Trump’s latest executive order aims to reduce health care costs, but some fear it will turn providers into cartels

Andrew Trunsky, DCNF

Advocates praised President Donald Trump’s Thursday executive order requiring price transparency from health insurers, saying that it would increase competition, but opponents warned that the opposite could occur instead.

Cynthia Fisher, an advocate for health care price transparency who leads the Patients’ Rights Advocacy, called the Trump administration’s directive a “major victory for all Americans,” adding that the rule would “reduce runaway health insurance costs and spur innovation.”

“The insurance order will usher in systemwide healthcare price transparency that will unleash a functional and competitive health care market, greatly reducing rampant waste, middle players, and price gouging,” Fisher said.

Her comments were echoed by Brian Blase, a former administration official who focused on economic policy: “With today’s rule, patients and employers will be able to assess the value of their insurer, better compare prices across providers, and institute payment structures that promote value-based purchasing,” he said.

The order will allow over 200 million Americans to access a list with live price information and cost-sharing data, allowing them to know the price of a drug or procedure before purchasing it, according to a Health and Human Services press release.

Blase also said that the order would prevent “surprise billing,” something which he said was even more important during the ongoing coronavirus pandemic.

“This measure will cut through waste and eliminate middlemen, spur innovation, foster competition between healthcare providers and plans, and put downward pressure on the cost of healthcare and coverage, resulting in tremendous savings and innovation,” he added.

Fisher and Blase’s reactions, however, were not unanimous. Dr. Robert Graboyes, a senior researcher at the Mercatus Center, told the Daily Caller News Foundation that “mandatory transparency may counterintuitively reduce competition and push healthcare prices upward instead of downward,” and instead would have preferred “narrower mandates focused on markets where tacit collusion and regulatory capture would be less likely.”

“Transparency requirements must be applied surgically, as with a fine scalpel, and not bluntly, as with a machete,” he said.

In markets like health care, where there are relatively few providers and high barriers to entry, mutual knowledge of each others prices can lead to what Graboyes called “tacit collusion.” Insurers could incrementally raise their prices with out explicitly engaging in conspiratorial behavior, “resembling that of a cartel” as a result, Graboyes said.

He also discussed the idea of “regulatory capture,” explaining how “transparency” with regard to drug prices must be objectively defined and how someone must outline how providers must comply.

“Unfortunately, the likely outcome is that established insiders will effectively write the rules in ways that pose obstacles to potential competitors,” he told the DCNF.

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