US health chief demands price transparency — or government will force change

It is time for healthcare providers, insurers, pharmacies and drugmakers to be more transparent about their pricing. And if the private-sector does not make that happen, the U.S. government has "plenty of levers to pull that would help drive this change," Health and Human Services Secretary Alex Azar told a gathering in Washington.

"I believe you ought to have the right to know what a healthcare service will cost — and what it will really cost — before you get that service," Azar said during a March 5 speech at the annual meeting of the Federation of American Hospitals.

With healthcare costs skyrocketing, "the current system simply cannot last," he said.

Azar insisted that the administration was "unafraid of disrupting existing arrangements simply because they're backed by powerful special interests."

"Change is possible, change is necessary and change is coming," he said.

The health secretary has grown impatient with the lengthy time it has taken the U.S. healthcare system to catch up with other industries, like restaurants, in providing consumers with price transparency, online systems to choose their services and the ability to pay based on outcomes. He was previously at the agency during the George W. Bush administration as a deputy secretary, where he tried for years to move healthcare toward a value-based system, only to return a decade later to find the transformation has been slow and cumbersome.

Azar, who spent his time between the Bush and Trump administrations as an executive at Eli Lilly and Co., acknowledged that his predecessors in the Obama administration had been serious about putting measures in place to make prices more transparent and ensuring patients were getting the value they deserved for the high costs they paid for their healthcare.

"But it has been a frustrating process," Azar said. "Today's healthcare system is simply not delivering outcomes commensurate with its cost."

He noted that no consumer would ever patronize a restaurant that requires people to order their meal before knowing the price, especially if they "got a surprise bill afterward from the off-site pastry chef."

Giving patients greater control

In addition to making pricing more transparent, Azar argued it was time to give consumers greater control over their health information through interoperable and accessible technology.

"Putting the healthcare consumer in charge — letting them determine value — is a radical reorientation from the way that American healthcare has worked for the past century," he said.

Doing so, however, may require some federal intervention — even to "an uncomfortable degree," Azar said.

He confessed such a move may sound surprising coming from an administration that "deeply believes in the power of markets and competition."

"But the status quo is far from a competitive free market in the economic sense of the term, and healthcare is such a complex system that facilitating a competitive, value-based marketplace is going to be disruptive to existing actors," he said.

The health chief said the administration was not interested in micromanaging the standards and processes used, but in setting out simple goals, like ensuring records are set up in a useful format and are portable and interoperable.

The administration is expected to make an "important announcement" on March 6 about putting patients more in control of their own health data and sparking private-sector innovation, Azar said.

Driving value with Medicare, Medicaid

The administration also wants to use experimental models in Medicare and Medicaid to drive value and quality throughout the entire health system, Azar explained.

"If we're serious about transforming our health system toward paying for value, Medicare and Medicaid will play a key role," he said. "Only Medicare and Medicaid have the heft, the market concentration, to drive this kind of change, to be a first mover."

He noted that the HHS already has a range of tools for driving change under the bipartisan Medicare Access and CHIP Reauthorization Act, signed by President Barack Obama in April 2015.

Along with those tools, the Center for Medicare and Medicaid Innovation, created under the Affordable Care Act, "vests HHS with tremendous power to experiment with new payment models," Azar said.

"Make no mistake, we will use these tools to drive real change in our system."

However, Azar does not intend to spend the "next several years tinkering with how to build the very best joint-replacement bundle."

"We want to look at bold measures that will fundamentally reorient how Medicare and Medicaid pay for care and create a true competitive playing field where value is rewarded handsomely," he said.

Removing government burdens

Azar argued that to achieve a value-based system, the administration must remove some government rules and regulations.

For instance, some Medicare and Medicaid price reporting rules, plus restrictions in some Food and Drug Administration communication policies, may be getting in the way of innovative ways for biopharmaceutical companies and payers to work together, he said.

Last month, the White House argued that Medicare and Medicaid policies were dampening competition and artificially driving up the prices of prescription medicines.

The HHS secretary also insisted that current interpretations of various "well-meaning" anti-fraud protections may be impeding "useful coordination and integration of services."