INTERVIEW: How Health Care Price Transparency Can Save Americans Money And Put Consumers In Charge

DW: What drew you to price transparency as it pertains to health care, as opposed to numerous other options that you could have pursued?

BRUHN: I think I’ve always been interested in the intersection of how medicine and health care can help vulnerable, poor populations. And as I started doing health care research at Johns Hopkins with Dr. Martin Makary, he was really the one that introduced me to a lot of these ideas of price transparency as a means to help lower the overall burden of health care costs on lower income, vulnerable populations.

So yeah, since then, I’ve been really fortunate to help march out some of these ideas on different platforms, and it’s really exciting to see price transparency gain traction within the onslaught of different ideas on how to reform American health care. I’m particularly passionate about this topic because I think it’s one that both sides of the aisle can come into agreement on.

DW: Why do you think there isn’t already transparency in health care like there is in so many other industries?

BRUHN: I think it’s a great question, one that probably goes back more so to how we came to be with the current medical pricing insurance model. For most of history, the prices of medical services were just set by physicians themselves. So you had a physician that took care of a particular community, and that doctor would simply charge what was reasonable and fair in his mind, and to what was available for the community.

But after World War II, limits were placed on workers’ wages, so employers began to offer benefits in addition to wages to attract the best workers, and part of those benefits included health coverage and things of that sort. This all sort of paved the way for early insurers like Blue Cross Blue Shield to come in as the main way to pay for health care. As health insurance became more widespread, hospitals got into this discount game where each year, they’d renegotiate their contract with the health insurance companies by offering them “steeper discounts” for the members, when in reality, hospitals are just raising their prices on the back end.

So really no controls have ever been put into place for health care costs or how much medical centers increase their prices, and keeping the prices hidden was really the only way this game could be played until recently. Obviously, there’s a lot more focus on this issue. Both legislatively, and in the private market, we’re seeing more of a demand for better health care reform around pricing.

DW: Why are hospitals charging so much? Because you’d think insurance companies would demand lower prices in negotiations.

BRUHN: You would think so. I mean, the market has never demanded hospitals to really identify their true costs and then to give a price. So as a result, you’re really left with this absurd approach to estimating the cost of a service. And hospitals eyeball their revenue, and they eyeball their costs, and they sort of just hope they come out on top. And if they don’t, it’s really no problem because they can just go back to the negotiation table with the insurance companies next year.

So you’re really left with this pathetic system where hospitals inflate medical prices for the sole purpose of giving themselves negotiating leverage at the insurance negotiation table to use bigger discounts. So you’ve got hospitals [that] will go to a group like Blue Cross Blue Shield and say, “Hey, we’ve increased your discount from 35% to 40% for those within your insurance plan,” when in reality the hospitals have just increased their prices by 10% on the back end. So there’s really no discount that comes into play for the patient.

And like you said, you would think that insurance companies would be the ones demanding lower prices, but unfortunately, insurance companies are completely fine with this arrangement. You know, insurance companies are widely perceived as these safe havens for patient expenses, and they’re the main patient advocates that are trying to save every dollar for us. It’s just not true. Insurers are often totally fine agreeing to pay these high prices because they just pass down the high prices to the patients.

Insurance companies don’t care much about having to pay for these inflated services as long as they can accurately increase their member premiums to cover their costs. So you have higher cost of a service, which means insurance companies can increase their premiums, and that means higher profits for them. It’s just ridiculous, as hospitals and insurance companies are caught in this really perverse incentive cycle that continues to grow year to year.

DW: Do hospital and medical facility monopolies play any part in keeping these prices opaque?

BRUHN: Yeah, I mean absolutely. The mass hospital consolidation that you’re seeing around the country has largely been shown to increase prices and decrease quality of care. The issue has really been widely researched at this point, and consistently the research shows that in areas of the country that have mass hospital consolidation, and thus less competition, your medical prices are 20% to 45% higher than those in comparable areas of the country with more competition.

I mean, it totally makes sense if you consider, if a hospital system decides that its physicians can only use a certain medication, or procedure, or treatment, for a given condition throughout the entire hospital conglomerate, those patients are never going to be informed about other potentially cheaper, less invasive options. So you’re just left with these monopolies where hospitals can essentially charge whatever they want, and nobody’s going to come after them because they’re the only player in town.

DW: Similarly, do you think lobbyists have helped keep prices dark, maybe in order to protect their large staffs and bureaucracies?

BRUHN: Yeah, of course. I mean, health care is riddled with special interest groups that put a lot of money and effort into keeping the system the way it is. You’re currently seeing that play out with the American Hospital Association, or the AHA. They’re appealing that executive order for price transparency, which requires hospitals to disclose their privately negotiated rates with health insurers. You know, if you talk to the AHA, or read their public statements, they say that this is putting too much of a demand on hospitals to comply with this ruling. But in reality, we all know that the jig is up once the prices are posted. We’re all going to be able to see how ridiculous these pricing arrangements are.

DW: Were you satisfied with former President Trump’s executive order pertaining to price transparency?

BRUHN: Yeah. I think the executive order was spot on in its language, and it’s a good starting point for legislative change. I like in particular the requirements for the insurance companies and self-insured plans to disclose their pricing information. So if that actually rolls out correctly into the marketplace, we’ll hopefully see a lot of Americans that do have private insurance, they should be able to shop around for care much easier within their networks and know how much it’s going to cost them. But like I said, I think it’s just a starting point. I think posting prices only goes so far. If the prices are posted, but they’re still out of reach and egregious, then it doesn’t do too much good. So the hope here is that over time, innovators will come into play to help innovate and drive costs lower.

DW: Is there sort of an inherent complexity when it comes to medical procedures that might make transparent or upfront pricing more difficult than in other industries, say in the airline industry or the car industry?

BRUHN: Yeah. I think absolutely the health care industry is inherently complex. Part of the problem is that price transparency, at least in some instances, is really just a downstream effect of not having cost transparency. You know, in most other industries, you can distill the cost of a sold product down to a cost-per-unit calculation that’s pretty airtight. You think of, like, a car dealership selling a new Toyota Corolla for $20,000. I mean, that dealer knows exactly how much it costs them to make that car, down to the rubber that is used on the windshield wipers. It’s a pretty airtight manufacturing process. Unfortunately, health care’s just not that simple.

Hospitals oftentimes don’t have a good measurement as to how much the cost-per-unit of care is. And part of this problem is just the complexity of the services, like you said. I mean, you’re trying to calculate the clinicians time, the nurses and PAs that work on a patient, the lab techs that are running the lab and drawing the blood, and the people that are running the MRI machine. If you look at it, if anyone’s spent any amount of time in a hospital, you understand that it’s a complex industry that’s not easy to track the exact costs for care. Some hospitals do a great job at doing rigorous cost analyses so they can offer a fair [and honest] price, but for the most part, hospitals just do a simple guessing game as to what their costs are.

DW: So it is possible?

BRUHN: Yeah. I think it is totally possible, and I think, in particular, emergency situations are not easy to create predictable costs around. But it’s estimated that about 60% of health care is shoppable, meaning it’s an elective, non-urgent medical service, like a diagnostic exam, a blood test, a common procedure, that really should not have too much cost variation amongst different providers. So I think that those are the types of areas of health care that can significantly benefit from increasing the transparency of the prices.

DW: Is there something unique to the American health care system that makes price transparency more difficult to achieve than it would be somewhere else?

BRUHN: Yeah, I think no doubt, the American health care system is uniquely complex compared to other countries around the world. The system is complex. The history of how it was created is unique and complex. There’s various layers of middlemen and groups along the way from being treated that increase the prices along the way. Then you also have the issue of how our legislators are oftentimes bought out by special interest groups. All this makes it extremely convoluted, and it’s really difficult to push this goal forward of price transparency because of all the special interest groups and the different middlemen that convolute the system.

DW: If nearly all Americans favor this transparency, why aren’t policies being enacted to make it happen (outside of Trump’s executive order)?

BRUHN: Like I said, the special interest groups, they’re making hefty profits off these undisclosed prices, and so they have a lot of power over the legislative decision makers. I’ve personally seen some of the payments that these lobbying groups pay to government decision makers, and it’s really sickening that we allow this type of corruption to take place at the highest levels of government in America. So even if the public wants it — and there’ve been surveys that have been done that show nearly 9 in 10 Americans do favor price transparency — even with that, you don’t get the legislative change because you’ve got these special interest groups that really have the power over them.

DW: Given all that, is it reasonable to expect anything to actually change when for so many years, so little has been done to make this health care system better?

BRUHN: Yeah. I think we are living in an exciting time where you’re seeing real grassroots efforts rising up and demanding better health care. The American people are innovators to their core, and I think we’re seeing that in full display within health care right now. You’ve got innovators and companies like Sesame Care, and MDsave, and Oklahoma Surgery Center. You know, these types of companies are really paving the way forward for more transparent pricing. And what’s cool is, if you look at areas around the country where transparent pricing is heavily adopted, we’re seeing massive decreases in the health care costs in those parts of the country. So if anything, I’m excited about this new revolution that’s swelling up from grassroots efforts around the country, and I really don’t feel hopeless about the situation at all.

DW: A concern some people might have is that price transparency seems to require mandates from the government, and that could lead to more government bloat in the system.

BRUHN: I think that’s a reasonable concern. As someone that personally leans pretty libertarian, I usually just want the government to stay out of my life as much as possible, but I do feel like the government can play a major, positive role in pushing for these changes. We need the government to. The reality is, the major health care stakeholders that are getting rich off of the current system have no incentive at all to change it.

So in those instances, we need new legislation and we need the government to step into place and [enforce] the changes that are occurring. We’re seeing this battle take place currently with the executive order. We’re seeing these massive lobbying groups rise up against the government because they want the system to stay how it is, but we need strong government legislators to stand up and demand something better for our patients.

DW: Is there anything else that should be done to achieve a better free-market experience? Is there anything that you think should be coupled with price transparency to provide Americans with better outcomes?

BRUHN: I think there’s a huge list there that we could talk about, but one of the massive problems in health care right now that’s also a significant driver of increasing costs is over-treatment. I think, our research group at Hopkins did a national survey of physicians and we asked them, “What percent of all medical care is unnecessary?” What the physicians said was, 21%. So, 21% of all medical care, according to practicing physicians, is unnecessary.

That’s a massive financial burden on the health care system, not to mention the patient harm that comes from that. So there’s been pretty innovative solutions that have been put into place to cut down on over-treatment. Dr. Makary and I have been able to start a project called GAM, or Global Appropriateness Measures, that helps hospitals and payers identify physicians that are over-treating or abusing the system. So I think we’re seeing some solutions go into play on that.

But over-treatment is certainly an area that needs a lot of work. Not to mention, I think a lot of people start talking about the middlemen of health care that increase the prices, and I think that’s a whole other — we could talk another hour about just the middlemen and how they increase the prices. But I think cutting down on the middlemen and the laws that have allowed them to really sink their teeth into the health care costs and increase them, I think that’s another area that could really benefit from some different legislative changes.

DW: Because of the complexity of the current system of hospitals, insurance companies, and middlemen, like you said in the PragerU video, do you think transparency is sort of the push to get the ball rolling that will gather enough momentum to make other necessary changes happen? Additionally, is there something maybe we haven’t touched on in this interview, that I haven’t asked you, that you want to let the readers know, and the listeners know, as well?

BRUHN: I think price transparency is a really good start. It puts the consumer, or the patient, back in charge of the market, at least for those services that we talked about that can be shoppable. But for the health care system to ever begin to become a healthy economy, you need to give patients proper information to make wise purchasing decisions. I think price transparency is a great start to that, but it’s really only one of a myriad of things that need to take place to move the needle.

We definitely need other drivers to come into play to decrease health care costs. I mean, we’ve got issues on access to care in rural parts of the country, and not to mention just the cost burden of the state of health in our country. We’ve got a total epidemic of diabetes, and obesity, hypertension, heart disease, and so on, and those things really put a massive strain on the cost of health care overall. So if we could get better preventative care in place to mitigate those diseases from ever happening, I think that’s another real opportunity to decrease prices overall.