If you’ve ever received a medical bill, chances are you were confused, frustrated, or both. The bills are often filled with inscrutable codes, massive dollar amounts that seem to make no sense, and a complete lack of clarity around what you’re actually being charged.
It’s a systemic problem in the US healthcare industry that leads to jaw-dropping stories of people being blindsided by surprise bills for tens or hundreds of thousands of dollars. And it leaves many patients feeling scammed, helpless, and at the mercy of a system that seems utterly rigged against them.
The state of medical billing is opaque, inconsistent, and user-hostile in the extreme. But it doesn’t have to be this way. There’s a growing movement pushing for true transparency that could help demystify these bills and put control back into the hands of patients.
The Current Mess
To understand why medical billing is such a mess, you have to look at the bizarre Rube Goldberg machine of stakeholders, middlemen, and ever-shifting incentives that make up the US healthcare system.
Providers like doctors and hospitals negotiate opaque rates for specific services and treatments with different insurance companies. These “allowable amounts” can vary wildly between insurers for the exact same thing. For uninsured patients paying cash, providers often charge wildly inflated “chargemaster” rates that are multiples higher than what insurance companies pay.
Those providers then pass along billing codes for treatments and services to companies that handle medical coding and billing. There are many third-party billing services have a vested interest in subcontracting and outsourcing as much work as possible, adding even more middlemen to the chain. At Medwave, we do not outsource billing, our work is all done in-house.
Then comes dealing with the insurance companies themselves. These insurers have enormous sway given their tremendous market power as the entities actually paying the bills. They can impose all sorts of complex rules around which services are covered, what deductibles need to be met, what percentage of costs a patient is responsible for, and more. Patients are largely at their mercy in terms of network coverage, prescription drug prices, and approval processes.
To make matters even more convoluted, any given medical case can involve multiple providers like surgeons, anesthesiologists, radiologists, and more who may not be employees of the same healthcare system. So even something as simple as an outpatient surgery can have its costs fragmented across a baffling array of different parties sending separate, indecipherable bills.
And that’s all before we get to the coding errors, rejected claims, out-of-network charges, arcane insurance policies with endless fine print, and more that further obfuscate and complicate the bills that ultimately land in patients’ hands.
Is it any wonder these bills are so incomprehensible? With so many different entities and competing incentives involved, it’s a recipe for chaos, confusion, and a consumer experience that can be nothing short of nightmarish.
But it’s not just a hassle or source of frustration. This lack of transparency in medical billing is also a major driver of out-of-control healthcare costs in the US. When prices are opaque and wildly inconsistent, it becomes incredibly difficult for a free market to operate efficiently. There’s no way for consumers to make informed decisions that incentivize cost control and competition.
The Importance of Transparency
The only way to resolve this unsustainable, unfair mess is by bringing true transparency to medical billing processes. When patients can see clear, consistent prices upfront for the care they’re seeking, they can make fully informed choices as consumers just like with any other purchase. And transparent pricing can go a long way toward finally injecting real free market competition and cost control into the bloated US healthcare system.
Now, full transparency is easier said than done with so many different players and competing incentives involved. Powerful vested interests like insurance companies, hospital systems, and other major providers make an enormous amount of money from this current opaque, inefficient system. But even making incremental steps toward transparency could start bringing some rationality to the system.
For example, simply requiring upfront disclosure of negotiated rates between providers and insurers could reduce inadvertent out-of-network billing issues. Having standardized billing codes and formats so all bills look the same could help demystify and disentangle the fragmenting caused by multiple providers billing separately. Regulations could force provider rates for common shoppable services like MRIs to be publicly listed. New laws could cap outlier charges by limiting how much more can be charged than the median in-network rate.
Those are just a few of many potential avenues for bringing more transparency to this notoriously opaque system. The ultimate goal? Create a system where patients are empowered consumers able to see the actual costs of care upfront. Armed with that information, they could comparison shop for the highest value care and reward cost-effective providers with their business.
It would still be a highly complex system even under the best-case scenario for transparency. But ensuring patients have clear information on prices and can make apples-to-apples comparisons based on quality metrics and outcomes would go a very long way. It could completely transform the broken system we have today into one that is patient-friendly, incentivizes value over volume, and starts reining in unsustainable cost growth.
Recent Efforts for Reform
There have been some promising efforts in recent years to address the medical billing transparency issue. But there’s still a ton of work left to be done, and certain special interests are actively pushing back against reforms that could threaten their bottom line.
One major piece of legislation came in late 2020 when Congress passed the No Surprises Act. Spurred by public outcry over the prevalence of surprise out-of-network bills patients were receiving, the law aimed to ban many of those charges that were hitting patients through no fault of their own.
It requires that emergency services are covered without any additional patient costs beyond in-network rates, even if provided out-of-network. It also protects patients from getting separate “balance bills” from out-of-network providers for certain scheduled procedures at in-network facilities.
The No Surprises Act also included provisions requiring upfront disclosures of costs for scheduled services, as well as establishing a new arbitration process for settling payment disputes between providers and insurers.
While it was an important and meaningful step, many observers felt the law didn’t go nearly far enough in ensuring true billing transparency. For example, it still left patients on the hook for out-of-network charges in many non-emergency situations. Its disclosure requirements also only apply to certain procedures, not comprehensive visibility into all pricing.
Like any sweeping reform, it represented a compromise position that failed to satisfy all stakeholders or fully resolve systematic issues plaguing medical billing transparency.
Around the same time, the Centers for Medicare and Medicaid Services finalized new price transparency rules requiring hospitals to disclose pricing for all services in a standardized, easily accessible format. While an important move toward increased visibility, the rules have faced compliance issues and criticism that the way the data is currently being published often still makes it difficult for consumers to fully understand.
At the state level, there have been various efforts to tackle the issue as well. Massachusetts passed a law in 2012 requiring comprehensive statewide price transparency for healthcare services, procedures, and items in the state. Other states like Kentucky require publishing of average charges within a certain range, while Arizona has an online service that provides free cost estimates for certain procedures.
In practice, many of these state reporting mandates have been criticized as still overly complex and insufficient for true billing transparency aimed at empowering patients. But the ongoing piecemeal efforts at the state level show the appetite for reform beyond just the federal No Surprises Act alone.
Outside of government regulations, there are also private sector innovators attempting to untangle the medical billing knot. Companies like Turquoise Health, The Karis Group, and Healthcare Bluebook aim to help employers and patients more easily navigate pricing as well as quality metrics for specific providers and procedures.
These firms leverage data analytics and insights from medical claims to provide upfront cost and quality estimates. The goal is to cut through the opacity that prevents consumers and payers from making informed, value-based decisions about where to seek care.
While a valuable added layer of transparency, such services are ultimately beholden to the data sharing and pricing disclosure made available by much more powerful players like major hospital systems, insurers, and industry groups. So while promising tools, they have limitations without true systemic reform.
Special Interests Pushback
Whenever major changes start getting proposed to disrupt the status quo of how things operate, affected special interests and entrenched industry power players push back aggressively. The recent moves toward medical billing transparency have been no exception.
Perhaps the most potent opposition to greater transparency has come from major hospital systems and physician staffing firms. Groups like the American Hospital Association have lobbied intensively against having to disclose their negotiated rates with insurers, which they view as vitally important proprietary data.
Under the banner of “contract confidentiality,” these providers argue that being forced to make negotiated rates public data would grievously harm their ability to negotiate favorable rates going forward. They also contend it would create an uneven playing field where insurers have maximum leverage by being able to see competitors’ rates.
Critics of this position argue that greater transparency is not only fair for consumers but could ultimately be good for providers as well. By empowering patients to seek quality care at competitive rates, it could reward cost-effective, efficient providers who currently lose out to high-overhead competitors under the opaque system. It could drive overall consumer demand by reducing instances of surprise billing that tarnish the industry’s reputation.
But the major hospital lobbies have been staunch defenders of lack of transparency and have scored legal victories in efforts to actually roll back CMS’ latest pricing disclosure rules.
Insurers are a more complicated case when it comes to transparency. While lack of visibility benefits them in being able to dictate opaque charges in many cases, there are instances where more transparency could work in their favor. At the very least, insurers generally favor having claims resolved more efficiently through clear standards and billing practices.
Physician staffing groups have been another major opponent of efforts like the No Surprises Act, voicing concerns that its restrictions on out-of-network billing could cripple their business models. They argue physicians could shun working with insurers whose rates are now publicly disclosed and opt out of insurance networks altogether.
Overall, the movements toward greater transparency have been met with fierce resistance by healthcare industry stakeholders like these who have benefited greatly from the lack of visibility and consistency.
Work Still To Be Done
Despite signs of progress like the No Surprises Act and CMS’ data disclosure rules, the US is still nowhere near a system of truly transparent billing practices that empower patients to be informed consumers. Too much fundamental change that threatens bottom lines has been averted or obstructed by powerful special interests so far.
But the mounting pressures of out-of-control healthcare costs and outrageous consumer experiences like bankrupt-inducing surprise bills show something has to give eventually. A dysfunctional system where prices are indecipherable and seemingly arbitrary is simply unsustainable, both for consumers and society as a whole.
What’s likely needed is comprehensive federal legislation that truly shreds through the tangle of misaligned incentives and industry infighting to put the needs of patients first. Making all negotiated rates transparent data across insurance markets and states could be a start.
Standardized, decipherable billing formats across providers using unified medical coding could make it easier for patients to actually understand the bills they receive. Requirements for upfront bundled pricing estimates before scheduled services occur could further empower patients to shop around.
There’s no silver bullet, but rather an array of small and large changes that, taken together, could revolutionize the billing experience. Transparent, rational pricing would become the norm rather than the unicorn case it exists as today.
Patients could become functioning consumers able to make informed choices that reward quality, efficiency, and value over the current perverse incentives of the opaque billing system. Downward cost pressures could finally start emerging instead of the unimpeded price gouging that now runs rampant.
Opponents argue that such disruption could destabilize the healthcare system and threaten major industry players because of just how entrenched the status quo is. But supporters argue the system is broken already – that cost and accessibility will suffer far worse ramifications if nothing changes from this unsustainable obfuscation of true costs.
It’s a messy, contentious issue just like most challenges of transforming massive legacy systems and industries. But the fact remains that medical billing as it currently exists in America is fundamentally at odds with rational market behavior and fair, affordable care for citizens.
True transparency should not be just a pipe dream but a basic expectation for an industry that profoundly impacts every person’s life and financial security. While an immense, systemic undertaking, injecting transparency into the chaos of medical billing could be a critical foundation for finally bringing accountability, value, and sanity to America’s excruciatingly expensive and dysfunctional healthcare system.
