by Joe DeSantis
What is the price for a COVID-19 test?
Given the high demand for these tests, you would think this question could easily be answered.
After all, within a few seconds, you can go online and find prices for a wide variety of medical tests. A few clicks of the mouse on Amazon.com, and you will find pregnancy tests for about $5 a piece. Strep throat tests are about $1 a piece if you buy a pack of 25. HIV tests go for around $40, and flu tests go for about $60.
For each of these tests there are several competing options with a relatively narrow range of prices depending on the brand and the quantity you buy. This is the sort of widespread availability and competitive pricing that transparent marketplaces provide.
Now try doing the same search for the price of a COVID-19 test. It is practically impossible to find this information. This is partly because Congress required in the Families First Coronavirus Response Act that nobody pay out-of-pocket expenses for testing (although there are reports of patients still being charged other fees related to their visits). This includes patients who have not yet reached their deductibles and the uninsured.
However well-intentioned this decision was, the result of hiding the price of testing from patients is that there is no accountability or transparency in the testing marketplace. The consequences of this decision are revealed in a new study by MyMedicalShopper. By analyzing claims data from health plans, the organization has identified a range of prices as low as $51 to as high as $351. Meanwhile, the allowed amounts (the negotiated price paid by the health plans) ranged from $39 to $157.
In the coming months, America will need to perform hundreds of millions of COVID-19 tests as a condition of reopening our society. This means that difference in total cost for that testing — depending on whether the lowest or highest prices are being paid — amounts to tens of billions of dollars.
In fact, the problem of massive price variation is endemic in all of health care. It is the central dysfunction in our health care markets behind the ballooning cost of premiums and out-of-pocket expenses for patients.
Analysis by Larry Van Horn has shown that people who pay cash for health care rather than going through insurance (or who seek reimbursement from their health plan after the fact) pay an average of 40 percent less than health plans for the same services. This is mostly because cash paying patients take the time to seek out the best value. The competition for health care services in the cash marketplace for health care drastically reduces the price variation.
Meanwhile, most patients don’t take the time to shop around because they have little incentive to do so. They simply choose a provider in their network with little attention paid to price. They assume the health plan already negotiated the lowest possible one. This means that the more expensive health care providers have little incentive to offer competitive pricing if they can convince patients to use their facilities. They understand that health plans won’t be attractive to customers if they don’t include the biggest and most popular hospitals. That’s why you see so much advertising from your local hospital.
The Trump administration has taken a bold first step in fixing this central problem in the health care marketplace by issuing a rule that all health care providers must list all their prices in a machine-readable format to allow for online tools to arise to easily compare prices. This includes all their negotiated rates with health plans. Sadly, hospitals are suing to stop this rule from going into effect in 2021, arguing that current law doesn’t give Health and Human Services (HHS) this authority.
Some might argue that for those with insurance, all a patient is interested in is his or her co-pay. But this is misguided because in exchange for lower immediate out-of-pocket expenses, patients will just end up paying higher premiums. For those whose employers pay a portion of their premium, that is money that could be going into their paychecks. And of course, anything paid for by the government via public health programs comes from taxpayer money. The bottom line is that it all comes out of the patient’s pocket eventually.
Once these prices are out in the open, patients can see just how much more certain providers are charging than others. It will also allow employers who self-insure (about half of the private marketplace) to create incentives for their employees to shop around for the lowest prices for their health care needs. For instance, as Newt mentions in his upcoming book Trump and the American Future, the Phia Group in Boston provides its expectant mothers a year’s worth of diapers and wipes if they have their babies at the local community hospital instead of the big teaching hospital nearby (the larger hospital charges almost five times more).
As for COVID-19 tests, we as a country still want anyone who needs a test to get one, regardless of his or her ability to pay. But this cannot come at the cost of making COVID-19 testing another opportunity for price gouging behind the veil of secret pricing.
Congress should mandate immediate, clear pricing for all COVID-19 testing in the next relief package. It should also take the opportunity to codify the administration’s price transparency rule into law to remove the possibility that the hospitals succeed in their court case. Not only would this be a badly needed patient and taxpayer protection, fixing the broken health care marketplace would lead to massive savings for individuals and small and medium-sized businesses. It would be a powerful economic stimulus to catapult the American economy in this time of crisis.
Joe DeSantis is the Chief Strategy Officer at Gingrich 360. He leads the Better Care Project at Gingrich 360 to create a health care system that leads to longer, healthier lives, and lower medical costs for all Americans. – Newt