency tools. When using reference pricing, an employer or insurer pays up to an 

established maximum price, the reference price, for a healthcare service. The reference price is 

typically set at a level that allows patients to receive a healthcare service from multiple high50 S.J. Wu et al., Price 7/·ansparencyfor MR!s Increased Use of Less Cost!v Providers and Triggered Provider 

Competition, 33 HEALTH AFFAIRS 8, 1391-98 (2015). 51 /d. The intervention was implemented in Atlanta, GA; Cincinnati, OH; Cleveland. Ol!; Indianapolis, IN; and St. 

Louis, MO. 

52 !d. 

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quality providers without additional contribution. The patient must pay for any costs of the 

service above that price, so reference pricing encourages patients to be more engaged consumers. 

For instance, if the reference price for an office visit to a provider is $200, the patient will 

receive full coverage for providers that charge $200 or less, but they will need to pay $50 extra 

for a provider that charges $250. Unlike HDI!Ps, where patients might be forced to forgo care if 

they cannot afford the procedure, reference pricing lowers costs while ensuring that patients can 

access care from a range of covered providers. 

Reference pricing thus preserves a patient's ability to choose higher-priced providers if 

she values their services enough to pay the higher rate, and simultaneously encourages providers 

to drop their price to the reference price. A study by Robinson and Brown found that price 

transparency tools coupled with reference pricing effectively directed patients seeking orthopedic 

surgery to lower-cost providers and, similarly to the study by Wu eta!., the costs of the 

procedure at high-priced facilities decreased by 30% due to price competition53 Studies of two 

of the leaders in adopting reference pricing, the California Public Employees' Retirement System 

(CalPERS) and the grocery firm Safeway, demonstrate the potential of coupling reference 

pricing and consumer price shopping. These organizations reduced spending by 20% for joint 

replacement, 5

4 18% for cataract rcmovai,I5 21% for colonoscopy, 56 17% for arthroscopy,57 12% 

53 J.C. Robinson & T.T. Brown. Increases in Consumer Cost Sharing Redirect Patient Volumes and Reduce 

Hospital Prices for Orthopedic Surgery. 33 liEAl.TII AFFAIRS 8, 1392--97 (2013). 

54 !d. 

55 J.C. Robinson eta!., Rej'erence-Based Benefit Design Changes Consumers· Choices and Employers' Payments for 

Ambulatory Surgery, 34 HEALTH AFFAIRS, 415-22 (20 15). 56 J.C. Robinson ct al., Association of Reference Payment for Colonoscopy with Consumer Choices, Insurer 

Spending, and Procedural Complications. 175 JAMA INTERNAL MEDICINE. 1783-89 (20 15). 57 J.C. Robinson et al., Consumer Choice Between Hospital-Based and Freestanding Facilities for Arthroscopy: 

Impact on Prices, Spending. and Surgical Complications. 97 THE J. OF BONE AND JOINT SURGERY. 1473-81 (2015). 

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for computed tomography, 58 and 32% for laboratory assays 5

9 using reference pricing. Montana 

also used reference pricing to control hcalthcare costs for beneficiaries in the state employees' 

health plan60 and agreed to pay an average of234% of Medicare rates for hospital services61 

Since the program started in July 2016, the state has saved $15.6 million62 and will save an 

estimated $25 million by the end of 2018. oJ A study by researchers at the University of 

California, Berkeley, estimated that if the insurers Aetna, United Healthcarc, and Humana all 

implemented reference pricing for laboratory testing services for their commercially insured 

patients, collectively they would save $7.6 billion annually, or about 8% of the total spending for 

this population64 

Taken together, these studies demonstrate the potential of price transparency tools when 

coupled with other mechanisms to encourage their usc. They further demonstrate the potential of 

price transparency between providers to leverage competitive forces to drive down prices. An 

important caveat, however, is that these studies focus on "shoppable '' medical services, ones that 

are generally standardized and relatively interchangeable, like laboratory tests and generic drugs. 

In other words, they are not relationship-based services; they do not require patients to switch 

providers. 

58 J.C. Robinson eta!., Reference Pricing, Consumer Cost-Sharing, and Insurer Spendingfor Advanced Imaging 

Tests, 54 MEDICAL CARE, I 050-1055 (20 16). 59 J.C. Robinson ct a!., Association ofReference Pricingfi>r Diagnostic Laboratory Testing with Changes in Patient 

Choices, Prices, and Total Spending for Diagnostic Tests, 176 lAMA I~TERNAL MEDlCl~E, 1353-59 (2016). 60 Julie Appleby, Ho(v Cow· Moment Changes How Montana's State Health Plan Does Business, THE 

W ASIIINGTON POST (June 20, 20 18), https://www.washingtonpost.com/national/health-science/lJOiy-cow-momentchanges-how-montanas-state-health-plan-does-business/20 18/06/20/92b3693c-7 46a-11 e8-bdal18e53a448al4 5lory.html?utm term~.df!a721650al. 

61 Appleby, supra note 60. 

62 ld 

63 Press Release, State of Montana Government, Governor Bullock Announces State Health Plan Change Will Save 

Taxpayers More Than $25 Million By End of2018 (July 8, 2016), https://news.mt.gov/governor-bullockannounces-state-health-plan-change-will-save-taxpayers-more-than-25-million-by-end-of-2018. 

64 J.C. Robinson eta!., Reference Pricing Changes the 'Choice Architecture' of Health Care for Consumers, 3 

HEALTII AFFAlll.S. 524-30 (2017). 

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To bend the cost curve, however, patients need to choose lower-priced providers. As 

noted above, consumers have been more reluctant to use price transparency tools to select 

providers. Trust and relationships are paramount for most patients, especially sick ones. A survey 

of people with HDHP insurance coverage showed that, while the majority of these enrollees 

believed there were large differences in price between providers, and that higher-cost providers 

were not necessarily of higher quality, they were no more likely than enrollees in traditional 

plans to considering switching providers or to compare out of pocket costs for a new provider. 65 

Simply put, patients are reluctant to switch providers, even when it might mean substantial outof-pocket savings. 

Furthermore, the burden of lowering healthcare costs should not be placed solely on the 

weakest and most vulnerable link in the healthcare chain, patients. Those who can most benefit 

from price transparency tools are often too sick and overwhelmed to appropriately advocate for 

themselves and navigate the complicated labyrinth of insurance networks, plan benefit design, 

and healthcare prices. The stakes arc simply too high for individuals- one misstep could result 

in financial ruin, loss of a home, or bankruptcy. Other actors in the healthcare market, including 

providers, employers, insurers, and policymakers, should also leverage price transparency tools 

to lower costs. 

Providers 

Primary care providers are uniquely well-positioned to usc price transparency tools to 

guide patients toward lower-cost providers when making decisions about which specialist to see 

and which treatment options to consider. Patients often want an informed referral or 

recommendation from a trusted provider that takes price into account. One survey of insured 

65 A.D. Sinaiko eta!., Cost-Sharing Obligations, High-Deductible Health Plan Growth, and Shopping for Health 

Care Enrollees with Skin in the Game. 176 lAMA INTERNAL MEDICINE 3, 395-97 (2016). 

22 
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patients found that more than 80% wanted to discuss costs with their doctor, and 75% of patients 

reported they wanted their physician to consider out-of-pocket costs before making decisions for 

their care. 66 This kind of consultation between patient and provider reflects the most complete 

form of informed consent, known as shared decision-making, in which the provider and patient 

jointly consider all of the relevant information about a particular treatment decision including 

the costs, risks, and benefits of various treatment options and use that information to make a 

treatment choice that best reflects the patient's preferences. 67 The same survey that demonstrated 

that patients want their doctors to consider costs found that less than half of the surveyed patients 

could find information about healthcare costs when needed. 68 Since primary care physicians 

occupy a sentinel role in connecting patients to other services, they can successfully steer 

patients to lower-cost facilities and providers, and offer guidance on lower-cost alternatives if 

they have access to a particular patient's insurance network, pricing, and cost-sharing obligations 

when recommending treatment. 

Implementation of this kind of sophisticated interaction, however, faces many challenges. 

Foremost among them is that providers need price information that is patient, procedure, 

provider, and plan specific at the time of decision-making, i.e., during a patient's appointment. 

Few providers know what their patients will have to pay for the care they recommend. Currently, 

physicians often struggle to find out if a particular provider is in a patient's insurance network at 

the time a referral is made, so developing tools that give providers the necessary detailed 

information through coordinated infrastructure and intcropcrability between electronic medical 

66 N.B. Henrikson et al., Communication with Physicians about Health Care Costs: Survey of an Insured 

Population, 21 THE PERMANENTE J. 2, 16-070 (20 17). 67 JaimeS. King & Benjamin Moulton, Rethinking Informed Consent: 1he Case for Shared Medical DecisionMaking, 32 AM. J. L. & MED. 429 (2006). 68 Henrikson, supra note 66. 

23 
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records (EMRs) and insurers will require substantial systematic changes. However, health 

systems, especially those with an insurance arm, have begun offering providers such information 

via EMRs, and data reporting practices to APCDs could help facilitate the integration of price 

and insurance information into EMRs. Even if EMRs could systematically incorporate patient 

insurance information, provider network lists and information on which providers currently 

accept new patients would need to be consistently updated to ret1ect accurate information, so that 

patients do not inadvertently seek treatment from an out-of-network provider. Further, the short 

duration of most physician visits, typically 15 minutes, limits the amount of time that can be 

spent on treatment choice and provider selection. Engaging a patient in a meaningful discussion 

about the potential risks and benefits, including financial risks and benefits, of different 

treatment options requires time, and providers should be paid for providing this service. 

Payers 

Payers for health care in the U.S., mostly insurers and employers, also have much to gain 

from increased price transparency. Approximately half of Americans receive their health 

insurance through their employer,69 and as a main conduit to healthcare, employers have a strong 

incentive to steer their employers to high-value, lower-priced care. Employers provide health 

insurance to their employees by either selecting an insurance provider and contributing to 

premiums or by self-insuring their patients and paying directly for their care, often through a 

third-party administrator. When choosing an insurance plan, employers need information on the 

premiums, benefit design, breadth of the provider network, and the cost of services when 

employees must go outside of the network. When self-insuring, employers need data on the 

69 Health Insurance Coverage of the Total Population, KFF.ORG, https://www.kff.org/other/state-indicator/totalpopu lation/OcurrentTimeframe~O&sortMode I~% 7B%22co I Id%22 :%22Location%22 %22sort%22:%22asc%22% 70 

(last visited July 14, 20 18). 

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negotiated prices that health plans pay for a wide range of services to ensure they are obtaining 

reasonable rates. They also need information on the size of the provider network needed to 

ensure that patients can stay in-network for most care. Employers must have a sense of the range 

ofrates for out-of-network care to predict their overall exposure. Having access to an APCD to 

analyze benchmarks for insurer negotiated rates would prove very helpful to employers seeking 

to self-insure their employees. 

While insurers generally have access to the rates they negotiate with providers, they can 

also benefit from having access to benchmarks for insurer negotiated rates in a particular 

geographic area when negotiating their own rates. While making negotiated rates entirely 

transparent presents some risks of price collusion, 70 using claims data from an APCD to establish 

average pricing benchmarks for average to high quality providers should encourage, rather than 

threaten competition. Further, health plans can bene tit from being able to encourage patients to 

select higher-value/lower-cost providers through tiering and reference pricing tools. Price 

transparency initiatives that prohibit anti-tiering/anti-steering contract provisions also can 

facilitate use of those tools. 

Po/icymakers 

Finally, policymakers probably have the most to gain from improved transparency of 

healthcare prices. As noted above, state governments have shown a great deal of interest in 

obtaining health care price data for a variety of uses. States can use health care claims data 

reported to an APCD to examine the drivers of health care costs over time, the e1fectiveness of 

various reform efforts, the impact of mergers, acquisitions, and other affiliations on health care 

price and quality, and other factors that might hinder competition and efficiency in the healthcare 

70 Erin C. Fuse Brown & Jaime S. King, The Double-Edged Sword of Health Care Integration: Consolidation and 

Cost Control, 92 IND. L. J. 55 (20 16). 

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market. For example, Oregon recently published a report summarizing 54 use cases for its 

APCD, the Oregon All-Payer All-Claims Database71 Identifying Oregon's APCD as "an integral 

component of the state's ongoing healtheare improvement efforts," the report outlined numerous 

uses for the APCD data in analyzing and monitoring healthcare spending and cost trends, 

healthcare delivery system performance, healthcare utilization, population health, disease 

prevention, and insurance coverage72 Oregon, Colorado, and Maryland have used their APCD 

data to analyze geographic variations in price and utilization ofhealthcarc services to detect 

unwarranted variations due to overutilization and market consolidation. 73 Massachusetts' APCD 

provides essential information to the Massachusetts Health Policy Commission to track 

hcalthcarc spending trends and inform policy and legal decisions regarding consolidation and 

payment reform74 Finally, New York views its developing APCD, the NYS Connector, as a 

central hub of health information that will collect and synthesize all varieties of health data from 

the entire state. According to the New York Department ofllealth, "the APD fall payer database] 

is creating new capability within the Department, including more advanced and comprehensive 

analytics to support decision-making, policy development, and research, while enhancing data 

security by protecting patient privacy through encryption and de-identification of potentially 

identifying information.''75 Perhaps state health policy experts, Joel Ario and Kevin McAvey, 

71 0REGO~ ALL-PAYER ALL-CLAIMS DATABASE USE CASE DOCCME~T (2017), 

https:l /www.oregon.gov/oha/HPA/ ANAL YTJCS/ AP AC%20Page%20Docs/ APAC-U se-Cases.pdf. 

72 !d. 

73 A. COSTELLO ET AL., APCD COUNCIL, ]NFORMING HEALTH SYSTEMS CHANGE- USE OF ALL-PAYER CLAIMS 

DATABASES (20 18), hUps;LiJY.~Y\YJ!l2_".\ko.!!DJ;iLo_rgipg]lJi<:.'!!i9.nbnfQrming-he.~l!ksystem:f.hange-use-l!Jl:Jlaverclaims-databases. 

7i'J.,[;;,sachuset~; Health Policy Commission, MASS.Gov, hl!P.s:/lw}~)'!'·mass.gQy/orgs/massachg§.etts-health-po!liT: commission (last visited July 14. 2018). 75 New York State All Payer Database, HEALTH.NY.Gov, https://www.health.nv.gov/tcchnology/all payer database/ 

(last visited July 14, 2018). 

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said it best in their recent Health Affairs Blog post, "APCDs are very much a work in progress, 

with tremendous unrealized potential."76 

Legal Barriers to Price Transparency 

Yet a range of laws and contractual provisions currently hinder the potential ofAPCDs 

and other price transparency initiatives. Many states currently lack access to a complete set of 

claims data in their APCDs because federal laws, trade secret protections, and contract 

provisions limit what data they can demand from insurers. First and foremost, the Federal 

Employee Retirement Income Security Act of 1974 (ERISA) preempts any state Jaw that "relates 

to an employee benefit plan."77 ERISA's preemptive reach is limited by the "savings clause" 

which saves all laws that regulate insurance from preemption, 78 but ERISA does not deem selfinsured employer plans to constitute insurance for purposes of regulation. Therefore, ERISA 

preempts any state insurance Jaw that relates to an employee benefit plan provided by a selfinsured employer. 79 Consequently, many state transparency laws that target health plans do not 

apply to self-insured employers' plans, including laws requiring reporting or disclosure of 

healthcare claims data, drug pricing methodologies, provider network status, and billing 

information. 

Most cripplingly, in 2015, the Supreme Court in Gobeille v. Liberty Mutual Insurance 

Co. held that ERISA preempts state APCD reporting requirements with respect to self-insured 

employer health benefit plans. 80 Specifically, self-insured employers and their third party 

76 Ario & McAvey, supra note 13. 77 ERISA§ 514(a) (1974); 29 U.S.C. § 1144(a)(2006). 78 Kentucky Ass 'n ojHealth Plans v. Miller, 538 U.S. 329, 341-42 (2003). The savings clause will save state 

insurance regulations from preemption so long as they arc "specifically directed at entities engaged in insurance," 

and the state law "substantially affect[s] the risk pooling arrangement between the insurer and the insured." 79 29 U.S.C. § 1144(b)(2)(B) (2006). 8

° Cobeille v. Liberty Mutua/Insurance Co., 136 S. Ct. 936 (2015). 

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administrators, which cover approximately two-thirds of all workers with employer-based health 

insurance, are exempt from submitting their claims data to the APCD, significantly limiting the 

number of plans that must report to the APCD and the percentage of employee claims data 

included in the database. As such, the loss of self-insured employees' claims data deprives state 

APCDs from having the essential information needed to provide robust analysis on healthcare 

cost, quality, utilization, and geographic variations within the state. 

Second, as noted above, providers and insurers often include specific provisions in their 

contracts designed to keep healthcare prices secret, such as "gag clauses" or anti-tiering/antisteering provisions. These types of contract provisions greatly hinder patients' ability to choose 

high-value services, and policymakers' ability to know and understand how to best reform the 

healthcare system. States have passed laws prohibiting these and other similar provisions in 

provider-insurer contracts, but the impact of these laws has been limited due to claims that 

negotiated healthcare prices constitute trade secrets. 

Third, providers and insurers have successfully used trade secrets protections to prevent 

disclosure of negotiated healthcare price information in the absence of the contract provisions 

above. Historically, the states have governed trade secret laws, but Congress passed the federal 

Defend Trade Secrets Act of 2016 (DTSA) to establish a floor for trade secrets protection. The 

DTSA allows businesses and individuals to keep information confidential if I) "the owner has 

taken reasonable measures to keep such information secret"; and 2) "the information derives 

independent economic value, actual or potential, from not being generally known to, and not 

being readily ascertainable through proper means by, another person who can obtain economic 

value from the disclosure or use of the information."81 Some states, like California, Illinois, and 

81 The Defend Trade Secrets Act, I 8 U.S.C.A. § I 839(3) (20I 6). 

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Oregon have broader protections of trade secrets that would enable more information to 

constitute a trade secret. 

Historically, courts did not consider prices eligible for trade secret protections, but in our 

modern economy where business-to-business transactions are more common, this question is not 

so straightforward. Many healthcare organizations now claim trade secrets protections to avoid 

disclosure of their negotiated prices, rebates, discounts, and other pricing information. This 

jealous guarding of prices compromises the decision-making of nearly every stakeholder in the 

health care market and contributes significantly to the ever-rising price of healthcare goods and 

services. Ironically, no court has affirmatively decided that negotiated hcalthcare prices 

constitute a trade secret. 82 Trade secret cases are highly fact specific, such that even if a court 

found in a particular case that the confidentiality of such prices should be protected, it would not 

be generalizable to other cases. Yet, the mere claim that negotiated price information constitutes 

a trade secret has seemingly been sufficient to stop many who seck the data from continuing to 

do so or taking the issue to court, allowing provider and insurer organizations to use legal 

protections to avoid disclosure of information that has the potential to lower their revenues. 

Ultimately, ERISA, contract provisions, and trade secret laws form a formidable 

obstruction to price transparency in healthcare that require federal intervention. 

What Can Congress Do? 

For transparency initiatives to achieve their full effect at the state level, the federal 

government must make changes. Despite the need for federal policy to maximize healthcare 

82 A number of courts have discussed how negotiated price lists may be considered trade secrets, but none have 

ruled squarely on the issue. See, e.g, Synthes, Inc. v. Emerge Med, Inc., 25 F. Supp. 3d 617, 706 (E.D. Pa. 20 14), In 

re Maxxim Med Grp., Inc .• 434 B.R. 660,669 (Bankr. M.D. Fla. 2010), Emergency Care Research Inst. v. Guidant 

Corp., No. CIV.A. 06-1898, 2007 WL 2702455, at *5 (E. D. Pa. Sept. 12, 2007) and Emergency Care Research Inst. 

v. Guidant Corp .. No. 06-1898, 2006 WL 3541776, at *3 (E.D. Pa. Dec. 5, 2006). 

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transparency efforts, policymakers should craft changes to preserve state flexibility and 

innovation. Fortunately, Congress, more than any other entity, has the ability to address the most 

significant barriers to price transparency in hcalthcare and maximize the tremendous untapped 

potential of existing state initiatives, in particular APCDs. 

1. Address ERISA Preemption Challenges 

APCDs have the greatest potential of any price transparency initiative to inform 

consumers and policymakers in ways that can help control healthcare costs. Unfortunately, 

following the Gobeil/e decision to allow ERISA preemption of state APCD reporting 

requirements as applied to self-insured employer plans, many data reporters have reduced or 

ceased their submission of healthcare claims data to state APCDs, depriving state governments, 

researchers, and the public from access to essential information on healthcare costs, quality, and 

utilization83 

The omission of self-insured employer claims data greatly limits the accuracy and utility 

of APCDs. Essentially for health policy analysts, trying to analyze the healthcare landscape 

using an APCD without the self-insured employer population is akin to trying to use 

GoogleMaps with one-third of the roads missing you don't have the whole picture. Enabling 

APCDs to collect the full set of healthcare claims data would dramatically increase the utility 

and reliability of these initiatives. 

Congress can pursue several paths to relieving the burden of ERISA preemption on 

APCDs. It could pass legislation creating a federal APCD that required reporting on all claims 

from all healthcare payers. While a federal APCD would standardize reporting requirements, 

83 See NATIONAL ACADEMY fOR STATE HEALTH POI.ICY, COMMENTS ON DEPARTMENT OF LABOR NOTICE OF 

PROPOSED RULEMAKlNG I (20 16), https:i/www.dol.gov/sites/default/fi les/ebsa/laws-and-regulations/rules-andregulations/public-comments/121 O-AB63/00030.pdf. 

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streamline, and simplify reporting mechanisms, and create one complete dataset for the entire 

country, such an initiative would further entrench the federal government's role in healthcare and 

require significant human and capital resources. A federal APCD would also fail to capitalize on 

the investment made by nearly half the states to develop state APCDs. 

Rather than reinvent the wheel, Congress should invest its efforts in facilitating fhe 

already significant strides made by state APCDs. The most effective and direct manner of doing 

so would be to amend ERISA to narrow preemption to exclude state health regulations that do 

not unduly burden ERISA's goal of uniformity for employer-based benefit plans, while also 

granting states suftlcient flexibility to achieve their health reform goals. 84 Amending ERISA's 

preemption scheme to replace broad preemption with conflict preemption would permit the states 

to experiment with a variety of health reform proposals, including price transparency initiatives, 

while permitting ERISA to preempt any state law that directly conflicts with the federal law. 85 

Alternatively, Congress could pass legislation that affirms the Department of Labor's 

authority to collect healthcare claims data from ERISA plans and allow them to partner with 

state APCDs under ERISA § 506, such that the Department of Labor could require ERISA plans 

to submit claims data to state APCDs. 86 For states that have not yet created an APCD, the 

Department could require ERISA plans to submit claims data to a third party contracted to 

perform the APCD functions for those states, similar to the federal marketplace created by the 

Patient Protection and Affordable Care Act of2010. The Department of Labor could facilitate 

84 Erin C. Fuse Brown & JaimeS. King, ERISA as a Barrier for State Health Care Transparency Efforts, 

TRAl'OSPARENCY IN HEALTH A:-lD HEALTH CARE (Holly Fernandez Lynch, I. Glenn Cohen, & Barbara Evans eds., 

Cambridge University Press, forthcoming 2019) (manuscript at 10-11 ), b.llps://ssm.com/abstract~3214173. 

85 Elizabeth Y. McCuskey, Body ofl'reemption: Health Law Traditions and the Presumption Against Preemption, 

89 TEMP. L. REV. 95, I 03 (20 16); Erin C. Fuse Brown & A meet Sarpatwari, Removing ERISA 's Impediment to State 

Health Reform, 378 N. Eng. J. Med. 5, 7 (2018). 86 29 U.S.C. § 1136 (1996). 

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the collection of this additional claims data with minimal financial investment and also develop 

the ability to request reports from the state APCDs on claim information from employee benefit 

plans. 87 On the other hand, this approach would leave ERISA's broader preemption scheme in 

place, which would still hinder other state transparency initiatives like surprise billing 

protections, pharmacy benefit transparency laws, and anti-tiering and anti-steering prohibitions, 

making a direct amendment of ERISA the preferred approach for promoting price transparency 

initiatives overall. 

Under either approach, Congress should require that state APCDs request claims data in a 

standardized manner to minimize the burden for multi-state employers and to facilitate data 

comparisons across states. State APCDs have already developed and agreed upon a standardized 

set ofhealthcare claim and related data that can be collected from all health plans- the Common 

Data Layout. 88 The Common Data Layout creates a uniform system of reporting across all state 

APCDs that will ease the reporting burden on employers, third-party administrators, and 

insurance companies, satisfy ERISA's uniformity requirements, and facilitates analysis of claims 

data across states. Further, the depth of information reported in the Common Data Layout could 

strengthen the Department of Labor's ability to monitor ERISA plans well beyond any 

information the Department currently collects. 

Overall, addressing ERISA preemption of state health reform laws is the most important 

action Congress could take at this time to promote price transparency to bring down healthcare 

costs, but additional actions by Congress could also further illuminate healthcare prices. 

87 See Fuse Brown & King, supra note 84, at 8-9. 88 See NATIONAL ACADEMY FOR STATE HEALTH POLICY, COMMENTS ON DEPARTMENT OF LABOR NOTJCE OF 

PROPOSED RULEMAKING (20 !6), https://www.dol.gov/sites/default!fi les/ebsa!laws-and-regulations/rules-andregulationsipublic-commcnts/121 O-AB63/00030.pdf. 

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2. Encourage Consumer Pricing Shopping Initiatives 

Congress should seek to encourage consumer price shopping initiatives like reference 

pricing, rewards, aud tiered networks to provide patients with further incentives to select highvalue/lower-priced providers. Congress could promote reference pricing by implementing 

reference pricing schemes into Medicare and funding pilot projects to test reference pricing in a 

variety of settings. Congress could also facilitate insurers' attempts to signal lower-priced 

providers to patients by prohibiting anti-tiering/anti-steering provisions in contracts or 

prohibiting them in ERISA plan contracts. 

3. Create a Public Interest Exemption to Trade Secrets 

Trade secrets protections were designed to encourage and protect innovation, not protect 

cxorbitaut prices that take advautage of consumers, bankrupt businesses, and bleed government 

coffers. Congress should pass a public interest exemption to the Defend Trade Secrets Act of 

2016 that clearly establishes that trades secret protections will not apply to information being 

kept secret in ways that harm the public's interest. In the case of negotiated healthcare prices, 

keeping negotiated rates secret from competitors in highly concentrated markets where 

disclosure might drive costs up might serve the public interest, but keeping those same rates 

secret from the government, employers who pay them, or consumers would not. Evaluation of 

this standard would be a highly fact-specific analysis, performed on a case by case basis, yet it 

would provide a clear opportunity to better define the specific contours of trade secret 

protections in healthcare and raise questions about whether trade secrets protections apply to all 

or any negotiated healthcare prices. 

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4. Mandate Interoperability of Electronic Medical Records Systems 

Similar to the Common Data Layout, Congress should require manufacturers of 

electronic medical records and insurance companies to establish uniform standards of 

interoperability and data reporting practices, such that a patient's insurance information can load 

into a provider's electronic medical record to enable the provider to access meaningful network, 

out-of-pocket cost, and quality information for patients when making provider and medical 

service referrals during appointments. Placing relevant cost information into the hands of both 

patients and providers when they are selecting a treatment or provider will significantly increase 

the odds that patients will incorporate such information into their healthcare choices. 

5. Develop Billing Codes to Pay for Physician Time for Shared Decision-Making 

Congress should develop billing codes and other payment mechanisms within Medicare 

to pay for physician time in discussing treatment selection, including information on which 

providers are "in-network" and what the cost to the patient would be of different treatment 

choices. Shared decision-making that includes a discussion of the out-of-pocket costs to the 

patient not only encourages physicians to provide a robust fonn of informed consent to patients, 

but it also has the added benefits of encouraging patients to shop for healthcare services and 

potentially decreasing overutilization of services that patients would not choose if they knew all 

the risks and benefits. 

Thank you for your time and your consideration of these important issues. 

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APPENDIX A 

2018 Legislative Session 

During the 2018legislative session, state legislatures have attempted to pass laws related 

to healthcarc price and quality transparency. In 2018 the legislatures have focused particularly on 

lowering drug prices, and as such, have constructed their legislation to target drug manufacturers, 

pharmacy benefits managers (PBMs), formularies, and other pharmaceutical-related entities and 

tools. The vast majority of these bills target consumers' access to healthcarc price and quality 

information, rather than other stakeholders. 

Focus of Bill* Number of Number Number Died 

Bills Passed in in 2018** 

Introduced in 2018** 

2018** 

Pharmacx Gag Clauses, 55 25 17 

Clawback Prohibitions, and 

Mandatory Disclosure of 

Chear2er Drug Alternatives 

Price Comparison (Right to 46 5 23 

Shop, the Right to Know, and 

Transparencx Website/Tools} 

Prohibition on Price Gouging 43 2 21 

(Continued on next page) 

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35432.036

Focus of Bill* Number of Number Number Died 

Bills Passed in in 2018** 

Introduced in 2018** 

2018** 

"Pricing Regort" Laws 41 8 16 

(Mandatorv Disclosure of Drug 

Prices, Increase in Costs, or 

Pricing Mechanisms) 

Sumrise and/or Balance Billing 34 7 15 

Laws 

All Payer Claims Databases 9 2 4 

CAPCD) 

Reference Pricing Laws 8 2 4 

Chargemaster Laws 4 0 3 

Price/Claim Reguest 3 0 3 

* Some categones of transparency bt!ts not mcluded m thts summary as " there arc too lew b1lls or do not spcciflca!ly target pncc/qua!Jty, though 

they may impact elther 

**All data as of July 3, 2018 

36 
59 

Mr. HARPER. Thank you very much, Dr. King. 

And the chair will now recognize Dr. Chernew for 5 minutes for 

purposes of his opening statement. 

STATEMENT OF MICHAEL CHERNEW 

Mr. CHERNEW. Thank you very much, Chairman Harper, Ranking Member DeGette, members and staff. Thank you for the opportunity to speak with you today about price transparency in 

healthcare. 

Before I launch into the main thrust of my comments I would 

like to emphasize that as an economist I believe strongly in markets. Well-functioning markets require buyers to effectively shop 

for the combination of price and quality that best meets their 

needs. And in the market for medical services, buyers, in this case 

patients, do not have the necessary information. 

For that reason, one would think that efforts to promote price 

transparency in healthcare would be able to significantly lower the 

cost and perhaps improve the quality of care. In fact, this logic has 

spawned the creation of numerous transparency initiatives and 

tools, launched several innovative companies. All of the major insurers that I’m aware of have some price transparency tools—not 

all are great—as do many other vendors in several states who are 

pursuing transparency-related programs. 

Although there are a few studies that suggest transparency initiatives may be helpful, such as the one in New Hampshire, they’ve 

only had a modest impact on the spending for some services, at 

best. Overall, the evidence, unfortunately, suggests that the impact 

of transparency has been minimal. 

This reflects several institutional features of healthcare. First, 

healthcare is complex. Any course of treatment or diagnostic pathway is comprised of many individual services. An accurate price 

quote requires knowing the exact service. This is complex. 

For example, there are over 50 codes for CT scans. In some cases 

it is even unknowable because the exact service delivered may 

change during the course of treatment based on clinical information that arises during that treatment. Moreover, the fees to the 

hospital and the physician are often separate. To get an accurate 

price, they have to be combined. This makes it hard, particularly 

for providers, to provide the information. 

Imagine when shopping for a car consumers could only get the 

average price of a specific car, and that the actual price that they 

would pay depended on who put them together and the customer’s 

employer. The information would be of limited value. 

Most transparency tools seek ways around this, but so far there 

have not been great successes. 

Second, physicians are central to almost all consequential decisions in healthcare. Physician recommendations about where to 

seek care appropriately carry enormous weight. As a result, few patients shop for care. In our work, we find around 10 to 15 percent 

of patients use transparency tools when offered. This result seems 

pretty standard in the literature. While it’s certainly true that patients can question or even ignore their physician’s referral recommendations, few do. 

60 

Third, consolidation in healthcare markets limits choice and, 

thus, competition in some markets. Specifically, competitive forces 

can only work when there are competing firms. As markets have 

consolidated, the potential for transparency or shopping more 

broadly diminishes. 

Finally, insurance distorts choices. Patients fundamentally care 

about what they pay out of pocket. The out-of-pocket price will depend on the details of the patient’s insurance plan and will change 

over time depending on things like whether they’ve met their deductible. As a result, one cannot accurately quote an out-of-pocket 

price without knowing details about the patient’s health plan and 

how much they’ve often already spent, often for specific services. 

This implies that insurers are best suited to provide transparency 

information and, as noted, many do, although, as we’ve mentioned, 

with relatively little impact. 

I do not mean to imply that transparency, or more generally 

price shopping for medical services, cannot work. Very simplified 

indicators such as flagging high-priced providers, as happened in 

some tiered insurance products can help, particularly when tied to 

benefit design. Moreover, transparency can have an impact even if 

it does not alter consumer behavior. The widespread availability of 

data may shame high-priced providers to lower their prices, particularly when journalists have access. 

There’s some evidence that this can be salient in healthcare. 

However, one has to proceed with caution, caution because it’s also 

possible that widespread availability of information could alter the 

negotiation dynamics in other ways, leading to higher prices for 

some patients. Because payers negotiate price discounts with providers, if forced to reveal those discounts the providers may be 

more reticent to offer them. And there’s some evidence of that in 

markets outside of healthcare. 

So, where does this leave us? I’m generally supportive of the initiatives, particularly the private sector ones that simplify the information and focus on out-of-pocket prices. I’m more skeptical about 

public sector initiatives that entail new mandates on providers to 

provide data because it’s particularly hard to get that data right. 

I worry it will not substantially improve the system, and may impose administrative costs. 

There is certainly a lot we do not know. And while there may be 

deleterious unintended consequences, most evidence is either neutral or positive, and I think the shaming effect may be important 

in the most egregious cases. Moreover, states are experimenting in 

many ways, which should be allowed to play out. 

So, there are a few fundamental things the Federal Government 

could support those efforts. 

The first, as was mentioned, support the ERISA exemption or get 

rid of the ERISA exemption. 

Providing financial support for All Payer Claims Databases could 

be a wise investment. 

And providing more funding to AHRQ or other federal agencies 

to study what is actually working. 

We have a lot of problems in healthcare, and I very much applaud your efforts to seek a solution. But please do not let transparency distract you from other strategies such as supporting alterVerDate Nov 24 2008 13:10 Mar 20, 2019 Jkt 037690 PO 00000 Frm 00064 Fmt 6633 Sfmt 6633 U:\MY DOCS\HEARINGS 115\HEARINGS\115-151 CHRIS
61 

native payment models or addressing adverse selection in the individual markets of healthcare that may be more impactful. 

Thank you. 

[The prepared statement of Mr. Chernew follows:] 

62 


35432.037

Testimony of: 

Michael Chemew 

Examining State Efforts to Improve Transparency in Health Care Costs for Consumers 

Subcommittee on Oversight and Investigations 

Committee on Energy and Commerce 

U.S. House of Representatives 

Tuesday, July 17,2018 
63 


35432.038

Main points 

Well-functioning markets require well informed consumers. 

• Consumers in health care markets are poorly informed and health care markets do not function 

welL 

• It is logical therefore to assume that improving information in health care markets would 

support lower prices and better quality 

• However, evidence suggests transparency initiatives that improve information in health care 

will not have a significant impact. though there are some clinical areas (e.g., imaging) where 

research is more positive. The reason for the limited broad impact is that other aspects of 

health care markets limit their effectiveness 

o Health care services arc purchased in very fragmented units 

o Patients defer to physicians 

o Some markets have too few providers to be considered competitive 

o Insurance masks true price differentials 

• Nevertheless, policy makers can take some action to support greater competition, these include 

o Requiring ERISA plans to submit data to All Payer Claims Databases 

o Providing financial support to APCDs 

Funding greater research on competition and competitive strategies 
64 


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Testimony 

Chairman Harper, ranking minority member Degette, members and staff, thank you very much 

for the opportunity to speak with you today about price transparency in health care. I am going to 

confine my remarks to transparency in the context of medical services, excluding prescription drugs or 

insurance. This is only because the market for insurance is completely different than that for health 

care services and the prescription drug market has unique issues and complexities. 

Before I launch into the main thrust of my comments, I would like to emphasize that as an 

economist I believe strongly in the merits of markets. Moreover, I suspect that you have asked me 

here today because you, correctly, recognize that markets for medical services are not working well. 

This is part because well-functioning markets require buyers to effectively shop for the combination of 

price and quality that best meets their needs and in the market for medical services buyers-in this 

case patients--do not have the necessary information. 

Taken together, the logic outlined above would suggest that efforts to promote price 

transparency in health care would be able to significantly lower the cost, and perhaps improve the 

quality, of care. In fact, this logic has spawned the creation of numerous transparency initiatives and 

launched several innovative companies. All of the major insurers I am aware of have transparency 

tools, as do many other vendors and several states are pursuing transparency related programs. 

Although there arc a few studies that suggest transparency initiatives, such as New Hampshire, can 

have a modest impact on spending for some services, 1 overall, the evidence, unfortunately, has not 

been kind to these initiatives. Many studies, including several of my own and those of my colleagues, 

find that transparency has minimal, if any impact on the market. 2 This reflects several institutional 

features of health care. 

1 http://www.economics.illinois.edu/seminars/documents/Brown.Pdf; Whaley C, Schneider Chafcn J, Pinkard S, et al. 

Association between availability of health service prices 

and payments for these services. lAMA. 2014;312(!6): !670-1676. doi: I 0.! 001/jama.2014.13373. 2 Desai S, Hatfield LA, !licks AL, Chcmew ME, Mehrotra A Association Between Availability of a Price Transparency 

Tool and Outpatient Spending. lAMA. 2016;315(17): 1874-1881. 
65 


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First, health care is complex. Any course of treatment (or diagnostic pathway) is comprised of 

many individual services. For example, there are 10 codes for office visits and 56 for CT scans (based 

on the CPT code list CMS released in Nov 20 1 7)3 If one wants to know the price of a service, one 

would need to specify the exact service and that is hard. In some cases, it is even unknowable because 

the exact service delivered may change during the course of a test or procedure based on clinical 

information that arises. Though this complexity can be minimized by reporting averages for broader 

service groups, many providers are often involved in care delivery and each has a different price. For 

example, a surgery will inc] ude different fees to the hospital and surgeon. The hospital will likely not 

know the surgeon's fee and the surgeon will not know the hospital fees. 

I am aware of several website that support shopping for other important items such as cars. But 

imagine those websites could only provide data on specific parts and the customer had to know which 

were needed and how well they would work together. That would diminish, if not destroy the 

usefulness of such shopping tools. In addition to the complexity arising from the Jragmented way in 

which we buy care, any given provider is paid a different amount from different insurers. In one study 

we found that large insurers paid 21% less than smaller ones4 Therefore, to quote an accurate price, 

one must know the patient's insurer (and maybe even their exact health plan). All of this complexity 

makes seemingly simple goals, like requiring providers to post or provide accurate price quotes, 

difficult. 

Second, the physicians are central to almost all consequential decisions in health care. Patients 

trust their physicians to guide them through the episode of care, laying out alternatives and 

recommending treatments. Physician recommendations about where to seek care carry enormous 

weight. As a result, few patients shop for care. In our work we find that around 10% to 15% percent 

3 https:/lwww.cms.gov/Medicare/Fraud-and-Abuse!PhysicianSelfReferra!IList of Codes.htm! 4 Roberts ET, Chemew ME, McWilliams JM. Market Share Matters: Evidence of Insurer and Provider Bargaining Over 

Prices. HEALTH AFFAIRS 36. NO. l (2017): 141--148 
66 


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of patients used a transparency tool when offered. 5 This result seems pretty standard in the literature. 6 

While it is certainly true that patients can question, or even ignore, their physician's referral 

recommendations, few do. 

Third, consolidation in health care markets limits choice, and thus competition, in some 

markets. Specifically, competitive forces can only work when there arc competing firms. Gaynor and 

colleagues (20 15) report that between 1990 and 2006, the proportion of metropolitan statistical areas 

(MSAs) with "highly concentrated" hospital markets increased from 65 percent to 80 percent7 

Likewise, Capps and colleagues (20 17) report that 22 percent of physician markets in 2013 were 

highly concentrated8 Moreover, hospitals are increasingly buying physician practices further 

diminishing competition.9 

Finally, insurance distorts choices. Some patients may care about the total price of care, but 

most fundamentally care about what they pay out of pocket. Often insurance masks the true cost of 

care because patients pay just a fraction, if any, of the price. Very sick patients, who spend the most, 

arc the most likely to be largely protected once they hit their out of pocket maximum. Even if they do 

have to pay, the price will depend on the details of patients' insurance plan and will change over time 

depending on things like if they have met their deductible. As a result, one cannot quote an accurate 

out of pocket price without knowing details of a patients plan AND how much they have already spent 

on care (and often on which types of services). This implies that insurers are best suited to provide 

5 Desai S, Hatfield LA. Hicks AL, Sinaiko AD, Chemew ME, Cowling D, Gautam S, Wu SJ Mehrotra A. Offering A Price 

Transparency Tool Did Not Reduce Overall Spending Among California Public Employees And Retirees. Health Aff 

(Millwood). 2017 Aug 1;36(8):1401-1407. 6 Desai S, Hatfield LA, Hicks AL, Chemew ME, Mehrotra A. Association Between Availability of a Price Transparency 

Tool and Outpatient Spending. JAMA. 20 16;315(17): 1874-1881. 

Mchrotra A. Dean KM. Sinaiko AD. Sood N. Americans Support Price Shopping For llealth Care, But Few Actually Seck 

Out Price Information. Health Afl(Millwood). 2017 Aug 1;36(8):1392-1400 7 Gaynor, M., K. Ho, and R. J. Town. 2015. The industrial organization of health-care markets. Journal of Economic 

Lilera/ure 53(2):235-284 8 Capps, CoryC., David D. Dranove, and Christopher C. Ody. 2017. "Physician practice consolidation driven by small 

acquisitions, so antitrust agencies have few tools to intervene." Health Affairs 36(9):1556-1563. 9 Neprash, Hannah H. T .• Michael M. E. Chemew. Andrew A. L. Hicks. Teresa T. Gibson, and J. Michael M. McWilliams. 

2015. "Association of financial integration between physicians and hospitals with commercial health care priccs.'1 JAMA 

Internal Medicine 175(12): 1932-1939. 
67 


35432.042

transparency information, and, as noted, many do, though most evidence suggests with little impact 

even in markets where shopping is possible. 

I do not mean to imply that transparency, and more generally price shopping for medical 

services, cannot work. However, even in areas where we might assume it would work well, such as 

Lasik surgery, evidence is less promising. 10 Perhaps shopping will work better in areas where there is 

greater patient responsibility for the price, less reliance on referrals, services that are less complex and, 

such as in the case of durable medical equipment, involve repeated purchases. Some of the most 

positive evidence focuses on imaging. Yet, I consider these areas exceptions rather than the rule. 

I should also note that transparency may have an impact even if it does not alter consumer 

behavior. The widespread availability of data may shame high price providers to lower their prices 

(particularly when journalists have access). There is some evidence that this effect can be salient in 

healthcare. 11 

However, one must proceed with caution because it is also possible that widespread availability 

of information could alter negotiation dynamics in other ways leading to higher prices for some, likely 

many, patients. 12 This is because payers negotiate discounts with providers. If forced to reveal those 

discounts health care providers be more reticent to offer them. In fact, there is some evidence, from 

outside of health care, to support the perverse impact of posting prices. 13 

So where does all of this leave us? Believe it or not, I am generally supportive of transparency 

initiatives. They are important as we move to newer, innovative benefit designs that attempt to help 

patients shop. They need not be tremendously detailed and may provide broad categories of price 

(and/ or quality, which I admitted have not emphasized enough). For example, they can label 

providers high value or preferred. Simpler information is easier for patients to digest and act upon. 

10 http://www.hschangc.org1CONTENTI862ntopic~topic0 I #noteS 11 Imps:/ /www ,chc forg/wp~content/uploads/20 17/12/PDF ~MovingMarkets NewHarnpsh ire, pdf 12 Cutler D, Dafny L. Designing Transparency Systems for Medical Care Prices. N Engl J Med 2011; 364:894-895 

"Albaek, Svend, Peter Mollgaard, and Per B Overgaard, "Government-Assisted Oligopoly Coordination? A 

Concrete Case," Journal of Industrial Economics, Vol. 45 (1997); 429-43. 
68 


35432.043

As I mentioned at the onset, I believe in markets and the commercial insurance market is 

responding by providing transparency tools (and redesigning plans and networks) to encourage 

shopping. 

I am more skeptical about public sector initiatives that entail new mandates on providers to 

provide data because it is particularly hard to provide the right data. I worry that it will not 

substantially improve the system and may impose administrative costs. I worry that some transparency 

advocates, in their zeal to help markets work, will override what markets are doing. That said, there is 

certainly a lot we do not know. While there may be deleterious unintended consequences, there is 

some positive evidence and I think the shaming effect may be important in the most egregious cases. 

Moreover, states are experimenting in many ways and there are ways the federal government could 

support that. For example, requiring ERISA covered health plans to submit data to all payer claims 

databases (APCDs), which the supreme court, in Gobeille v. Liberty Mutual Insurance Companv, ruled 

the states could not do. Providing financial support to APCDs could be a wise investment. Finally, it 

is clear that healthcarc is sufficiently complex that our intuition about how consumers and markets will 

behave may not be correct. Mine was not. Supporting evidence generation with research funds 

through A !IRQ or other federal mechanisms could help us steer the most productive path forward. 

We have a lot of problems in healthcare, I very much applaud your efforts to seek solutions. 

But please do not let transparency distract you from other strategies, such as supporting alternative 

payment models, or addressing adverse selection in the individual market for health care, that may be 

more impactful. 

Sincerely, 

Michael E. Chernew, Ph.D. 
69 

Mr. HARPER. Thank you both for your testimony. It is now the 

opportunity, the moment that you have waited for, our members 

get to ask questions of each of you. That will help us very much 

in that process. And I will now recognize myself for 5 minutes for 

the purpose of that. And I will start with you, if I may, Dr. King. 

Obviously, it is clear that a lot of Americans struggle greatly 

with how to pay for their healthcare costs. And part of that is they 

never know how much it is going to cost until they see a bill sometime later. And as you noted in your testimony, a lot of transparency initiatives have focused on changing consumer behavior to 

encourage them to select lower price providers and services. 

But can you elaborate on why these initiatives seem to have limited usage and have mixed results? 

Ms. KING. Yes. So, I think there are largely four reasons why 

consumers don’t tend to use these as much as we would like them 

to. And the first is that insurance often, the structure of insurance 

often insulates consumers from feeling the price, different prices for 

different providers. If you pay a $20 copay every time you go to the doctor, it doesn’t 

really matter to you what type of doctor you go to; right? So there 

is some function of that. 

The second is that the provider relationship is really important 

to patients. And it turns out where we have seen price transparency work is exactly on the thing that you noted before, Chairman Harper, is on shoppable goods. We have seen some movement 

there, where things that people find interchangeable. Right? 

So, you might go, you don’t care where you go to an MRI, to have 

your MRI tested or have your CT scan done. Those seem likely to 

go to this lab or that lab, unless this lab or that lab automatically 

supplies the results into your electronic medical record and it goes 

directly to your provider. That might make a difference to you. 

But, generally, those are places where people are more willing to 

shop. 

Where they’re less willing to shop is on provider, right? They 

want a recommendation. Let’s say that you, your child, or your 

spouse, or your loved one just got diagnosed with cancer. Are you 

really going to look at a list of providers and their charges to decide 

where you’re going to go? You’re not. You’re going to go to a trusted 

primary care physician, or a family member that’s had experience 

with cancer and ask them who they went to and who they had a 

good experience for. 

So, I think the reality is is that healthcare is so important that 

patients really want to get advice from someone they trust and not 

the provider. And that’s really why price transparency initiatives 

that put pricing information that is relevant to the patient in terms 

of their out-of-pocket costs in the hands of the provider so it’s there 

when they’re making that decision, I think have the most, the 

greatest possibility of a shifting choice on the provider side. 

Mr. HARPER. OK. 

Ms. KING. And the last thing is that there’s very, as Dr. Chernew 

pointed out, there’s very little standardization in healthcare pricing; right? So, if you look at one, if you look at one sheet and it 

says, well, you can get an MRI for $300, but then you don’t know 

if the MRI needs specific dyes or other things accompanying it, it’s 

70 

very hard for a patient to navigate that and to figure out what the 

overarching price will be for that. 

Mr. HARPER. All right. Thank you very much. 

Dr. Chernew, in your testimony you noted that there are several 

institutional features of healthcare that make it difficult for transparency alone to have a significant impact on the market. You do 

highlight however, that the transparency initiatives are important 

as we move to a newer innovative benefit designs that attempt to 

help patients shop. 

Can you please elaborate on that point? 

Mr. CHERNEW. Of course. So, let me say for those of you that 

don’t know or may not care, I chair the Benefits Committee at Harvard University, which means I advise the provost on what we, as 

an employer, should do for the benefits for our workers. And we’ve 

been very worried about the variation of prices within Massachusetts, which was pointed out. And so that was painful, thank you. 

So, when we think about what to do we start with how we might 

change our benefit designs to incent our workers to make more informed choices about providers. One cannot do that without having 

the relevant information available. So, if you want to do tiered network, if you want to do reference pricing, if you want to do any 

type of benefit design that involves incenting patients beyond a 

flat, say, $20 copay, it’s important that you have the tools to provide information to them. In that way I think transparency is important. And you should know all of our vendors will provide such 

transparency tools should you decide to do that. 

Mr. HARPER. Are the right to shop laws that also provide the financial incentives for consumers to choose the lower cost options 

perhaps, are they likely to have an impact do you think, a bigger 

impact on spending? 

Mr. CHERNEW. I’m not familiar enough with all of all the laws, 

so I would defer to Dr. King. But I think that the general sense 

that allowing patients to shop and supporting their ability to shop 

when they want to I think is valuable. But because of all of the 

institutional features I think that alone is not really what’s going 

to be helpful. 

What we really care a lot about is even if you’re not shopping you 

just may want to know up front what you’re going to have to pay. 

And just getting that, which seems incredibly reasonable, is hard 

to do. And we’re working through that. 

Mr. HARPER. Thank you very much. 

The chair will now recognize the ranking member of the subcommittee, Ms. DeGette, for 5 minutes. 

Ms. DEGETTE. Thank you. Mr. Chairman, just to show how bipartisan this subcommittee can be, you just asked my question. So 

I am going to follow up on what you were talking about. And I will 

start with you, Dr. King. 

And what I want to ask you is what percentage of healthcare 

costs are these things that would be negotiable to most patients, 

the MRI, the lab tests, issues like that? And what percentage is the 

things they are less likely to want to negotiate on, like physician 

services? 

71 

Ms. KING. I think it’s a great question. And I am not, I am not 

a health economist. I’m not studying, somebody who studies all of 

that percentage, so I don’t know exactly. 

I know that in studies, there was a study done that looked at Anthem, and United, and some other big health insurers, and it suggested that if they used reference pricing for their shoppable items, 

for their laboratory tests, that they would be able to bring down 

costs. I think it was on the order of around 10 to 15 percent. 

So I don’t know the exact number of laboratories. So maybe Dr. 

Chernew knows that. 

Ms. DEGETTE. Well, he is a health economist. 

Ms. KING. Yes. He may know. 

Ms. DEGETTE. So I think I will ask him that. 

Mr. CHERNEW. In great humility, there’s a lot of things I don’t 

know. 

Ms. DEGETTE. Even though you are at Harvard? 

Mr. CHERNEW. Especially because I’m at Harvard. 

Ms. DEGETTE. Good answer. 

So, so you don’t have any idea what the percentage would be reduced? 

Mr. CHERNEW. Advocates of shopping will give you a very big 

number, 60, 70 percent. 

Ms. DEGETTE. Yes. 

Mr. CHERNEW. In for realistic numbers about what really could 

be shopped, I think you’re probably talking closer to 10 to 15 percent of services. 

Ms. DEGETTE. That is the same thing Dr. King just said. 

Now, now if you, if you did have increased transparency and if 

you could encourage patients to actually look at the sources, with 

physician costs even though, even though people, I mean I am not 

going to pick the cut-rate physician over the more expensive one 

that might have gotten a good reference, or whatever. But would 

there be some incentive for physicians to, on their own, maybe 

tamp down some of their rates? 

Mr. CHERNEW. So, the answer is if the markets were working 

well there would be an incentive for physicians to change and facilities to change their prices. And you’ve seen some of that. I really 

don’t associate that with transparency, I associate that with benefit 

design, things like reference pricing. 

I also think there’s evidence, we’ve done a lot of work on alternative payment models, which I know is not the specific subject of 

this hearing, but when physicians are in payment models that give 

them an incentive to shop—— 

Ms. DEGETTE. Right. 

Mr. CHERNEW [continuing]. They are much more active in shopping because they will change their referral patterns if they get to 

keep some of the savings if they’re more efficient in their referral 

patterns. 

So, really I think transparency should be thought of as a tool 

that supports other impactful things as opposed to an end in and 

of itself. 

Ms. DEGETTE. Dr. King, did you want to add to that? 

Ms. KING. Yes. So, on the reference pricing point, so the way that 

reference pricing works is that an insurer will pick a fee that it deVerDate Nov 24 2008 13:10 Mar 20, 2019 Jkt 037690 PO 00000 Frm 00075 Fmt 6633 Sfmt 6633 U:\MY DOCS\HEARINGS 115\HEARINGS\115-151 CHRIS
72 

cides that it’s an amount that it’s willing to pay for a particular 

service. And then any provider that charges above that, the patient 

has to pay that out of pocket. 

And what the studies have shown with respect to that is that a 

number—there’s been a decent amount of savings from patients 

saying they don’t actually want to go to a higher-priced provider, 

but there’s been a 30 percent reduction in provider costs overall, 

that they have dropped their prices to be under the reference price 

to get a broader volume of patients. And so that might be, that 

might prove to be helpful. 

Ms. DEGETTE. Dr. Chernew, do you want to? 

Mr. CHERNEW. I think Dr. King’s referring to a study by Jamie 

Robinson and colleagues about a program that CalPERS did in 

California Anthem. There’s a lot of things they did besides just reference pricing. So it’s a very complicated thing. And they were a 

very big purchaser, which is helpful. 

I think we looked at reference pricing for our employees. And one 

of the problems we had was if you pick a price and then the patient’s responsible for the amount above that price, you actually 

have a lot higher bills that they have to pay. 

Ms. DEGETTE. Right. 

Mr. CHERNEW. Substantially higher bills. And the whole reason 

you’re here is because you’re upset, I’m upset that the patients are 

facing very substantial bills. 

So, we are trying to find ways in our benefit design to support 

shopping without going through the full risk that reference pricing 

might impose on patients should they not shop. So, it’s a complicated tradeoff. 

Ms. DEGETTE. So, what did you do? 

Mr. CHERNEW. We decided not to recommend reference pricing. 

Ms. DEGETTE. OK. 

Mr. CHERNEW. And you should know, going in I really wanted to 

recommend it because as an economist I thought it would be a victory. 

Ms. DEGETTE. Yes. And so what it is sounding like to me is that 

while we can, we can work on some of these transparency issues— 

Dr. King, you mentioned your five items and, don’t worry, they are 

in your testimony, too, so even though you were kind of cut short— 

but, but we should also look at other ways of structuring these insurance plans which may make incentives for providers versus just 

the patients. 

Thank you. Thank you, I yield back. 

Mr. HARPER. The gentlewoman yields back. 

The chair will now recognize the vice chairman of this subcommittee, the gentleman from Virginia, Mr. Griffith, for 5 minutes. 

Mr. GRIFFITH. Thank you very much. Appreciate you all being 

here today. And obviously this is a very complicated subject, and 

I do appreciate it. 

I wish there was some way people could go in and say I have got 

to have this procedure and, like a car, you could say if you are getting this, the fancy wheels, then you pay more, et cetera. But it 

seems that that is outside of our realm right now. Although one 

73 

would hope that with all these young computer whizzes coming on 

that somebody might be able to figure out how to plug all that in. 

And I do agree that there are some things, I am going to pay 

more for the doctor that I know. Happy to do that, and able to do 

that, fortunately. Some people aren’t. And so we have to try to look 

at some of the things that you all already talked about in relationship to insurance and getting the ability to say how much is this 

going to cost me out of pocket before you go forward I think is important. And you all touched on that as well. 

So, you all are dealing with this huge, complicated matter. And 

my questions are much simpler. I have just been really concerned. 

We had a hearing in the Health Subcommittee where we had all 

the providers lined up. And it was shocking, I had heard rumors 

but they actually confirmed that because of the way the system 

currently works there are cases where you could go to your pharmacist with your insurance company and your PBM and say, I 

want to get this drug, how much will it cost me if I don’t use my 

insurance? And sometimes it is less if you don’t use your insurance 

than it is if you do use your insurance because of the complicated 

formulas, and so forth. 

And Delegate Todd Pillion in my district out of Abingdon, Virginia, got a bill through the Virginia legislation—I heard there 

were 22 others this morning—that said you can’t have those gag 

orders anymore. 

Dr. King, do the states eliminating those gag orders, do we find 

that that make a whole lot of difference when they go to the pharmacy? Do they sometimes figure out that they are better off nothing using their insurance because of the PBMs, et cetera? 

Ms. KING. Thank you. It’s a great question. 

So, I think a lot of these laws are new and so we haven’t been 

able to really do the studies on them. But I think in terms of allowing pharmacists to actually say to the client at the desk, by the 

way, if you go outside your insurance or you get this generic you 

can save a lot of money, I can’t, because pharmaceutical drugs in 

a large respect are those kinds of interchangeable drugs, interchangeable products, and so I think that that should have some 

substantial effect. And the idea that they were prevented from 

doing so by contract before is unconscionable to me. So, I think it’s 

great. 

Mr. GRIFFITH. Mr. Carter has a bill I am glad to be a cosponsor 

of to make that a Federal policy. And it is really interesting. I was 

discussing it back home and lady said, yes, that happened to my 

sister by accident. Her insurance company initially stated that they 

wouldn’t pay. And so she paid for the prescription herself. Then 

when it came time to renew they said, oh, we changed our minds, 

we will pay for that particular prescription, and she found out it 

was more. 

She called her pharmacy and said, what is this, it cost me more 

when I am using my insurance? 

Ms. KING. Yes. 

Mr. GRIFFITH. He says, yes, I can’t tell you about that but if you 

will ask me to do it outside of your insurance you will only have 

to 17 instead of paying 50. 

Ms. KING. Right. 

74 

Mr. GRIFFITH. And so, I think it is something we need to pass. 

And there are a fair number of patrons on that. 

But it was clear to me that we need to look at the PBMs along 

with all the other things that you all are mentioning as part of the 

transparency. I know they serve good purpose. 

But, again, Virginia on this, and it is my home State, that is why 

I keep referencing, but we had Delegate Keith Hodges out of 

Gloucester directed the State Bureau of Insurance to report to the 

General Assembly about how PBMs charge for their services and 

whether they save money or make healthcare costlier. Among the 

findings of the first PBM transparency report as a result of his 

work, mandated by that language, last year there were 152,250 

payments, with total PBM markups of 3.5 million between July 1 

and September 21. 

The differential or spread on each claim ranged from 1 penny to $4,932. 

Do you think that having more transparency and more oversight 

over PBMs and what they are doing—I know they work hard in 

some cases and save money, but in other cases they are actually 

costing the consumer—do you think that would help? 

Ms. KING. Yes, I do. 

Mr. GRIFFITH. Dr. King, you do. 

Dr. Chernew, do you have an opinion? 

Mr. CHERNEW. You can call me Michael, please. 

Mr. GRIFFITH. Michael. 

Mr. CHERNEW. I think as a matter of principle people should be 

able to get the information that they need. So, just on the pure 

principle of it. 

In terms of the market demand, that gets much more complicated. I, I didn’t talk about prescription drugs because a lot of 

the situation that you’re discussing arises because of the complicated rebate rules that are going on in the prescription drug 

market. And those rebates both in some ways they help markets 

work, but in other ways, and I think more dominantly, they make 

it much more complicated and much more difficult to have markets 

work well in healthcare. 

And so, I think that while we could debate conceptually what the 

ability, you should have the ability to negotiate, I think the fact 

though we live in an environment where it’s just so complex for 

people to get the price and get simple information, they’re told that 

by contract they’re not allowed to tell them, I think it’s just a matter of principle that the situation shouldn’t arise, even though it 

may well result in some people paying more because the discount 

that currently the PBMs can get might be less because they don’t 

want everybody to know when they’re getting the discount. That’s 

basically what the problem is. 

Mr. GRIFFITH. All right, I appreciate it. And I think that for a 

lot of our folks back home, they don’t understand all the big stuff. 

But they understand when they go to their pharmacist and they 

feel like they are being overcharged. 

I appreciate it, and yield back. 

Mr. HARPER. The gentleman yields back. 

The chair will now recognize the gentlewoman from Florida, Ms. 

Castor, for 5 minutes. 

75 

Ms. CASTOR. Thank you, Mr. Chairman. 

I want to return to what providers and insurers can do to help 

lower the costs through their transparency efforts. Because I think 

you correctly stated how folks feel, that if their doctor recommends 

something, I mean, it is pretty rare that a patient, a neighbor is 

going to go shop and do something else. 

So, Dr. Chernew, you, you said, OK, alternative payment models 

can be one way. What else on physicians, because they play such 

a central role on consumer behavior? 

Mr. CHERNEW. So, first let me say I really wish I could come here 

with some silver bullet and solve the problem. And I can’t. Because 

anything I’m about to say is going to have potential deleterious 

consequences. 

Most of the insurers I know, all of the insurers I actually know, 

are struggling to find ways to address the healthcare cost problem. 

It is not that insurers want healthcare spending to be high or 

they’re not working on it. 

Essentially what matters is the interaction between the patient 

and the physician, the treatment that’s given, and the price that 

we pay for that. The way to address that is some combination of 

payment reform and benefit design. And you’re seeing a ton of private sector initiatives to do that. And where we are right now is 

employers in the market sorting through which ones work for them 

in which particular ways, and we’re trying to learn what works better than not. 

So, alternative payment models honestly is my favorite. I’m a big 

believer in benefit design changes. So the evidence on high deductible health plans that are HSA coupled isn’t as strong as I would 

like as an economist in general. There are some things that I would 

recommend, like the way chronic care medications are treated in 

the HSAs is something I think are probably a good thing to help 

people being able to shop. Things like that. 

But there is not a specific Federal thing that one can do. And the 

challenge that you will face—and again I say this in a totally nonpartisan way—is where the regulations should step in and stop at 

least the most egregious cases. Because there are some really outof-network billing things, there are some really egregious cases 

that are just unconscionable that should probably be stopped by 

regulation. And I honestly think that transparency is not the mechanism to get at those types of things. 

To the extent that the private sector can build transparency 

tools, which I am supportive of, and the States can try different 

ways through their All Payer Claims Databases, I think that is 

wonderful. But I think fundamentally my advice would be focus on 

rules to prevent the most egregious situations where people in an 

emergency room are paying some huge out-of-pocket thing. 

Ms. CASTOR. Right. 

Mr. CHERNEW. And telling them that matters. But, honestly, I 

would say just prevent that. 

Ms. CASTOR. So and, Dr. King, your number one recommendation 

was on ERISA. And ERISA was a law passed in the 1970s that 

said, across the country you have to have certain standards. 

Ms. KING. Yes. 

76 

Ms. CASTOR. So, why would that be so important for us to get 

into to help lower healthcare costs? You want to empower the 

states to do additional things I guess? 

Ms. KING. So, basically ERISA, the way that it is written because 

it’s trying to promote uniformity and place benefit plan regulation 

across all 50 states has a very broad preemption scheme. Which 

means that it will come in and negate any state law that relates 

to an employee benefit plan, including all the employer health 

plans. 

Now, there is a savings clause as a part of ERISA which says 

that any state insurance law that directly regulates insurance will 

be saved from ERISA preemption. But there’s the next part of 

ERISA says that it doesn’t deem self-insured employer plans to be 

insurance, even though that’s the way that the vast majority, or at 

least half of our employees get their insurance is through self-insured employer plans. Right? 

So, any law that’s passed by a state to regulate health insurance 

or employer-based insurance is going to be preempted by ERISA as 

it applies to about half of our employees. And —— 

Ms. CASTOR. Who would oppose it? 

Ms. KING. I think industry would oppose it. Right? They, they 

like not having regulations apply to them in that way. But it is 

crippling state All Payer Claims Databases, which have demonstrated that they can do a lot. 

They’re doing a lot with the information they have. But if they 

had all the claims, healthcare claims in a particular state, they 

could really get a handle on what’s driving cost, where is competition not working, what thing, what mergers and acquisitions 

should or shouldn’t go through. 

And it also provides the foundation for every, like, for the majority of other, the other solutions we’re talking about, so, allowing individuals to have better price information for what it would cost 

them, for putting that information into the hands of providers, I 

mean providers and insurers. Like, it would just sort of seed a lot 

of other efforts. Reference pricing would be based on that, and 

other things. 

So, I think addressing the ERISA problem—and I have a number 

of ways, a number of ideas of how you could do that—I think is 

foundational to any sort of transparency initiative that you would 

propose. 

Ms. CASTOR. Thank you very much. I yield back. 

Mr. HARPER. The gentlewoman yields back. 

The chair will now recognize the gentleman from Texas, Mr. Barton, for 5 minutes. 

Mr. BARTON. Thank you, Mr. Chairman. And it is always good 

to have hearings like this to try to, through bipartisan basis, get 

facts on the table. 

My first question is just kind of a general question. I have been 

on this committee 32 years. I have been involved with some of the 

major healthcare issues over a number of times. One of the most 

vexing issues we face is pricing drugs. And to my mind, except for 

the long-time over-the-counter drugs like aspirin and things of this 

sort, there is no rational explanation for how we price drugs. 

77 

I think the over-the-counter drugs that have been on the market 

for decades, in some cases hundreds of years, they are pretty much 

priced like any other commodity and it is cost-based, distributionbased, advertising. You pay more for Bayer aspirin than you do for 

the Walmart generic brand, but they are basically aspirin. 

But I would like you, Dr. Chernew, to go back to the Harvard 

Business School and have them come up with a flow chart and explanation of how we price Lipitor, or how we price Plavix, or how 

we price the new stem cell-based drugs. Do either one of you want 

to defend the current pricing system for these, these new drugs 

that are coming on the market, or even try to explain it? 

Mr. CHERNEW. When you said comment, I thought you were 

going to say comment, I was going to jump in. When you said defend I had to back off. 

But I will do my best. The—— 

Mr. BARTON. Do it in about 30 seconds because I have got two 

or three questions. Give me the executive summary. 

Mr. CHERNEW. New drugs provide great value. I think that is indisputable. 

Mr. BARTON. I agree with that. 

Mr. CHERNEW. We have a patent system that supports them. 

And the drug companies charge what the market will bear. And 

that, fundamentally, both gets us really good drugs and creates 

huge amounts of problems. 

And that was my 30 seconds. I’m happy to talk more. 

Mr. BARTON. Well, that is pretty rational. The drug manufacturers charge what they think the market will bear. But you go 

through these convoluted, average wholesale pricing and 340B discount drug program. 

Mr. CHERNEW. That’s all just a distraction. They’re basically 

charging what the market would bear. And because of a bunch of 

rules, it’s much more complicated than that. And the question is 

how we want to support innovation and pharmaceuticals, which we 

want to support because it—— 

Mr. BARTON. We do. 

Mr. CHERNEW. And that’s where the problem comes in. 

Mr. BARTON. Dr. King. Then I have got two more questions. 

Ms. KING. I just want to interject that I think Dr. Chernew is 

totally right that we get, we tend to get good value for new drugs, 

for most of them. Where we’re really not getting good value is 

where we’ve already had a drug that has been on patent, expired 

its patent life, and then they change a tiny little bit of this drug, 

get an entirely new patent, run prices up for 20 more years. 

There’s a lot of things that we are not getting good value for that 

remain in patent. 

And if you want to look strongly at how to fix drug pricing, I 

would look at how drugs are patented and what we allow a whole 

re-upping on the patent. 

Mr. BARTON. I think that is valid. 

All right, I want to go to the very bottom line here. I have a constituent in Texas, a real estate agent who is on Medicare. And her 

doctor gave her a coupon for a prescription drug covered by Medicare. She took it to her pharmacist and the pharmacist said, 

78 

‘‘Great, but I can’t, I can’t take this coupon because you are on 

Medicare.’’ Medicare doesn’t take coupons. 

So I got with the Congressional Research Service and some other 

groups and found out that for some reason when we established 

Medicare we don’t allow senior citizens—and we started covering 

prescription drugs—we don’t allow senior citizens to use coupons if 

they are under Medicare. 

So, Congressman Doyle and I have got a bill, we are going to introduce it either this week or next week, that says if you are on 

Medicare and you have got a coupon from your doctor, you can’t 

use them for generic drugs, but for any other drug you can. Good 

idea, bad idea? 

Mr. CHERNEW. So, I appreciate your constituent’s problems. I 

think the challenge is most of the time in the patent system what 

the market will bear is not distorted by insurance. In healthcare 

it’s distorted by insurance. So the problem is if you take any consumer incentive away by the coupon, the actual price for the drug 

the market will bear goes up. And that’s what the tension is, is 

that if you want the consumers to—— 

Mr. BARTON. Well, then the manufacturer doesn’t have to give 

the coupon. If they don’t give the coupon to the doctor, the doctor 

doesn’t give it to the patient. 

Mr. CHERNEW. No, the manufacturer likes giving coupons because then they charge a higher price and the insurer can’t use the 

cost function. 

Mr. BARTON. Then we should just stiff the Medicare recipients? 

Mr. CHERNEW. Is my time up? I hope so. 

[Laughter.] 

Mr. BARTON. It is not complicated if you are an elected member 

of Congress and all of a sudden Medicare recipients start showing 

up at their town, town hall. 

Mr. CHERNEW. Yes. I, I totally agree. The challenge at the core 

is you want the market to discipline the providers, which requires 

people having to pay. And when people have to pay, it turns out 

they don’t like having to pay. And therein lies the problem with 

coupons and a bunch of other distortionary things. 

So, I agree with you. And we’ll have to have a longer conversation on how to deal with it. 

Mr. BARTON. I think that is yes, he agrees with me. 

Mr. HARPER. The gentleman yields back. 

The chair will now recognize the gentlewoman from New York, 

Ms. Clarke, for 5 minutes. 

Ms. CLARKE. I thank you, Chairman Harper, Ranking Member 

DeGette, for convening this important hearing examining state efforts to improve transparency of healthcare costs for consumers. 

Additionally, I want to thank our witnesses for providing your expert testimony here this morning. 

This is a critical issue that is most deserving of Congress’ attention as we work with industry to ensure consumers have a positive 

experience on their healthcare journey. In my home State of New 

York, since 2015 we have an out-of-network law that protects patents from surprise billing when services are performed by non-participating providers. This same law also protects New Yorkers from 

bills for emergency services. 

79 

The focus on transparency and consumer protection are needed 

so that consumers will not have to continue paying more than their 

usual in-network cost sharing and/or copayment amounts. 

So, I have a couple of questions. Dr. King, how effective have 

state efforts been to ban surprise out-of-network hospital bills? And 

what more should we be doing to prevent this? 

Ms. KING. Thank you. It’s a great question. 

I think surprise billing is a really important issue for just consumer protection in general. So I think that we have seen a number of different types of laws to protect consumers from surprise 

billing. So there are those that, as Dr. Chernew said, ban the practice outright, just say you will not be exposed, especially in emergency services, you will not be exposed to prices that are higher 

than your in-network copay for emergency services and other 

things. 

And I think those are very effective. At least they’re protecting 

the consumer. And then we allow the bigger fish in the game, the 

insurance companies and the providers, to hash it out over what 

are reasonable reimbursement rates. And that’s what we have in 

California. 

But there are others, there are lots of states that are passing 

laws right now that just say that a person should be informed that 

they may be being seen by an out-of-network provider, or that they, 

when they arrive at the emergency room, someone who takes care 

of them might be an out-of-network provider and they might experience other charges. 

And I think that these laws, while well-intentioned, don’t reflect 

accurately the reality of the patient experience. If you show up at 

the emergency room, you are in an emergency situation. You are 

signing whatever it is that you’re signing and then you’re going to 

get help. And I think that someone telling you that you may be 

subject to out-of-network law, out-of-network bills at that point is 

not that helpful for you. 

So, I think we need to focus on the laws that seven states have 

passed that really just make it very clear that patients in these 

specific situations will not be subject to copays that are higher than 

what their in-network charges would be, and then let everybody 

else hash it out. 

Ms. CLARKE. OK. And, Dr. Chernew, in your written testimony 

you note that efforts in New Hampshire have had a modest impact 

on healthcare spending. What was it about the reforms in New 

Hampshire that have enabled costs to go down, albeit slightly? 

Mr. CHERNEW. So, the study by Zach Brown in Columbia is what 

I, who is at Columbia is what I was referring to. And they found 

by looking at MRIs what I consider to be a modest impact on a 

service where you often see impacts, like MRIs. 

So I think there were some things about that. They had insurerspecific prices. They knew whether you were in your deductible or 

were not in your deductible, things like that. 

So, I think as those laws go that’s a reasonable law. I think it’s 

a mistake to believe that doing things like that are going to solve 

the basic problems. And as far as I know, New Hampshire has not 

really solved all of the problems. Maybe there’s someone here from 

New Hampshire. 

80 

But I think in the end of the day through their All Payer Claims 

Database they were able to do some things that were valuable. And 

to the extent that you can support the All Payer Claims Databases, 

I think you might be able to help on the margins the system get 

a bit better. 

I still think private sector initiatives could have the potential to 

be more impactful. 

Ms. CLARKE. So, Dr. King, could you describe any other promising state efforts to improve transparency of healthcare costs for 

their citizens? 

Ms. KING. Yes. I’ll comment just really briefly on New Hampshire and then I’ll talk a little bit about Massachusetts as well. 

So, one of the things that New Hampshire did through their All 

Payer Claims Database is they have a website called New Hampshire Health Costs which you can go into. And I checked it out this 

morning because I had heard good things about it. And basically 

as a, as a patient you can go there and check off this is the health 

insurance plan that I am in, I am in Anthem and I want to get 

this kind of procedure, and I want to do it with this particular provider. And they’ll tell you, they’ll run down the cost. And they’ll 

run down the cost for that provider and they’ll show you how it, 

how it compares to other providers. 

Now, that doesn’t tell you your specific out-of-pocket costs and it 

doesn’t tell you where you are in your personal deductible, but I 

think that is more helpful than what we’ve seen in a lot of other 

states’ price transparency initiatives. 

Now the other state that I want to highlight here is Massachusetts. And Massachusetts has gone a long way with their All Payer 

Claims Databases. But they also have their Health Policy Commission, which is an arm that is designed to analyze that information 

and really mine the All Payer Claims Database for a whole host 

of policy reasons. And they’ve been able to interject and produce reports, annual reports on spending, annual reports on the drivers of 

costs, but also interject in a number of different places where, 

where that information would not have otherwise been available to 

inform policy decisions, but also to inform patients in that case. 

So I think there are consumer-facing things that are very useful, 

although I do agree that some of the private initiatives from insurers are better. But I do think that having the Health Policy Commission there to really analyze that data has been a very useful 

step as well. 

Ms. CLARKE. Thank you. I yield back. 

Mr. HARPER. The gentlewoman yields back. 

The chair will now recognize the gentleman from Texas, Dr. Burgess, for 5 minutes. 

Mr. BURGESS. Thank you, Mr. Chairman. And I have got way 

more questions than I can package into 5 minutes, but we will do 

our best. And I may submit some for the record. 

I do appreciate both of you being here today. Let me just ask you 

a question, Dr. Chernew, since you brought up about the private 

sector initiatives versus the All Payer Claims Databases. 

I pointed out in my opening statement, Texas has Texas 

PricePoint. I believe it is Texas Hospital Association that has done 

that. So, good on them for having done that. But is that not helpful 

81 

for them to have done it? Does that delay getting an All Payer 

Claims Database set up in the state? What are some of the tensions there? 

Mr. CHERNEW. I think it is at the end of the day probably marginally helpful as opposed to not. I don’t think it delays All Payer 

Claims Databases. 

I think because all healthcare is local and the states are going 

to do different things, I’m sort of a state experimentation kind of 

person in this space. I wish I could tell you I knew what would 

work. I don’t like sounding as skeptical as I am. So I think the 

more we can allow states to do different things and then study 

what they’re doing, I think the better. 

Mr. BURGESS. And, Dr. King, do you have any thoughts on that? 

Ms. KING. I tend to agree. I think that on balance it’s probably 

helpful. I think any attempts to provide transparency are generally 

useful. I don’t think it probably delayed an All Payer Claims Database unless you were considering that as the alternative option and 

went with this one. 

I think that an All Payer Claims—so, in terms of the private entity tools, I think those tend to be much more useful for consumers. 

Right? And so, United Healthcare they go in, you type in your 

name, you get into the system, and it tells you what your actual, 

where you are in your deductible, what your copay would be for different people. 

And I think All Payer Claims Databases allow you to use the information for a lot of different purposes; right? So that’s sort of the 

difference. One is very targeted at individuals, but you also have 

to be in the plan in order to see that information. 

Mr. BURGESS. Sure. 

Ms. KING. Right? You can’t get that information when you’re 

choosing your plan. Although Massachusetts I think just has a law 

coming down that would enable that, for you to see different prices 

as though you were in different plans. 

Mr. BURGESS. Txpricepoint.org you would not have to be in a 

plan. That is a —— 

Ms. KING. No. But it tells you—— 

Mr. BURGESS [continuing]. Public hospital provides database. 

Ms. KING. But it doesn’t tell you the price that you would pay 

for your insurer. 

Mr. BURGESS. No, it does not. 

Ms. KING. Right. So that is very hard to know what to do with 

those prices. 

Mr. BURGESS. So, every time I see that TrueCar ad on T.V. I 

wonder why we don’t have TrueCar for healthcare. But then as 

someone who had a health savings and account for years and year 

and always has paid the highest out-of-pocket costs for everything, 

hospital labs included, I was a big believer when I first heard about 

Theranos. And I thought, oh man, a cheap way to get a bunch of 

blood tests done. I’m all in. Except the reliability suffers. 

Ms. KING. Yes. 

Mr. BURGESS. So there is a caveat there, I guess. Is that the correct observation? 

Mr. CHERNEW. Yes. And remember, it’s TrueCar, it’s not 

TrueCarborator; right? And it’s TrueCar. 

82 

Mr. BURGESS. So, I think, Dr. Chernew, I think you mentioned 

the alternative payment methods. And going back to when the Secretary of Labor was Secretary of Health and Human Services he 

did a demonstration project, a physician group practice demonstration project where they dealt with some alternative payment mechanisms. I think, if I understand the history correctly, ACOs kind 

of grew out from there. 

But can you speak to that? Is there a way to foster the development of what perhaps Secretary Leavitt’s original idea was there? 

Mr. CHERNEW. Yes. And I think, again maybe a little far afield, 

Medicare has been very innovative in the whole range of payment 

models. But I also can’t tell you what the right type of payment 

models are. But I think—— 

Mr. BURGESS. Neither can we. But we are learning, I hope. 

Mr. CHERNEW. There you go. But the more we support alternative payment models, in many ways the better. 

One thing that I think does matter is to understand that the 

price from the point of view from the physician is different than the 

price from the point of view of the patient because the patient is 

buying some episode of care. The physician is delivering a small 

part of that, the same with the facilities. 

So, the more for example supporting bundled payments, which 

Medicare is doing, the more you can support that type of thing, and 

the more payment moves towards more consumer-oriented sets of 

things that are being purchased, the closer you get to transparency 

because then someone will know what does it cost for a 

colonoscopy, not what does it cost for the technical component, the 

professional component, the anesthesia component, et cetera, et 

cetera. 

Mr. BURGESS. But people still buy on provider as well as on 

price. Which just brings me to the final thought, and I will close 

my section out. 

In the lead-up to the Affordable Care Act there was a lot of concern about physician-owned hospitals. And in fact, remember, physician-owned hospitals got whacked in the Affordable Care Act. Mr. 

Chairman, I am going to ask unanimous consent to insert a letter 

or a article into the record about physician behavior with physician-owned facilities. 

Back in my world it was all about time. I got paid the same 

amount, regardless whether the patient went to an ambulatory surgery center or to a community hospital. The lab processing from my 

reimbursement’s perspective was identical. But the cost to the patients was a fixed rate in an ambulatory surgery center, and the 

sky’s the limit in the community hospital. I am oversimplifying. 

But nevertheless, that is I think one of the pressures that we are 

going to have to consider as we work through these. 

But, again, I ask unanimous consent to put this article into the 

record. 

Mr. HARPER. Without objection. 

[The information appears at the conclusion of the hearing.] 

Mr. HARPER. The gentleman yields back. 

The chair now recognize—— 

83 

Mr. BURGESS. I want the gentlelady from Colorado to read it before she accepts. I thought I had found a way to get you to read 

my articles. 

Ms. DEGETTE. I will take your word. 

Mr. BURGESS. All right. Thank you, Mr. Chairman, I yield back. 

Mr. HARPER. And that was on the record by the way. 

And the chair will now recognize—— 

Ms. DEGETTE. But not under oath. 

Mr. HARPER. Not under oath. 

But the chair will now recognize the gentleman from California, 

Mr. Ruiz, for 5 minutes. 

Mr. RUIZ. Thank you, Mr. Chairman. 

Overall we know transparency is a good thing and leads to better 

understandings of market dynamics and better ways to help everybody come up with good policy that is going to really lead to a more 

cost-efficient way of providing better healthcare for the American 

people. However, there are certain things that transparency is good 

for and the market really focuses on. 

Like, for example, if you had the ability to make the choice, and 

knowledge to know the difference between the products in a situation where you can actually make a decision, and not under duress, 

or when you are in a coma, or when you are in cardiac arrest or 

something going into the emergency department, and there are 

some things that transparency obviously can work. 

So, in your statement, however, Dr. Chernew, you note in your 

testimony that ‘‘many studies, including several of my own and 

those of my colleagues, find that transparency has minimal, if any, 

impact on the market.’’ You go on to explain why transparency results in only minimal impact on price. 

Dr. Chernew, it sounds like the bottom line is that it is somewhat folly to rely upon transparency as the magic bullet to bring 

down healthcare costs. Is that correct? 

Mr. CHERNEW. Yes. 

Mr. RUIZ. OK. In what situation does transparency work? 

Mr. CHERNEW. When there’s more commodity type services, when 

they’re not as connected to things and you have time to shop I 

think transparency works. 

I think independent of shopping, transparency works just to tell 

people what they would have to pay out of pocket. Just knowing. 

So, you’re not going to shop, it’s just you don’t want to get a bill 

after the fact that’s way higher than you thought. 

So, I think transparency is useful. I think it needs to be coupled 

with other things. 

Mr. RUIZ. But you are saying it is not what we should be focusing on? 

Mr. CHERNEW. I think there’s a lot of reasons why healthcare 

markets don’t function well. Transparency I would put down on my 

list for what that’s true. 

I think it’s important, let me say, what I worry about, for example, is insurance inherently, unlike most products is a pooled product. I’m in with a lot of other people on the same plan. I worry that 

if we allow the benefit packages to deteriorate to the point where 

people are paying a lot out of pocket and we separate that market 

through a range of things that are going on that I won’t mention— 

84 

it might be too partisan, I don’t mean it to be—that people have 

higher out-of-pocket bills because they won’t understand when they 

bought the insurance plan what was covered. They’ll go to the doctor and they’ll realize that what they thought was insurance wasn’t 

that good. And it’s very hard to make that work well. 

Mr. RUIZ. So, do you think that putting too much weight on 

transparency to reduce healthcare costs is a distraction? 

Mr. CHERNEW. I worry that that’s the case. 

Mr. RUIZ. OK. I am a doctor. And I know that patients rely on 

doctors’ knowledge, and training, and years of experience to make 

decisions that will be to the best benefit for the patients. And I 

know that it is difficult for patients to then, if an orthopedic surgeon says I recommend a titanium type of metal for your knee replacement, that a patient in general is not going to do the research 

or have the know-how in order to determine what kind of equipment they want for their knee to make that best judgment. 

But I do think that there is some value in transparency. I think 

it is just what Dr. Burgess said earlier, it is insane that one hospital will charge, I don’t know, I’m just making these numbers up, 

but $2,000 for a colonoscopy. And then, like, across the city in the 

same, same region another hospital charges $10,000. So why is 

that? 

And we should understand where are the mechanics that go into 

that so that we can identify, in those cases when you do have the 

time to choose which studies or which equipment you want where 

you can have the knowledge and have the time, and under the situation, to make that possible, I think we should focus on that. 

But, Dr. Chernew, you also mentioned that if the objective is to 

meaningfully reduce healthcare costs, other strategies such as addressing adverse selection in the individual market for healthcare 

may be more fruitful. Can you expand on that? 

So, if the objective is to lower costs are there ways to combine 

transparency initiative with some of these other efforts to lower 

costs? Can you go into that? 

Mr. CHERNEW. Well, let me talk about two separate things very 

quickly. The first one is transparency is important to support almost all of the various new benefit design things we do. It’s important for a range of public regulation things. I think there’s a bunch 

of reasons why transparency matters. And I think it’s unconscionable, some of the stories that I’m sure your constituents have told 

you. I think that’s a really big deal. 

That said, the biggest problems we have in a lot of healthcare 

markets aren’t related to transparency, they’re related to how we 

hold the market together and how the benefit design packages play 

out. So, at Harvard we control exactly the benefit package. We 

push everybody into it. It’s pooled, it works. 

If you allow markets to spin out of control and let people do various things there’s implications of that that differ from markets for 

cars, or markets for asparagus, or things like that. So, figuring out 

how to address those types of problems so you don’t have individuals that end up in insurance plans where they’re going to be 

charged a lot out of pocket I think are important. 

Mr. RUIZ. Harvard. Harvard Business School? 

85 

Mr. CHERNEW. Harvard University. Harvard University has a 

Benefits Committee that offers benefits for all of the schools. 

Mr. RUIZ. OK. 

Mr. CHERNEW. So, Business, the Medical School, the main part. 

And we advise the Provost, for the non-union workers, about how 

to deal with our challenges. And we have a lot of challenges. 

Mr. HARPER. The gentleman yields back. 

The chair will now recognize the gentlewoman from Indiana, the 

chair of our Ethics Committee, Ms. Brooks, for 5 minutes. 

Mrs. BROOKS. Thank you, Mr. Chairman. 

And I want to stay on that line of questioning, Dr. Chernew. 

Speaking of employers, and you mentioned Harvard specifically, 

and even some insurers provide transparency tools to their members or their employees, and have redesigned plans and networks 

to encourage price shopping, can you describe some of the features 

of the price transparency tools that are adopted by employers and 

insurers, whether it is Harvard or others, and how they differ from 

the state transparency initiatives? 

Mr. CHERNEW. Yes. So, and again Dr. King mentioned, if you are 

in a plan that offers one of these types of transparency tools and 

you know you need a service, you can go in and type the service. 

Now, that actually sounds easy. But remember, if you’re shopping 

for a CT scan, there’s 50 types of CT scans, and it depends on what 

the dyes are, so it’s not as easy as you think. 

It will aggregate out and try and come up with a number. It will 

combine the physician and the hospital. Because you don’t care 

how much is going to the hospital and how much is going to the 

physician, you care totally what are you going to pay—— 

Mrs. BROOKS. Right. 

Mr. CHERNEW [continuing]. For the whole thing. It will know, 

and again it won’t know perfectly because there’s time lags, it will 

know within reason where you are in your deductible. So, if you are 

over the top of your deductible it will give you a different price 

quote than if you haven’t yet spent your deductible. 

Most of the public non-insurer-based tools don’t have all that information, so they cannot tell you very accurately what you would 

pay. They don’t. We know what prices our carriers have negotiated 

with all the different providers. But most public tools don’t know— 

New Hampshire being an exception—the prices that different providers have negotiated with different insurers. And they certainly 

don’t know where you are in terms of your deductible. 

Mrs. BROOKS. And do you, are you familiar with a lot of private 

tools like what you have just described, and are these types of 

tools, whether they are insurers or employers, are they proving to 

be effective in changing consumer behavior—— 

Mr. CHERNEW. So, the tools—— 

Mrs. BROOKS [continuing]. And reducing steps? 

Mr. CHERNEW [continuing]. Are almost always tools that employers offer but the insurers make. The employers don’t do much. 

They buy things. So, the insurers are the ones that offer the tools. 

Or other, there’s a firm Castlight, for example, that’s well known 

for having these types of tools and selling to employers who can 

buy access to them. And they have been, unfortunately, disappointingly ineffective. 

86 

Mrs. BROOKS. Why, do you believe? 

Mr. CHERNEW. Well, for one, even the best of them are very complicated. The people care more about their physician than the tool, 

so they’re hesitant to shop. And in many cases the employers have 

provided the transparency tools but haven’t designed their benefit 

packages in ways that make them really salient. So you get back 

the same result. 

Even if there—you’ve mentioned, several people have mentioned that there’s wide variation in prices across markets, $2,000 and 

$500. But most patients don’t pay $2,000 and $500 to their employers, most of them only pay—if you were at Harvard you’d pay $30 

flat fee no matter where you went to. So the tool doesn’t help you 

that much. 

Mrs. BROOKS. Dr. King, would you like to comment on the private initiatives, private, the private tools? 

Ms. KING. Yes. So I would just basically reiterate what Dr. 

Chernew said, that they haven’t seen the kinds of results that they 

would be looking for. And I know that Castlight has been, is employers basically buy Castlight Health and offer it to their employees. And they found very low engagement from employees. 

I think a lot of employees don’t want to shop for providers. They 

don’t necessarily want to shop. They will shop a little bit for the 

shoppable services. But they haven’t seen the overall level of engagement has been about 3 to 6 percent on a lot of those tools. 

Mrs. BROOKS. Well, and I would like to ask both of you why do 

you believe that is the case? Why is it that we have these tools, 

whether it is a private sector, an employer, or at the state base 

that states have invested in these, why do we have such low engagement on this issue? 

Ms. KING. I think that we largely have low engagement, partly 

because people aren’t incentivized to use them. If you pay the same 

price you’re not that much incentivized to use them. But I also 

think it goes back to this idea that when you go to your provider 

and they make a recommendation for you of which provider to go 

to for your hip surgery, or which lab to go to. Oh, go to the lab 

down the street. It’s unlikely to then, to whip out your laptop and 

figure out if there’s a cheaper provider elsewhere. 

Also, a lot of times individual providers prefer that their patients 

use a particular lab—— 

Mrs. BROOKS. Right. 

Ms. KING [continuing]. Because they know that they get the results quickly, or it goes right into their EMR, or there are some 

synergies within the system. 

And so I think that patients are reluctant to go against their provider’s advice or recommendation, which is why you should try to 

get this information into the hands of the providers so that if they 

think I would recommend five doctors to do your hip surgery. Oh, 

two of them are in your network. Let’s talk about you’d pay $500 

for this doctor, and you’d pay $200 for this doctor, let’s talk about 

the benefits and detriments of that. That’s what we need. 

Mrs. BROOKS. And, Dr. Chernew, anything different on that as 

to why we have such low rate of use? 

Mr. CHERNEW. Yes. I think that it is a mistake to believe that 

consumers fundamentally want to shop. They actually fundamenVerDate Nov 24 2008 13:10 Mar 20, 2019 Jkt 037690 PO 00000 Frm 00090 Fmt 6633 Sfmt 6633 U:\MY DOCS\HEARINGS 115\HEARINGS\115-151 CHRIS
87 

tally want to pay less out of pocket, and they want things to be 

simpler. That’s what they really want because of all these sort of 

interactions with their physicians. 

And so they tend not to want to go find these things out. You 

can push at the margins, but as a main view that we’re going to 

use market forces to fundamentally control our problems I think is 

a little optimistic, as much as that pains me to say as an economist. 

Mrs. BROOKS. Thank you both. I yield back. 

Mr. HARPER. The gentlewoman yields back. 

The chair will now recognize the gentleman from New York, Mr. 

Tonko, for 5 minutes. 

Mr. TONKO. Thank you, Mr. Chair. And welcome to our guests. 

Many states and healthcare systems have implemented a variety 

of programs that are intended to give consumers additional information about the price of healthcare services on the theory that 

this will allow consumers to make more informed decisions and 

perhaps lower their costs. They are listening to your concerns 

there. 

But maybe you can develop for us a little better some of the tools 

and some of the concerns that we should have. 

Academics, including both of you today, have studied these reforms to see what works, what doesn’t work, and where we might 

go from here. I would like to spend a few minutes discussing with 

our panelists what the academic literature has to say about these 

efforts. 

Dr. Chernew, in your written testimony you use the example of 

shopping for a car to describe why transparency doesn’t always 

work to bring down the cost of shopping for healthcare and the 

like. Could you briefly describe what makes shopping for 

healthcare different and more complicated than that which we 

would utilize for products or services? 

Mr. CHERNEW. Most products or services are bundled in a way 

that you care about. So you’re not buying the ingredients. When 

you go buy a meal you don’t price out all the individual ingredients, it all comes together. 

Healthcare, because of the history of the way in which it developed, and because the reimbursement system was really provider 

focused so you, remember, physicians and hospitals, they’re inputs 

to providing care. Right? But you really care about the joint product. And so that has made it difficult to simply give prices that 

have been developed from sort of a payer perspective to consumers 

who are purchasing from a different perspective. And it, broadly 

speaking, has been hard for people to shop in that way. Combine 

that with insurance distorting prices, the reliance on physicians, 

the complexity of the problem, the salience of the problem altogether has made it very hard for people to shop. 

Mr. TONKO. And, also, you wrote in an August 2017 ‘‘Health Affairs’’ article that ‘‘simply offering a transparency tool is not sufficient to meaningfully decrease healthcare prices or spending.’’ 

So, what did you find regarding these transparency tools? And 

why were they unable to bring down the prices on their own? 

Mr. CHERNEW. They’re often offered with the narrative of they’re 

going to help make markets work. And because most people don’t 

88 

use them, because they’re complicated, they don’t make markets 

work that well on their own, and as a result you don’t see prices 

respond. 

Mr. TONKO. So, could you describe what conditions would be sufficient to meaningfully bring these costs down? 

Mr. CHERNEW. Well, there’s bringing costs overall down is challenging. What’s sufficient to how transparency tools work, which I 

believe are true in a limited number of cases, is you need to have 

services bundled in a way that people can understand. You need 

to have benefit designs done in a way that make people actually 

feel the cost at the margin. And you need to avoid a situation in 

which the physicians that are making the recommendations are, for 

example, owned by a system, so the physician’s going to refer within a system. And once you choose your primary care doctor you’re 

actually choosing a whole referral network they use, and it’s very 

hard to get them to work. 

So, I think Dr. King and I agree that the margins is all valuable. 

There are specific cases. It’s really valuable to let people know 

what they might have to pay out of pocket. But as a fundamental 

question about what could you all do to all of a sudden use transparency to revolutionize the way that consumers shop, and therefore to control healthcare spending, that’s a really tall order. 

Mr. TONKO. Thank you. 

And, Dr. King, your written testimony discusses the usefulness 

of state efforts such as All Payer Claims Databases to bring down 

prices for consumers. These databases are intended to house a comprehensive collection of medical claims data from both public and 

private payers on how much they pay for different kinds of procedures. 

How can consumers use that information in these databases to 

inform their healthcare decisions? And what are the limitations on 

this kind of data? 

Ms. KING. Thank you. So, basically the consumers wouldn’t use 

the database themselves. The information that’s housed in the 

database would then have to get put into a consumer-facing 

website like what New Hampshire has on Health Costs. And that 

has been demonstrated to bring down costs a little bit and allow 

patients to use it. 

So if you have the negotiated rate between a provider and an insurance company in all of these All Payer Claims Databases, and 

all of the utility, how we utilize healthcare, who patients go to, 

what they charge, what the negotiated rates are across the State, 

you could then generate really meaningful information for patients 

because you would know which insurance company they were in 

and what that insurance company had negotiated its prices with 

providers for. And you could use that to populate consumer-facing 

websites and consumer-facing tools that would provide patients 

with information on their out-of-pocket costs. 

I just want to say that one of the other things that we haven’t 

really discussed today as a driver of costs that affects transparency 

is the fact that a huge majority of our markets for healthcare are 

highly concentrated. And one of the reasons why we have such a 

problem with transparency is that you have provider organizations 

and provider systems with a large amount of market power and 

89 

they can demand to keep their prices secret. They can negotiate 

things in ways that drive up costs and then, and then hinder transparency to find that out. 

And so, if you were really looking, I think transparency is important at the margins. I think it’s useful. I think it’s generally a good 

thing in a capitalist society for people to know what they’re going 

to pay. But I also think if we want to talk about competition and 

why the markets don’t work you need to look at the markets themselves and figure out that competition is dwindling and dying because these markets are so consolidated. 

Mr. TONKO. Thank you very much. And, Mr. Chair, I yield back 

my time. 

Mr. HARPER. The gentleman yields back. 

And the chair will now recognize the gentleman from Georgia, 

Mr. Carter, for 5 minutes. 

Mr. CARTER. Thank you, Mr. Chairman. And thank both of you 

for being here. 

Dr. King, I am going to let you continue on because you have hit 

on the right point, the vertical integration that we are experiencing 

right now. What you have is you have a PBM who owns a pharmacy. Now the PBM and the pharmacy are talking about buying 

an insurance company. Now you have got an insurance company, 

Cigna, talking about buying the PBM, which also owns the pharmacies. 

The vertical integration and lack of competition is something. 

And then they can hide it all throughout that vertical integration. 

They don’t care where they make it, as long as they make it. But 

that is the problem. You hit the nail on the head right there. 

Anything else you want to add to that? 

Ms. KING. I just want, I just want to pile on. So, I —— 

Mr. CARTER. Sure. 

Ms. KING. I think that in some instances we’re seeing integration 

and it’s not just vertical; right? We’re seeing horizontal integration. 

We’re seeing vertical integration. And now we’re also starting to 

see cross-market integration where hospitals are buying provider 

systems in other parts of the state, other, and in other states. And 

the more integrated these markets become overall, the less competition we are able to have. 

Mr. CARTER. And that is the whole key. Transparency is eminently important, no question about it. But competition is the key 

as well. And being able to see that competition, we have used the 

example about buying a car. I believe it is New Hampshire who has 

a database, a website you can go to to compare medical costs. That 

is the kind of thing we are talking about, and that is what is going 

to lead to decreasing healthcare costs. 

Ms. KING. Well, that’s right. And if there’s very little competition 

in the state, or you have an entity with an extreme amount of market power, they are able to keep prices very high, regardless of how 

transparent you make them. 

Mr. CARTER. Right. 

Ms. KING. If you don’t have a choice of where to go, they can 

charge you whatever they want. 

Mr. CARTER. OK. Let me get to my part. First of all, Mr. Chairman, I want to ask unanimous consent to submit two letters, one 

90 

from the National Community Pharmacists Association and another from the American Pharmacists Association for the record. 

Mr. HARPER. Without objection, so ordered. 

[The information appears at the conclusion of the hearing.] 

Mr. CARTER. Thank you very much. 

I need to get back very quickly to a question that Representative 

Barton asked about the coupons being used in Medicare Part D. 

The anti-kickback, as you know, that will prohibit that from happening. But one thing my colleagues need to keep in mind is that 

a lot, most of these coupons are for brand name drugs. And if you 

get outside of that formulary it is going to end up costing taxpayer 

more. 

And every quickly, the reason that happens is because when a 

patient goes and meets their deductible, then goes into the donut, 

if they increase the costs by buying the ones that are off the formulary then they get into the catastrophic quickly, more quickly, 

which means that the taxpayers are going to be paying more for 

their insurance, for that patient’s insurance. It is going to end up 

actually costing taxpayers more. 

So that is one of the reasons why the Medicare Part D CMS does 

not allow that to happen in there. So I want to make sure we got 

that clear. 

Representative Griffith mentioned my legislation dealing with 

gag clauses. Twenty-two states have implemented this thus far. We 

need to implement it at the Federal level. Here we are in America 

with freedom of speech, and over 30 years of experience in working 

in pharmacy and I could never tell a patient, look, if you pay for 

this out of your pocket it will only cost you $7.00, but your copay 

is going to be $20.00. And that is just ridiculous for us, particularly 

here in America, not to be able to do that. 

I wanted to talk also about PBMs and their licensure and registration. A number of states have required PBMs to register with 

their insurance commissions. And the most recent one was Arkansas held a special session. And now they have enacted the Arkansas Pharmacy Benefit Licensure Act where the state insurance department requires PBMs to license within the state. 

One of the things, also, we talk about pharmacies. The number 

one pharmacy in America, CVS, they have more stores. Walgreens. 

You know what number three is? Express Scripts with their mail 

order pharmacies. Yet, they do not have to register in each state. 

Don’t you think they should at least have to register in each 

state, the third largest pharmacy chain in America? And they are 

nothing but mail order pharmacies. Surely they should have to register in every state. 

Any comment. 

Ms. KING. I know very little about it but it sounds like you’re 

right, yes. 

Mr. CARTER. OK. I know. 

So, anyway, Dr. King, Medicaid managed care organizations, 

that is another way that we can attack some of these costs as well 

because without having, without having the transparency there to 

see what exactly the PBMs are charging in those, then we are unable to control costs. 

91 

In fact, West Virginia just did away with their managed—they carved that out and saved $30 million. In Ohio they saved $227 

million. In Kentucky they figured their costs would be $380 million. 

Why can’t we control that on a Federal level as well? 

We have a number of managed care organization contracts at the 

Federal level. If we could control those, do you think we could 

have—and had transparency in it, do you think we could save costs 

there? 

We could. The answer is yes. I’m sorry. 

Mr. HARPER. The gentleman yields back. 

The chair will now recognize the gentlewoman from Illinois, Ms. 

Schakowsky, for 5 minutes. 

Ms. SCHAKOWSKY. Thank you. 

Dr. Chernew, I have never heard a witness, though I am sure 

many are thinking of it, that I wish my time were over. And I have 

been chuckling over that for most of the hearing. 

You mentioned the idea that pharmaceutical companies, manufacturers can charge whatever the market will bear. But the question is, what is the market? 

We have a briefing from a Dr. Anderson from Hopkins who said, 

for example, Sovaldi, that they decided that all they really needed 

to make back the money that they invested in Sovaldi, or the marketing that they do, they need 20 percent of the market. 

So, we are not talking about widgets, we are not talking about 

cars, we are talking about illness, life, death. And so if they charge, 

which they did, $86,000 for this cure to Hep C, all they really care 

about is that if 20 percent of people who have this really awful disease can get cured. 

And so it seems to me that we ought to have a better way. When 

you say charge whatever they want to make the money they want, 

this isn’t about free markets, this is about a very segmented market. I just wonder if you would comment on that? 

Mr. CHERNEW. I wrote in my written testimony that I was going 

to avoid pharmaceutical markets because it raises so many complicated issues. But since asked, I will dip my toe in. 

The challenge, and I will use Sovaldi as an example, is Sovaldi 

was a truly innovative drug. And all analyses suggest at least most 

any value criteria you would have. And although it may be difficult 

for people to swallow—that’s not a pill joke—but anyway, it turns 

out that the evidence suggests that with greater incentives for prescription drug innovation you get more innovation. 

The problem is that statement should not imply that the drug 

companies get a blank check. And therein lies the basic problem. 

I do not think their goal was simply to make back their R&D 

money. Their goal was to make more money. 

Ms. SCHAKOWSKY. Yes. 

Mr. CHERNEW. Right? That’s the goal in capitalist societies, to 

make more money. And in fact they have created a remarkably 

good product that for decades will benefit us and everybody. Right? 

Ms. SCHAKOWSKY. Not everybody. 

Mr. CHERNEW. The challenge—— 

Ms. SCHAKOWSKY. The people who can pay for it. 

Mr. CHERNEW. No, that’s right. So the people who can’t pay for 

it and don’t get it, they’re in the same place off they were before 

92 

it got invented. So, the challenge is how to manage the incentives 

for innovation, which are really important, with the obvious egregious problems of pricing. Not simply for what people who pay out 

of pocket. It’s the out-of-pocket comments that bring everybody 

here. But the charge, to deal with the overall total amount of 

spending, and the prices, and the volume for all of these drugs. 

Ms. SCHAKOWSKY. You know what, let me stop because I have 

one more—— 

Mr. CHERNEW. Thank you. 

Ms. SCHAKOWSKY [continuing]. One more question about it. 

But I think it is worse if you know that there is the cure right 

there, that there is a cure right there and you can’t get it. I think 

in some ways it is worse than thinking there isn’t one. 

But, again, about—OK, so you don’t want to talk about markets, 

but I just want to mention this. One argument is that increased 

competition or more generic drugs are going to lead to lower drug 

prices. But recently Elizabeth Rosenthal described the bizarre phenomenon economists call sticky pricing where prices of competing 

prescription drugs simply rise together with each new drug that is 

provided. 

So, we have got Novartis, a cancer drug. And Gleevec was first 

listed at $26,000 in the market. And the first generic was list 

priced at around $140,000 annually. And now many drugs in the 

same family as Gleevec cost on average $150,000 per year. 

So, we aren’t seeing. Again, markets in drugs, very different. We 

are seeing an increase. So, this thought that competition is going 

to drive it down and generics will drive it down, not working always. 

Mr. CHERNEW. Always. I agree. 

So, if you look at drugs at 15 years ago we could have been arguing about Lipitor and a whole series of other blockbuster drugs. 

They’ve all gone generic. We buy them at Harvard, they’re bought 

as generic. It’s a great deal. And there’s a lot of real advances. 

The challenges that are presented through some of those drugs, 

through biosimilars, which is a whole different issue, becomes important, are really, really, really important. And the issues you’re 

raising I’m incredibly sympathetic with because the basic problem 

is we’ve been very successful at encouraging amazing innovation. 

We haven’t found a good way to make sure that that innovation 

is affordable for people. And even if you solve the problem that people are paying a lot out of pocket, the prices getting passed through 

through insurance premiums create a really fundamental challenge. 

Ms. SCHAKOWSKY. OK, but I just want—and I know my time is 

up—but we are seeing increases in drugs that have been on the 

market for decades. They charge what the market will bear, and 

that means that the prices have kept going up out of control. 

So, I can’t let you answer. I am sorry, I am out of time. And you 

should be happy. 

Mr. HARPER. The gentlewoman yields back. 

The chair will now recognize the gentleman from Pennsylvania, 

Mr. Costello, for 5 minutes. 

Mr. COSTELLO. Thank you, Mr. Chairman. 

93 

Dr. Chernew, in your written testimony you noted that one of the 

many reasons that many transparency initiatives have had only a 

minimal impact on the market is because consolidation in the 

healthcare markets limits choice. Consolidation in the healthcare 

industry is something that is of great interest to this committee. 

As Chairman Harper mentioned at the beginning of the hearing, 

the O&I Subcommittee had a hearing on consolidation in the 

healthcare market last February. 

Do you think that there has been too much consolidation in the 

healthcare market? And, if so, what impact has it had on 

healthcare costs? 

Second piece of the question, how does consolidation limit the effectiveness of both private and public transparency initiatives? 

Mr. CHERNEW. Yes, there’s too much consolidation and it’s raised 

the prices and spending. 

And the consolidation makes it difficult for transparency initiatives to work because they fundamentally require choice. If there’s 

no choice, knowing the price of an office charge doesn’t help you all 

that much. 

The only thing I will say is don’t think about transparency as 

only working through consumers. Having the regulators, having 

the policy commission, having journalists see the prices can also be 

helpful. But by and large the more consolidation, the harder it is 

to get markets to work and, therefore, the harder it is to get transparency to work. 

Mr. COSTELLO. I have a question for you. But would you like anything to add, Dr. King? You were shaking your head yes before. 

Ms. KING. Yes. Well, I’m in vehement agreement with most of 

the things he has said today. 

So, I think that also transparency can help with the consolidation problem because you can actually, if you have a good All Payer 

Claims Database you can look and see how a particular merger or 

acquisition over time drove up costs or didn’t drive up costs. 

Did they actually gain the efficiencies they said they were going 

to get when they actually merged? 

Did they pass it through to consumers? You’d be able to know 

that. And you’d be able to then turn around and stop future consolidation in the markets through that. 

So, I think that those work both ways. 

Mr. COSTELLO. Dr. King, thank you. In your written testimony 

you highlighted how states could use healthcare claims data reported to an APCD to examine the drivers of healthcare costs over 

time, the impact of mergers, acquisitions, and other affiliations on 

healthcare price and quality, among other things, similar to what 

you just were sharing with us right there. 

How would the healthcare claims data reported to an APCD give 

states with an APCD unique insight into the impact of M&As that 

states without an APCD would not have? 

Ms. KING. So, currently because a lot of these private prices are 

shrouded in secrecy, the attorney general doesn’t know and other 

state entities don’t actually have the data to examine how mergers 

in the past have affected prices, or they don’t have the ability to 

project how mergers in the future might affect prices. 

94 

And so, if you have this enormous database of healthcare prices 

over time that allows you to look at utilization patterns, how people went, were funneled to different providers, and the cost, you 

could then make much better economic projections about how a 

merger might affect things in the future. And, also, you’d be able 

to look back in the past and see if they kept their promise. 

Mr. COSTELLO. Can you describe the general approaches states 

have been taking regarding the pharmaceutical price transparency 

bills you have seen? 

Ms. KING. Yes. So, states have looked at a number of different 

things with regard to price to pharmaceuticals this year. This has 

been the big topic among the states. They have done everything 

from a lot of price, pharmaceutical price disclosure anti-gag clauses 

this year. 

They have also looked at pricing reports or requiring pharmaceutical companies to submit reports at the end of the year, annually or at some other time that basically describe how much it cost 

them to produce a drug, what they spent on development and marketing, and then what, how they’re pricing their drugs, both as an 

annual cost, as an individual patient cost. 

States have also focused on gag prohibitions and disclosures, 

pricing reports. And that’s a lot of what we’ve seen with respect to 

pharmaceuticals. And then a lot of PBM regulation as well, trying 

to promote transparency amongst the pharmacy benefit managers. 

Mr. COSTELLO. Thank you. I will yield back. 

Mr. HARPER. The gentleman yields back. 

I want to thank both of you for being here today, giving us some 

very valuable insight and information as we tackle this very important challenge that we have. 

So, I want to thank the members that have participated in today’s hearing. And I will remind members that they have 10 business days to submit questions for the record. And should you receive any written questions, we would ask the witnesses to respond 

as quickly as possible to those questions. 

The subcommittee is adjourned. 

[Whereupon, at 12:02 p.m., the subcommittee was adjourned.] 

[Material submitted for inclusion in the record follows:] 

95 


35432.044

E ~c U.S. HOUSE OF REPRESENTATIVES 

l;} COMMITTEE ON ENERGY AND COMMERCE EST. 1795 

July 15, 2018 

TO: Members, Subcommittee on Oversight and Investigations 

FROM: Committee Majority Staff 

RE: Hearing entitled "Examining State Efiorts to Improve Transparency of Health 

Care Costs for Consumers." 

The Subcommittee on Oversight and Investigations will hold a hearing on Tuesday, July 

17, 2018, at 10:15 a.m. in 2322 Rayburn House Office Building, entitled "Examining State 

Efforts to Improve Transparency of Health Care Costs for Consumers." The purpose of the 

hearing is to examine state laws and policies that improve transparency of health care costs for 

consumers and the impact that they had on consumers. 

I. WITNESSES 

Jaime King, Professor, UC Hastings College of the Law, Associate Dean and CoDirector, UCSF/UC Hastings Consortium on Law, Science, and Health Policy; 

• Michael Chernew, Leonard D. Schaeffer Professor of Health Care Policy, Director, 

Healthcare Markets and Regulation Lab, Department of Health Care Policy, Harvard 

Medical School; and 

• Kavita Patel, Associate ChicfMedical Officer, Johns Hopkins Medicine. 

II. BACKGROUND 

A. Health Care Expenditures 

In 2016, U.S health care spending was estimated to be about $3.3 trillion, and the overall 

share of gross domestic product (GOP) related to health care spending was 17.9 percent (up from 

17.7 percent in 20 15). 1 According to the Centers for Medicare and Medicaid Services (CMS), 32 

percent of the $3.3 trillion in expenditures was spent on hospital care, 20 percent was spent on 

physician and clinical services, 14 percent was spent on other (including, but not limited to home 

health care and durable medical equipment), I 0 percent was spent on prescription drugs, 8 

percent was spent on government administration and net cost of health insurance, 5 percent was 

spent on nursing care facilities and continuing care retirement communities, 5 percent was spent 

1 U.S. Dep't of Health and fluman Services, Centers for Medicare & Medicaid Services, National Health 

E<penditures 2016 Highlights (Dec. 20 !7), available at https://www.cms.gov/Research-Statistics-Data-andSystems/Statist ics-Trends-and-Reports/N ationalHealthExpendData!Down loads/highlights. pdf. 
96 


35432.045

Majority Memorandum for July 17, 2018, Subcommittee on Oversight and Investigations Hearing 

Page 2 

on investment, and 4 percent was spent on dental services2 The majority-75 percent--of the 

$3.3 trillion in expenditures was paid for by health insurance (34 percent by private health 

insurance, 20 percent by Medicare, 17 percent by Medicaid, and 4 percent by the U.S. 

Department of Veterans Affairs (VA), the U.S. Department of Defense (DOD), and the 

Children's Health Insurance Program (CHIP))3 

According to a Kaiser Family Foundation analysis of National Health Expenditure data 

released by CMS, total health expenditures have increased substantially over the past several 

decades. 4 Indeed, data released by CMS indicates that total health expenditures in the U.S. were 

about $721 billion in 1990, $1.4 trillion in 2000, $2.4 trillion in 2008, and $3.3 trillion in 2016. 5 

Moreover, on a per capita basis, health spending has also grown-increasing from $8,412 in 

2010 to $10,348 in 20166 Although health care expenditures have continued to increase at a 

rapid pace, U.S. health care spending increased in 2016 at a slower rate than in previous years (in 

2016, spending on health care increased by 4.3 percent compared to 5.1 percent in 2014 and 5.8 

percent in 20 15). 7 

Many different factors may influence health care spending, including, but not limited to, 

population aging, prices, policy changes, consolidation, and public and private initiatives. 8 

Moreover, some research has shown that there may be significant variation in the cost of health 

care services in one geographic region, and that more expensive health care services are not 

always associated with a higher quality of care.9 For example, a 2014 study by the U.S. 

Government Accountability Office (GAO), found that "the estimated total cost of maternity care 

at selected acute care hospitals in the Boston area that rated more highly on several quality 

indicators ranged between $6,834 and $21,554 (consumers would pay between $2,967 and 

2 U.S. Dep't of Health and Human Services, Centers for Medicare & Medicaid Services, The Nation's Health Dollar 

($3.3 Trillion), Calendar Year 2016: Where it Came From, Where it Went (Dec. 2017), available at 

https:/ /www. ems. gov /Research-Statistics-Data-and -Systems/Statistics-Trends-andReports/Nationa!HealthExpendData!Downloads/PieChartSourcesExpenditures.pdf. 

3 /d. 

4 Rabah Kamal and Cynthia Cox, Peterson-Kaiser Health System Tracker, How has U.S. spending on health care 

changed over time 7 (Dec. 20, 2017), available at https://www.healthsystemtracker.org/chart-collection/u-sspending-healthcare-changed-timel#item-total-health-cxpenditures-increased-substantially-past-severaldecades _ 2017. 

'ld. 

6 /d. 

7 Micah Hartman, et al., National Health Care Spending in 2016: Spending and Enrollment Growth Slow After 

Initial Coverage Expansions, HEALTII AFFAIRS, Vol. 37, No. I (Dec. 6, 2017), available at 

https:/ /www.healthafTairs.org/doi/fullll 0.1377/hlthaff.20 17.1299. 8 Aaron C. Catlin and Cathy A. Cowan, Hist01y qf Health Spending in the United States, 1960-2013 (Nov. 19, 

20 15), available at https:/lwww.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-andReports/NationalHealthExpendData!Downloads/HistoricalNHEPapcr.pdf; Sean P. Keehan, et al., National Health 

Expenditure Projections, 2016-25: Price Increases. Aging Push Sector to 20 Percent of Economy, HEAL Til AFFAIRS 

(Mar. 2017), available at https://www.ssc.wisc.edu/-gwallace/Papcrs/Health%20Aff-2017-Keehanhlthaff.20 I6.I627%20(1 ).pdf; Medicare Payment Advisory Commission (MedPAC), Report to the Congress: 

Afedicare and the Health Care Delivet:v System. Chapter I 0: Provider Consolidation: The Role ofA!edicare Policy 

(June 20 17). 9 U.S. Government Accountability Office (GAO), Health Care Transparency: Actions Needed to Improve Cost and 

Quality Information for Consumers, GA0-15-11, at II (Oct. 20, 20I4). 
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$5,000 in estimated out-of-pocket costs)." 10 Similarly, in Massachusetts, the median price of 

magnetic resonance imaging (MRI) of the spine ranges from $500 to $1,67011 

Consumers are increasingly responsible for more of their health care costs. According to 

CMS, in 20!6, consumers directly paid for about 11 percent of the $3.3 trillion spent on health 

care and out-of-pocket spending grew at the fastest rate of growth in 2016 since 2007. 12 In an 

April2018 report, America's Health Insurance Plans (AHIP) indicated that the number of 

individuals enrolled in Health Savings Account (HSA)-Qualified High Deductible Health Plans 

(1-IDHPs) has been increasing, and that as of January 2017, 52 health insurance providers 

reported that over 21.8 million people were enrolled in an l-ISA-Qualified HDHP.n This is a 

significant increase over the approximately 10 million individuals enrolled in an l-ISA-Qualified 

HDHP in 2010. 

B. Health Care Price Transparency Efforts 

i. Overview 

As consumers pay more for their health care, there has been an increasing amount of 

discussion about the role of health care price transparency for consumers and the importance of 

providing consumers with information that enables them to make informed health care 

decisions. 14 Some experts have reasoned that providing patients with information about health 

care costs may help reduce spending and improve care by empowering patients to make 

informed health care decisions. 15 Other experts, however, have questioned whether some of the 

10 !d. at 12 11 Atcev Mchrotra, M.D., M.P.H., Michael E. Chernew, Ph.D, and Anna D. Sinaiko, Ph.D., Promise and Reality of 

Price Transparency, THE NEW ENGLAND JOURNAL OF MEDICINE, at 1348 (Apr. 8, 2018); See also Zack Cooper, et 

a!., The Price Ain't Right" Hospital Prices and Health Spending on the Private(v Insured, HEALTH CARE PRICING 

PROJECT, at 21 (May 8, 20 18), available at 

http://www .healthcarepricingproject.org/ s itesidefault/fi les/20 180507 __ vari ationmanuscript 0. pdf. 12 U.S. Dep't of Health and lluman Services, Centers for Medicare & Medicaid Services, National Health 

Expenditures 2016 !!ighlights (Dec. 2017), available at https://www.cms.gov/Research-Statistics-Data-andSystems/Statistics-Trcnds-and-RcportsfNationa!HealthExpendData/Downloads/highlights.pdf; U.S. Dcp 't of Health 

and Human Services, Centers for Medicare & Medicaid Services, The Nation's Health Dollar ($3.3 Trillion), 

Calendar Year 2016: Where it Came From, Where it Went (Dec. 2017). available at https://www.cms.gov/ResearchSlatistics-Data-and -Systems/Statistics-Trends-andReports.fNationaiHealthExpendData/Downloads/PieChartSourcesExpcnditurcs.pdf. 

13 America's Health Insurance Plans (AHIP), Health Savings Accounts and High Deductible Health Plans Grow as 

Valuable Financial Planning Tools, at 3 (Apr. 2018), available at https://www.ahip.org/wpcontent/uploads/20 !8/04/HSA_Report __ 4. 12. 18.pdf. 14 See, e.g., U.S. Government Accountabillty Office (GAO), Health Care Transparency Actions Needed to Improve 

Cost and Quality Information for Consumers. GA0-15-11, at I (Oct. 20, 2014). 15 See, e.g., Robert Wood Johnson Foundation, How Price Transparency Can Control the Cost of Health Care, 

Health Policy Snapshot Series (Mar. 1, 2016), available at https://www.rwjf.org/en/library/research/2016/03/howprice-transparency-controls-health-care-cost.html; Health Care Cost Institute, Issue Brief Spending on Shoppable 

Services in Health Care (Mar. 20 16), available at http://www.hcalthcostinstitutc.org/files/Shoppablc%20Services% 

20!13%203.2.16_0.pdf; Chapin White. eta!., Policy Analysis: flealthcare Price Transparency: Policy Approaches 

and Estimated Impacts on Spending (May 2014), available at http://www.westhealth.org/wpcontent!uploads/20 15!05/Price-Transparency-Policy-Analysis-FINAL-5-2-14.pdf; Bobbi Coluni, White Paper: Save 

$36 Billion in U.S. Healthcare Spending Through Price 7/·ansparen<y, Thomson Reuters (Feb. 2012), available at 

http:i/64.64. 16. 1 03/wp-content/uploads/20 12/09/thomsonreuters _savings _from_price _transparcncy.pdf. 
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current efforts to engage patients and provide them with information about the costs of health 

care services have successfully lowered health care expenditures and encouraged price 

shopping. 16 Recently, the Secretary of the Department of Health and Human Services (HI-!S), 

Alex Azar, highlighted the potential value of price transparency I? Azar said that "if we want to 

move to a system where we put patients more in charge of their own healthcare dollars, providers 

and insurers have to become more transparent about their pricing. There is no more powerful 

force than an informed consumer." 18 

Many states have taken steps to improve price transparency in the healfh care market and 

lower health care costs. These transparency efforts have generally attempted to provide 

consumers with information about different types of health care costs, including, but not limited 

to, information about the cost of health care services and/or the cost of prescription drugs. The 

state initiatives encouraging more transparency on prescription drug costs have taken a variety of 

different approaches, including, but not limited to, requiring drug manufacturers to submit 

information about price increases, requiring drug manufacturers to report information regarding 

the prices of prescription drugs and the costs associated with developing and marketing them, 

and prohibiting "gag clauses" that restrict pharmacists from disclosing price options to 

customers. 19 According to the National Conference of State Legislatures (NCSL), 22 states 

enacted laws between 2016 and May 31, 2018, prohibiting "gag clauses" in contracts that 

prohibit pharmacies from telling consumers about alternative pricing options for prescription 

drugs 20 

Similarly, state efforts to promote price transparency for the cost of health care services 

have also have varied in approach. For instance, some state efforts have required that providers 

report certain pricing information to the state or the patient while other efforts have required that 

insurers submit certain pricing information.21 Likewise, some state initiatives have required that 

pricing information be publicly posted while other initiatives have required that the information 

be given to the individual patient before they receive medical care. 22 Sections II.B.ii and Il.B.iii 

of this memorandum provide a non-exhaustive list of examples of health care transparency tools 

16 See, e.g., Sunita Desai, ct al., Association Between AvailabWty of a Price Transparency Tool and Outpatient 

Spending, JAMA (May 3, 2016), available at https:l/jamanetwork.com/joumals/jama/fullartic1e/2518264. 17 Alex M. Azar II, Remarks on Value-Based Transformation to the Federation ofAmerican Hospitals (Mar. 5, 

20 I 8), available at https://www.hhs.gov/about/leadership/secretary/speeches/201 8-speeches/remarks-on-valuebased-transfonnation -to-the-federation-a f-american-hosp itals. htm I. 

18 !d. 19 National Conference of State Legislatures, Prescription Drug Resource Center, Recent Approaches in State 

Prescription Drug Laws (Apr. 4, 20 18), available at https://kaiserhealthnews.files. wordpress.com/2018/04/recentapproaches-in-state-prescription-drug-laws-discussion-march-20 18-002.pdf; National Conference of State 

Legislatures, Prescription Drug Resource Center. Prohibiting PBM '"Gag Clauses·· that Restrict Pharmacistsfrom 

Disclosing Price Options: Recent State Legislation 2016-2018 (Jun. I, 2018), available at 

http://www.ncsl.org/Portals/ I /Documents/Health/Pharmacist_ Gag_ clauscs-20 I 8-14523 .pdf. 20 National Conference of State Legislatures. Prescription Drug Resource Center, Prohibiting PBM "'Gag Clauses·· 

that Restrict Pharmacists from Disclosing Price Options: Recent State Legislation 2016-2018 (Jun. l, 2018), 

available at http://www. ncsl.org/Portals/1 !Documents/Health/Pharmacist .Gag_ clauses-20 18-I 4523 .pdf. 21 National Conference of State Legislatures, Transparency and Disclosure of Health Costs and Provider 

Statements: State Actions (last updated Mar. 201 7), available at http://www.ncsl.org/research/health/transparencyand-disclosure-health-costs.aspx. 

22 Ateev Mehrotra. M.D., M.P.H., Michael E. Chernew, Ph.D, and Anna D. Sinaiko, Ph.D., Promise and Reality of 

Price Transparency, THE NEW ENGLAND JOURNAL OF MEDICINF, at 1348-49 (Apr. 8, 20 18). 
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adopted by the states and other stakeholders that help inform patients about the costs of health 

care services. 

As some of these transparency initiatives have been discussed and implemented, many 

stakeholders have highlighted the importance of considering several factors to ensure that, when 

a transparency tool is adopted, it conveys health care cost information to consumers in a 

meaningful way. For example, in 2014, the llealthcare Financial Management Association 

(HFMA) issued a report entitled "Price Transparency in Health Care" outlining five principles 

for the development of price transparency tools. 23 These principles include, among other things, 

that "price transparency should empower patients and other care purchasers to make meaningful 

price comparisons prior to receiving care," and "that price transparency should ultimately 

provide patients with the information they need to understand the total price of their care and 

what is included in that price."24 Similarly, in an October 2014 report, GAO noted that 

"[t]ransparency tools are most effective if they provide information relevant to consumers and 

convey information in a way that consumers can readily understand" and identified 15 

characteristics of etTective transparency tools. 25 Moreover, one economist at the Kellogg School 

of Management at Northwestern University recently found that health care consumers will price 

shop, but only if the information is conveyed in a simple, and understandable manner26 

Some of the factors that make it difficult to convey price information to consumers in a 

meaningful way includes, but is not limited to, the fact that: (I) price information is oftentimes 

most useful for insured customers if it includes specific information about their particular 

insurance coverage;27 (2) each patient has unique circumstances that may change the cost of their 

care; 28 (3) billing for health care services is complex;29 (4) price information may be more useful 

to consumers if it also provides them with information about quality;30 (5) according to one 

study, less than seven percent of out-of-pocket spending was spent on shoppable health care 

services;31 and (6) transparency might be most ctTective if it is combined with other incentives or 

benefit designs that encourage consumers to price shop.32 Section Il.B.iv of this memorandum 

23 llealthcare Financial Management Association (llFMA), Price Transparency in Health Care, Report from the 

!!FMA Price Transparency Task Force (2014), available at https:l/www.hfma.org/transparency/. 24 /d. 25 U.S. Government Accountability Office (GAO), Health Care Transparency: Actions Needed to Improve Cost and 

Quality Information jar Consumers, GA0-15-11, at II (Oct. 20, 2014). 26 Kellogg Insight, Will People Price ShopjiJr Healthcare? (Jan. 4, 2018), available at 

https:l/insight.kellogg.northwestern.edu/articleiwill-peoplc-price-shop-for-healthcare. 

U.S. Government Accountability Office (GAO), Health Care Transparency: Actions Needed to Improve Cost and 

Quality lnfiJrmationfor Consumers, GA0-15-11, at I I (Oct. 20, 2014). 28 Public Agenda, Still Searching: flow People Use Health Care Price lnfimnation in the United States, New York 

State, Florida, Texas. and New Hampshire (2017), available at 

https:l iwww.publicagenda.org/filcsiPublicAgcnda_ StiiiSearching 20 I 7.pdf. 29 Matt Kuhrt, Report: This is the biggest barrier to consumer price shopping in hea/thcare, FIERCEHEALT!ICARE 

(Apr. I I. 20 I 8), available at https:l/www.fiercehealthcare.com/hospitals-health-systems/rcport-finds-barriers-touse-price-transparency-tools. 

3

° Francois de Brantes, ct al., Price Transparency & Physician Quality Report Card 2017, ALTARUM AND CATALYST 

FOR PAYMENT REFORM (20 17). 31 Health Care Cost Institute (HCCI), Issue Brief Spending on Shoppable Services in Health Care (Mar. 2016), 

available at http://www.healthcostinstitute.org/files/Shoppable%20Services%201B%203.2. I 6 _ O.pdf. 32 See, e.g., Sunita Desai. eta/., Offering A Price Transparency Tool Did Not Reduce Overall Spending Among 

CalifiJrnia PublicEmployees and Retirees, HEALTH AFFAIRS 36:8 (Aug. 2017). 
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Majority Memorandum for July 17,2018, Subcommittee on Oversight and Investigations Hearing 

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discusses some of these barriers to effective price transparency tools in more detail and 

highlights some of the recent evidence suggesting that many price transparency initiatives have 

not been associated with decreased spending33 

ii. State Efforts to Promote Transparency of the Cost of Health Care 

Services for Consumers 

As previously mentioned, there are a lot of initiatives at the state level to make the price 

ofhcalth care services available to consumers. For illustrative purposes, below is a nonexhaustive list of some of these efforts. 

• New Hampshire: New Hampshire has adopted robust price transparency policies. New 

Hampshire created an All-Payer Claims Database (APCD)34 in 2003 to collect and 

disseminate information about health care prices. 35 Four years later, in 2007, New 

Hampshire launched a public website, NHI-IealthCost.org, that originally provided the 

median bundled prices for about thirty of the most common health care services.36 

Today, NHI-IealthCost.org has been expanded to provide consumers with information for 

over 100 services and provides information about specific providers that can be 

customized to include information about the individual's specific health plan37 The 

website also includes certain quality information. 38 Additional information about New 

Hampshire's website and the methodology used for health costs is available on 

NI-IHealthCost.org39 On July 12, the New Hampshire Insurance Department announced 

that it was partnering with Harvard Medical School to help New Hampshire residents 

find medical cost estimates.40 In the press release, the President and CEO of the Greater 

Manchester Chamber of Commerce commented that '·NHHealthCost.org gives employers 

a way to share information on the differences in healthcare costs and quality. It also 

offers resources for large and small employers to help them evaluate the value of their 

33 Ateev Mehrotra, M.D., M.P.H., Michael E. Chernew. Ph.D, and Anna D. Sinaiko, Ph.D., Promise and Reality of 

Price Transparency, THE NEW ENGLA:-.10 JOl/RNAL OF MEDICI!"o:E (Apr. 8, 20 18). 

"Additional information about All-Payer Claims Databases (APCDs) and how they are used to provide consumers 

with price information is available on a website created by the APCD Council. See APCD Council, APCD 

Showcase (last visited Jul. 12, 20 18), available at https://www.apcdshowcase.org. 35 The Source on Healthcare Price & Competition, New Hampshire (last visited Jul. 12, 2018). available at 

http://sourceonhealthcare.org/new-hampshirc/. 

36 /d. 37 Ateev Mehrotra. M.D .. M.P.H., Michael E. Chernew, Ph.D, and Anna D. Sinaiko, Ph.D., Promise and Reality of 

Price Transparen<y. THE NEW ENGLAND JOURNAL OF MEDICINE (Apr. 8, 2018); New Hampshire Insurance 

Department, NH HealthCost (last visited Jul. 12. 2018), available at https://nhhealthcost.nh.gov/costs/medical/step2/?carrier"uninsured#filter-control. 

"New Hampshire Insurance Department, NH lfealthCost (last visited Jul. 12, 2018), available at 

https://nhhealthcost.nh.gov/costs/medical/step-2/?carrier=uninsured#filter-control. 

39 See New Hampshire Insurance Department. Methodology for Health Costsfor Consumers (Jul. I2, 2018), 

available at https:l/nhhealthcost.nh.gov/methodology-health-costs-consumers. 40 New Hampshire Insurance Department, NH Insurance Department Partners with Harvard Aledical School to 

Help NH Residents Find Medical Cost Estimates (Jul. 12, 20 18), available at 

https:/ /www.nh.gov/insurance/media!pr/20 18/documents/07 -12-18-nh-heaithcost-updates-harvard-press-re1ease.pdf. 
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investments in health benefits."41 New Hampshire also requires that health insurers 

provide their members with price information42 

• Massachusetts: Massachusetts has introduced several bills to improve transparency. 43 

One of the price transparency initiatives in Massachusetts was the development of a 

website that provides consumers with certain information about pricing of different 

health care services, quality information, and other resources such as suggested questions 

to ask about health care 44 The website, MassCompareCare.gov, provides information 

about the total amount that was paid to the provider for certain services, and allows 

consumers to compare the costs of medical procedures in different health care facilities 45 

lt provides information about the cost of nearly 300 common medical services and 

procedures46 The website also directs consumers to their insurance plan to learn what 

the procedure will cost them. 47 Under the Massachusetts Healthcarc Cost Containment 

and Quality Improvement law, passed in 2012, all health insurers in Massachusetts are 

required to provide members with cost estimates online.48 Recently, Massachusetts 

announced that it plans to release all of the data it uses to support its website as a single 

dataset on July 20,2018, and, at that time, will also launch a transparency data challenge 

to promote innovative uses of the data. 49 

• Ohio: In 2015, Ohio passed a law requiring providers to give patients a "good faith" 

estimate of how much non-emergency, elective health care services would cost 

individuals after accounting for insurance 5° Due to ongoing litigation, the law has not 

yet been implementcd 51 

·11 !d. 42 National Conference of State Legislatures, Transparen<)' and Disclosure of Health Costs and Provider Payments: 

State Actions (last updated Mar. 20 17), available at http://www.ncsl.org/research/health/transparency-anddisclosurc-hcalth-costs.aspx. 

43 The Source on Healthcare Price & Competition, Massachusetts (last visited Jul. 12, 20 18), available at 

http:lisourceonhealthcarc.org/massachuscttsl. 

14 Commonwealth of Massachusetts, CompareCare (last visited Jul. 12, 20 17), available at 

https:/lmasscomparecare.govl. 

41 Commonwealth of Massachusetts, About CompareCare (last visited Jul. 12, 2017), 

https:/lmasscomparecare.gov/about. 

46 Priyanka Dayal McCulskey. What consumers need to know about the state's new health care website, THE 

BOSTON GLOBE (May 16, 20 18), available at https://www.bostonglobe.com/metro/20 18/05/15/what-consumersneed-know-about-state-ncw-health-care-website/n9XGrgu I VtN4mhJQqc8PFL/story.html. 47 Commonwealth of Massachusetts, CompareCare (last visited Jul. 12, 2017), available at 

https:l lmasscomparecare .gov !. 48 Mass.gov, Mass Consumer Affairs Blog, Massachusetts l!ealth Insurers Now Required to Provide Prices in RealTime (Oct. 1, 2014), available at https:llblog.mass.govlconsumerlmassconsumerlmassachusetts-health-insurersnow-required-to-provide-prices-in-real-time/. 

19 Center for Health Information and Analysis (CHIA), Strategy for Releasing Procedure Price Data (Jun. 2018), 

available at http :I lwww .ch iamass .gov /assets/Up loads/Strategy-for-Releasing-Procedure-Pricing-Data. pdf. 50 The Source on Hcalthcare Price & Competition, Ohio (last visited Jul. 12, 2018), available at 

http :1 I sourcconhealthcare. org/ ohio/. 

5I !d. 
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• Colorado: Colorado has passed many proposals to promote price transparency 5 2 One of 

the recent initiatives passed by Colorado requires that hospitals and certain other provider 

groups to post their private-pay, non-discounted fees on their websites, or make them 

available upon request, for the most common health care services that they provide. 53 

• Illinois: Illinois has implemented several policies to promote price transparency 5 4 One 

of the laws passed in Illinois requires that hospitals give prospective patients estimated 

costs of services before treatment. 55 

Again, the above list is just a sampling of some of the state initiatives. For example, 

other states with health care price transparency websites include, but are not limited to, Oregon, 56 

Maine,57 Maryland, 58 and Washington. 5

9 While there have been several state initiatives targeted 

at price transparency, an annual report card released by the Catalyst for Payment Reform and 

Altarum's Center for Payment Innovation still gives most states a failing grade.60 Indeed, in the 

2017 report card, only two states-Maine and New Hampshire-received an "A" for 

transparency, only two states-Maryland and Oregon-received a "B" for transparency, and 

only three states-Colorado, Vermont, and Virginia-received a "C" for transparency. The 

other 43 states received an "F" for transparency 61 According to the organizations, "states with 

high price transparency grades have rich data sources and supply meaningful price information 

on a wide range of procedures and services that is presented on an accessible, publicly available 

website. "62 

States have encountered a lot of different barriers while trying to adopt some of these 

transparency initiatives. For example, many of the state transparency websites utilize 

information from the state's All-Payer Claims Databases (APCDs) to help facilitate price 

shopping, and there have been a number of implementation challenges for APCDs including 

"The Source on Healthcare Price & Competition, Colorado (last visited Jul. 12, 2018), available at 

http://sourceonhcalthcare.org/legislation-regulation/colorado/. 

53 Colorado General Assembly. SB17-065: Transparency in Direct Pay Health Care Prices (2017), available at 

https://leg.colorado.gov/bills/sb 17-065; See also Richard Mark Kirkner, If You Make Them Build It, They Still May 

Not Come, MANAGED CARE (Jun. 3. 2018), available at https://www.managedcaremag.com/arehives/2018/6/if-youmake-them-build-it-they-still-may-not-come. 

"The Source on Hcalthcare Price & Competition, Illinois (last visited Jul. 12, 2018), available at 

http://sourceonhcalthcare.org/illinois/. 

55 National Conference of Stale Legislatures, Transparency and Disclosure of Health Costs and Provider 

Statements: State Actions (last updated Mar. 20 17), available at http://www.ncsl.orgiresearch/health/transparencyand-disclosure-health-costs.aspx. 

56 OrcgonHospitalGuidc.org (last visited Jul. 12, 2018), available at http://oregonhospitalguide.org/. 57 CompareMaine.org (last visited Jul. 12, 20 18). available at http://www.comparemaine.org. 58 Maryland Health Care Commission. Wear the Cost (last visited Jul. 12, 2018), available at http://wearthecost.org; 

See also Robett E. Moffitt, Ph.D, eta!., The Next Chapter In Transparency: Mmyland's Wear the Cost, THE 

HERITAGE FOUNDATlON (Oct. 19, 20 17), available at htips://www.heritage.org/health-care-reform/commentary/thenext-chapter-transparency-marylands-wear-thc-cost. 

59 Washington llealthCareCompare (last visited Jul. 12, 2018), available at https://www.wahealthcarecompare.com. 60 In 2017, the Catalyst for Payment Reform and Altarum's Center for Payment Innovation issued a repott card that 

combined price transparency and quality information in one report card. Francois de Brantes, et aL, Price 

1!·ansparency & Physician Quality Report Card 2017, ALTARUM AND CATALYST FOR PAYMENT REFORM (2017). 

61 !d. 

62 ld. at 3. 
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issues relating to: (I) concerns with data privacy and security; (2) concerns with the accuracy 

and integrity of the data that is submitted and whether the data conveys information in an 

accurate manner; (3) concerns with the comprehensiveness of the data submitted to the APCD; 

( 4) concerns regarding whether the release of negotiated price information could violate state and 

federal antitrust laws and lead to collusion; (5) concerns that the requested information is 

confidential information pursuant to specific contractual provisions or is subject to trade secret 

protection; and (6) concerns with the administrative cost to comply with some of the 

requirements. 63 

iii. Other Price Transparency Tools that are Available to Promote 

Transparency of Health Care Services for Consumers 

The private sector has also pursued a lot of different transparency efforts to help inform 

consumers of the price of health care services. Nearly all insurers provide their members with 

access to a health care cost transparency tool. 64 Many employers-at least 85 percent of selfinsured employers according to one report-also use vendors such as Castlight Health and 

Truven Health Analytics to provide health care price transparency tools to employces 65 

According to a poll conducted by one of these vendors, Truven, 80 percent of the individuals 

who used the tool and were surveyed said that the cost transparency tool "helped them 

understand their financial responsibility up front." 66 Similarly, some hospitals and other 

providers have developed health care price transparency tools for patients. 67 

C. Role and Impact of Health Care Price Transparency 

As previously mentioned, there has been an increasing amount of interest in the role of 

price transparency, especially as consumers are directly responsible for more of their health care 

costs68 Patients generally want to know how much health care services will cost. A report 

released by Public Agenda in 2017 found that about 50 percent of Americans have tried to find 

health care price information before obtaining care and about 20 percent of individuals have tried 

to compare provider prices.69 A report released by the Foundation for Government 

Accountability (FGA) found that 77 percent of Americans want the "Right to Shop" in health 

63 The Source on Hcalthcare Price & Competition, Healthcare Legislative Topics: All Payer Claims Databases, 

MEDIUM (Apr. 3, 2015), available at https://medium.com/@SourccOnHcalth/hcalthcare-legislative-topics-all-payerc I a ims-databases-6 f87b24e 7 fcf. 64 Shelby Livingston, Is the price right? Solving healthcare ·s transparency problem, MODERN HEALTHCARE (last 

visited Jul. 12, 20 18), available at http://www.modernhealthcare.com/reports/achieving-transparency-inhcalthcare/#!/. 

65 /d. 

66 Truven Health Analytics, The Value ojPrice Transparenq in Healthcare (last visited Jul. 14, 2018), available at 

http:/iimg.en25.com/Web/TruvenHealthAnalytics/Price _Transparency_ lnfographic _FIN AL.pdf. 67 See, e.g., Harris Meyer, Hospitals roll out online price estimators as CMS presses for transparency, Modern 

Health care (Jun. 23, 2018), available at http://www.modernhealthcare.com/article/20180623/NEWS/ 180629994. 68 See. e.g., U.S. Government Accountability Office (GAO). Health Care Transparenq: Actions Needed to Improve 

Cos/ and Quality Information for Consumers. GA0-15-11, at I (Oct. 20, 2014). 69 Public Agenda, Still Searching: Flow People Use Health Care Price Information in the United States, New York 

State. Florida. Texas, and New Hampshire (Apr. 20 17). 
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Majority Memorandum for July 17, 2018, Subcommittee on Oversight and Investigations Hearing 

Page 10 

care. 70 Having access to price and quality information can help enable patients identify lower 

cost and high quality care.71 

While these 'reports showed that many patients want to know the cost of their health care 

services, some other studies have raised concerns about how, if at all, consumers use some of the 

available price transparency tools. 72 In April 2018, the New England Journal of Medicine 

published an article entitled ''Promise and Reality of Price Transparency" that described how 

"[mJany politicians and experts believe that price transparency will increase price shopping and 

reduce health care spending," yet concluded that "[t]o date, price transparency has not achieved 

the promises of facilitating price shopping and decreasing spending."73 The article reasoned that 

price transparency tools may not have encouraged price shopping because many patients do not 

know about the available tools, the complexity of health care billing makes it difficult for 

patients to price shop, patients are not given standardized infonnation that they can use to make 

price comparisons, most health plans do not have benefit designs that encourage price shopping, 

and patients do not want to disrupt their relationship with their provider. 74 Another article 

highlighted that there are many different purposes for price transparency, and determining the 

success of different price transparency efforts depends on the goal trying to be accomplished75 

Similarly, some experts have questioned whether consumers are the best target of transparency 

efforts or, alternatively, if transparency targeted at other stakeholders, such as providers, would 

be more effective. 76 

In addition to concerns about whether consumers are using price transparency tools and 

whether they decrease spending, some experts have cautioned that it is important to carefully 

structure price transparency initiatives to avoid unintentional consequences. For example, during 

a 2014 workshop at the Federal Trade Commission (FTC) exan1ining health care competition 

and ellorts to provide consumers, providers, payers, employers, and other stakeholders with 

meaningful price transparency, some of the panelists discussed how some forms of price 

transparency might have unintended consequences such as leading consumers to more expensive 

7

° Foundation for Government Accountability, Allies of Right to Shop: Paying Patients to Pick High- Value 

Healthcare (Dec. 28, 20 16), available at https://thcfga.org/research/allies-of-right-to-shop-2/. 71 See, e.g., Foundation for Government Accountability, How a Patient t.Xperiences Right to Shop -Jenny's Story 

(Dec. 28, 20 16), available at https://thefga.orglresearch/how-a-patient-experiences-right-to-shop-2/. 72 Ateev Mehrotra, MD, MPH, et al., Defining Goals of Health Care Price Transparency: Not Just Shopping 

Around, NEJM CATALYST (Jun. 26, 20 18), available at https:l/catalyst.nejm.org/health-carc-price-transpareneygoals/. 

73 Ateev Mehrotra, M.D., M.P.H., Michael E. Chernew. Ph.D, and Anna D. Sinaiko, Ph.D., Promise and Reality of 

Price Transparency, THE NEW ENGLAND JOURNAL OF MEDICINE (Apr. 8, 2018). 74 /d. 75 Ateev Mehrotra, MD, MPH, et al., Defining Goals of Health Care Price Transparency: Not Just Shopping 

Around, NEJM CATALYST (Jun. 26, 2018), available at https:/lcatalyst.nejm.orglhealth-carc-price-transparencygoals/. 

76 See, e.g., id. 
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Majority Memorandum for July 17, 2018, Subcommittee on Oversight and Investigations Hearing 

Page 11 

providers. 77 Similarly, in a July 2015 blog post, the FTC cautioned that "transparency is not 

universally good," and if it "goes too far, it can actually harm competition and consumers."78 

III. ISSUES 

The following issues may be examined at the hearing: 

• Different state efforts to enhance price transparency and provide consumers with 

information about the cost of medical care and medical products; 

• The purposes of different price transparency tools that states have adopted to 

provide consumers with information about the cost of medical care; 

• How to most effectively provide consumers with meaningful price information 

that they can usc to evaluate medical care; 

• Concerns with some of the different price transparency efforts that have been 

pursued at the state level; 

• Whether consumers have been using some of the various price transparency tools, 

and if not, the reasons that consumers have not been using them; and 

• Whether there arc other forms of transparency, such as transparency directed at 

providers rather than consumers, that should also be considered. 

IV. STAFF CONTACTS 

If you have any questions regarding the hearing, please contact Jen Barblan, Natalie 

Turner, or Lamar Echols of the Committee staff at (202) 225-2927. 

77 Federal Trade Commission, Workshop Transcript: Examining Health Care Competition, at 85-6 (Mar. 21, 2014). 

available at https:llwww. ftc.gov/systcm/filcsldocuments/public _ events/200361/transcriptmar21_ O.pdf. 78 Tara !sa Koslov and Elizabeth Jex, Office of Policy Planning, Federal Trade Commission, Price transparency or 

TMJ.? (Jul. 2, 2015), available at https://www.ftc.gov/news-events/blogs/competition-mattersi20!5/07/pricetransparency-or-tm i. 
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• BASIC QUERY I COMPREHENSIVE QUERY I ABOUT I FAQ I CONTACT I THA HOME 

8 Number of Discharges: 

8 Average Length-of-Stay: 

U Average Charge: 

8 Average Charge Per Day: 

U Median Charge: 

NR = 1 - 4 Discharges (Not Reported) 

~ = Show hospitals in that group 

Medical Center of Lewisville 

500 W. Main 

Lewisville, TX 75067 

(972) 420-1000 

Additional Hospital Information 

January 2016- December 2016 

Selected 

Hospital 

287 

3.5 Day(s) 

$28,364 

$8,104 

$26,201 

All Hospitals tal 

in this County 

843 

3.1 Day(s) 

$22,800 

$7,355 

$21,935 

g Notes About this Table 

Hospitals with tal Similar 

Patient Care 

72,046 

2.8 Day(s) 

$24,131 

$8,618 

$21,892 

c Understanding Hospital Charge Information 

g Why Charges May Differ Between Hospitals 

I Select New Service at this Hospital I 

MEDICAL CENTER OF LEWISVILLE 

CHARGE AND PAYMENT INFORMATION 

MOST RECENT FISCAL YEAR -ALL SERVICES 

What is the selected hospital's "payer mix?" U 

A hospital's "payer mix" refers to the proportion of its 

total charges attributable to different types of 

insurance coverage, 

$350.000.000 

$300_00D,OUO 

$?SO 000.000 

$200 000.000 

$150.000,000 

$100.000,000 

$SO 000.000 

$0 

Medicare Medicaid 

How much do government programs pay compared to private insurance? 0 

All Texas Hospitals 

84,939 

2.8 Day(s) 

$23,786 

$8,495 

$21,836 

Other 

In many cases, Medicare & Medicaid reimburse hospitals at rates that do not cover the costs they incur to provide 
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care. Payments from privately insured patients generally subsidize the shortfalls created by Medicare and 

Medicaid and therefore represent a "hidden tax" on individuals and families not covered by government programs. 

The graphs below represent all services provided by the hospital; they are not specific to the the selected service. 

All PllERS• MEDICARE• MEDICAID • This hospital collects an average of 27%of This hospital collects an average of 16%of This hospital collects an average of 17%of 

its charges from aU payers. 

0 $381,172,861 Charges Not Paid 

• $142,853,482 Charges Paid 

its charges from Medicare. 

0 $151,719,915ChargesNotPaid 

1111 $29,158,372 Charges Paid 

*Payments determined by federal 

government 

its charges from Medicaid. 

0 $43,178,707 Charges Not Paid 

II $8,693,669 Charges Paid 

*excludes Medicaid Disproportionate Share 

and UPL payments 

The above information is for all services at the selected hospital. It is not specific to the service you 

selected or any other single service. Contact your insurer to determine the specific amount that will be 

paid under your policy for the selected service. 

The table below details the health care charges that the hospital did not receive payment for because the patient 

qualified for free or reduced-charge care or because the patient failed to pay what was owed. 

6 Charity Care: 

&Bad Debt: 

6 Total Uncompensated Care: 

Charges 

$5,124,449 

$23,950,252 

$29,074,701 

Copyright© 2007 Texas Hospital Association. AU Rights Reserved.> 

Percent of 

Total Charges 

0.98% 

4.57% 

5.55% 
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Health Affairs 

HEALTH AFFAIRS BLOG 

Building Something Worth Building For 

All Patients 

Michael Burgess 

MARCH 24,2008 001: 10.1377/hblog20080324.000367 

Editor's Note: Today_ Rep. Michael Burgess (R-TX) kicks off a 

series of posts on Jon Gabel's article "Where Do I Send Thee? 

Does Physician-Ownership Affect Referral Patterns To 

Ambulatory Surgical Centers?, "published March 7 8 on the 

Health Affairs Web site. The series will also feature posts from 

Jerry Cromwell and Chris Cassel. 

To paraphrase the great American architect, Frank Lloyd Wright 

no man should write about building who has not himself built 

something worth building. As a physician who helped build an 

ambulatory surgery center (ASC), I conform to Mr. Wright's 

formula and am glad to pen some thoughts about my personal 

experiences with the facility. 
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Let me begin by stipulating that I am neither a statistician, an 

economist, nor an academic. I have, however, practiced twentyfive years' worth of medicine. My experience is far-ranging: from 

a multispecialty practice, to a solo practice, and then in a singlespecialty group. It was as a part of this single-specialty group I 

helped organize and start an ASC in my Texas hometown. And 

now, by virtue of the fact that I have been elected to Congress, 

one could argue that I've become an expert in almost anything. 

Therefore, I am grateful to have the opportunity to provide some 

alternative insights into the conclusions outlined in the piece by 

Jon Gabel and colleagues titled "Where Do I Send Thee? Does 

Physician-Ownership Affect Referral Patterns to Ambulatory 

Surgery Centers?" 

While the overall piece is thoughtful, I take issue with some of 

the conclusions. First and foremost, it is unfair to assume that 

self-pay patients fall into one of two categories: those seeking 

cosmetic surgery or those who are wealthy. There are also those 

who lack health insurance. 

Like other patients, the uninsured require and request surgery as 

well. In my own practice of obstetrics and gynecology, it was in 

dealing with patients who lacked health insurance where the 

payment disparity among different facilities became most 

apparent. Many times I encountered patients who desired 

operations, such as tubal ligation, but lacked health insurance. If 

they chose to pay for this operation, our local hospital would ask 

them to pay up front between $8,000 and $12,000. If, however, 

they were to make the same inquiry at an outpatient surgical 
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center, they would find the total facility fee to be in the range of 

$1,000. My own modest fee for this procedure was in the 

neighborhood of $400, which would be unchanged whether the 

surgery was performed in a hospital facility or an ASC. 

In response to these facts, I would simply ask the rhetorical 

question: in which scenario was I more likely to be paid my fee? 

That in which the patient had paid $1,000 for the facility or a 

figure about ten times as high? Invariably the patient's finances 

would be depleted by the hospital charge, and the physician's 

fee would often go unpaid. 

Thus, if a patient with no insurance presented to my practice for 

an elective procedure, my likelihood of receiving compensation 

might, in fact, be increased if the patient were referred to an 

ASC, regardless of ownership. 

Ownership encourages quality. Payment disparities are certainly 

a challenge. But, there are many other health care concerns 

today, including the issues of quality of care and payment for 

performance. One of the most controversial and complex 

subjects is physician-ownership of medical facilities, as 

evidenced by Gabel and colleagues' discussion. There is an old 

axiom that says no one ever checks the water in the battery of a 

rental car. There is a lot to be said for pride of ownership in any 

facility, including one's own office or one's ASC. 

The relative efficiency of ASCs. Paperwork and policy are also 

problems when it comes to modern-day health care. In my own 

twenty-five years of clinical practice, I had multiple struggles 
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with hospital administration. Indeed, sometimes the 

conventional wisdom was that my local hospital behaved like an 

absentee landlord. I recall very vividly a five-year effort to get 

filtered drinking water for my hospitalized patients. It is not a 

battle I would like to relive at any point in the future. 

Additionally, timing and schedules are critical parts of any 

medical practice. I was fortunate to have a robust roster of 

patients. So I began scheduling minor procedures on a day that I 

typically took out of the office. If I were to do four procedures at 

my local hospital, turnover time after each case would approach 

one hour. As a consequence, I could complete those four extra 

cases each week, but it would consume a large amount of time. 

If, however, those four cases were performed in an ASC, turnover 

time was much shorter. It allowed me to place the patient safely 

in the recovery room, speak with her family, and dictate a 

procedure note before it was time to start the next case. This 

meant that those four cases could be accomplished by midmorning and I could be off about other pursuits. Turnover time 

was reduced because the correct incentives were in place to 

make the facility run smoothly and safely. 

The need for better data on physician owners of ASCs. While I 

disagree with several of Gabel and colleagues' assertions, I do 

concur with their statements about the difficulty in interpretation 

of data because of the lack of public information about 

physician owners of ambulatory surgery centers. In fact, without 

this relevant data, any conclusion drawn becomes suspect -
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relying on broad generalities, or merely reinforcing preconceived 

notions. It is frequently hard to correct for observer bias. 

Additionally, the statements on the difference between Medicaid 

and Blue Cross Blue Shield - in other words, those ranging from 

the lowest to the highest payer- were somewhat confusing. As 

a clinician, why would I want to invest more of my most valuable 

commodity (time) to treat a patient for which my reimbursement 

is lowest? In the interest of precious time, it seems that the 

incentive for treating the Medicaid patient would be tilted toward 

the ASCs, so that it could be done more efficiently. Whenever I 

am confronted with a set of medical choices, my first default 

question is always, "Is it safe?" Secondly, I might consider, "What 

is the least complicated option for me and my patient?" And 

third, "What are the clinical as well as the business outcomes?" 

Thus, if I found myself recommending a procedure for a patient, 

and it could be safely performed in a surgery center, regardless 

of the amount of available compensation, the ease of 

scheduling and the rapidity of performance would tend to 

influence me toward the outpatient facility. 

There also might be a case to be made in terms of 

differentiation by specialties. Generalists such as gynecologists 

or general surgeons will typically have a broad mix of patients. 

Their diagnoses might reveal a different pattern than those 

among physicians who were more narrowly focused within a 

more well-defined specialty. 
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Differing attitudes toward the provision of health care. Finally, 

within the discussion section for this piece, perhaps the focus 

should not be on why the lowest reimbursement patients 

(Medicaid) were referred least often to an ASC. Instead, we 

should determine why Medicaid is the lowest payer. We should 

also explore what this says about those who want to expand the 

government's role in paying for health care. 

The paper talks about 11 a.m. on a Sunday morning. The 

statement is made that this might be the most segregated hour 

of the week. I am not certain about the source of that data, but I 

do wonder if there is a mindset of a segment of the population 

who believe that they should pay nothing for medical care 

versus those who search for an affordable option when hospital 

costs have increased to a level would preclude their use. 

The fact remains that both hospitals and ASCs are necessary for 

providing good, efficient, and cost-effective care in modern 

medicine. Physicians are more inherently aware of this fact than 

any other profession. Therefore, it is not surprising that they 

would want to provide these types of facilities or partner with 

their hospitals to provide these types of facilities, to provide the 

best possible care for their patients in an efficient and costeffective manner. After all, it is patient care that really matters at 

the end of the day, and this begins and ends with doctors. 

Related 
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CONTENT 

TOPICS 

Surgery 

Physician-Ownership 

Hospitals 

Uninsured 

Quality Of Care 

Private Health Insurance 

Payment 

Medicaid 

Medicaid Patients 

Patient Care 

Cite As 

"Building Something Worth Building For All Patients, " Health Affairs Blog, March 24, 

2008. 

DOl: 10.1377 /hblog20080324.000367 

Health Affairs Comment Policy 

Comment moderation is in use. Please do not s~ comment twice -- it will appear shortly. ~ 

Please read our Comment Policy before commenting. 
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N CPAri ------------------------- WWW.t4CPANIT.Ofl.G 

NA<>ONAC COMMUNHY e 

July 17, 2018 

The Honorable Buddy Carter 

United States House of Representatives 

432 Cannon House Office Building 

Washington, DC 20515 

Dear Representative Carter: 

The National Community Pharmacists Association wishes to thank the House Energy and 

Commerce Committee's Subcommittee on Oversight and Investigations for conducting this 

hearing, "Examining State Efforts to Improve Transparency of Health Care Costs for Consumers." 

This is a vital hearing looking at health care price transparency that has emerged as a hot topic in 

state government and legislatures as a strategy for containing health costs for consumers and 

state governments. NCPA would like to share our experiences with states that have enacted 

legislation and initiated programs that aim to reduce costs and bring about increased 

transparency to the drug pricing system. 

NCPA represents America's community pharmacists, including the owners of more than 22,000 

independent community pharmacies. Together they represent an $80 billion health care 

marketplace and employ more than 250,000 individuals on a full or part-time basis. Independent 

community pharmacies are also typically located in traditionally underserved rural and urban 

communities, providing critical access to residents of these communities. 

Community pharmacists have long been concerned with pharmacy benefit managers (PBMs) 

operating as largely unregulated middlemen in the drug supply chain. While PBMs claim to keep 

drug costs low, we believe PBM practices are anti-competitive and ultimately drive up 

healthcare costs for consumers and plan sponsors while reducing payments to pharmacies. 

PBMs determine which pharmacies patients may choose by creating provider networks, 

determine which drugs patients can be prescribed by creating drug formularies, and determine 

how much patients pay at the pharmacy counter for their medications. Despite their authority 

over patients' health care options, PBMs enjoy little regulatory oversight by the state. 

State efforts to increase PBM transparency in the Medicaid program 

Spurred by patient concerns, policymakers in several states have examined PBM practices and 

contract management in their Medicaid managed care programs. Those policymakers have 

found Medicaid managed care organizations (MCOs) that fail to hold their PBMs accountable, 

narrow networks that limit patient access to trusted community pharmacists, PBMs that often 

pay themselves much more than they pay community pharmacies, and spread pricing models 

THE VOICE OF THE COMMUNITY PHARMACIST* 

100 Daingerfield Road 

Alexandria, VA 22314-2888 

(703) 683·8200 PHONE 

(703) 683-3619 FAX 
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Representative Buddy Carter 

July 17, 2018 

Page 2 

that disadvantage taxpayers. Having examined the role of PBMs, policymakers in some states are 

implementing reforms in their Medicaid managed care programs to correct these abuses. 

For example, in the summer of 2017, West Virginia carved pharmacy benefits out of its Medicaid 

managed care program. The state's Department of Health and Human Resources made the 

move after an actuarial study showed that Medicaid could save $30 million annually by 

administering the benefit directly, and that doing so would also put $34 million back into local 

economies in the form of pharmacy reimbursements. Anecdotal reports from Medicaid officials 

indicate that the actual savings thus far are in line with the projections. 

In Kentucky, the state spends approximately $1.68 billion of taxpayer funds on the pharmacy 

benefit in the Medicaid managed care program. While testifying in front of legislative 

committees, the state Medicaid administrator could not explain where that money was going, 

other than it was going to MCOs. Data shows that as much as $380 million could be going 

directly into the pockets of the PBMs. This lack of transparency and accountability drew the ire 

of legislators who soon thereafter enacted some of the strongest Medicaid transparency 

language in the country. Under the new law, Kentucky's Department for Medicaid Services has 

the authority to review and approve contracts between an MCO and its PBM, contracts between 

a PBM administering Medicaid drug benefits and a pharmacy, and PBM reimbursement rates. 

The law also requires PBMs to disclose the difference between the amount the pharmacy is 

reimbursed for filling a prescription and the amount the PBM charges the MCO for administering 

the claim. 

Kentucky is not the only state to take action and increase transparency by examining PBMs' 

spread pricing models. Virginia and Georgia have also passed legislation requiring PBMs to 

disclose the difference between the amount the pharmacy is reimbursed for filling a prescription 

and the amount the PBM charges the MCO for administering the claim. Similarly, in Ohio and 

Pennsylvania, the state auditors have announced plans to review PBM practices in those states' 

Medicaid managed care programs and investigate potential wrongdoing after realizing that 

community pharmacies' reimbursements have been decreasing, but overall state spending on 

prescription drugs continues to increase. 

Members of this subcommittee should be just as concerned as state policymakers have been in 

realizing how harmful a lack of transparency is when it comes to PBMs' use of public tax dollars. 

MCOs have not been holding PBMs accountable, and states are beginning to take control. Those 

states have learned that constant vigilance and increased transparency is necessary to keep 

PBMs honest and ensure public funds are spent properly. These measures not only protect 

taxpayers' wallets, but they ensure that Medicaid beneficiaries can continue accessing the 

services of trusted community pharmacists. The success of these and similar initiatives have 
118 

Æ 


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Representative Buddy Carter 

July 17, 2018 

Page 3 

been noticed by states and organizations across the country, including the National Council of 

Insurance Legislators, which is currently developing model PBM transparency legislation. While 

examining efforts to improve transparency of health care costs of consumerS1 the committee 

should pay close attention to the success that states have had by increasing PBM transparency. 

Sincerely, 

~-cf.Utk-- Karry K. La Violette 

Senior Vice President 

Government Affairs and Director of Advocacy Center