OPINION:
President Trump’s return to office offers an opportunity to renew the pro-growth, pro-prosperity era Americans enjoyed during his first term before the pandemic hit. One policy the Trump administration can prioritize to quickly boost living standards is doubling down on its first-term health care price transparency initiative. Transparent prices in advance of care can transform the broken American health care system into a pro-consumer, competitive marketplace, significantly reducing costs and boosting workers’ wages.
Prices are the lifeblood of a healthy economy, yet their absence in health care creates information asymmetries that result in routine consumer overcharges. The staggering price variations — sometimes tenfold or more — for identical services, even at the same hospitals, illustrate the sector’s market failure. At one Northern California hospital, C-sections range from $6,000 to $60,000. Brain MRIs can vary from $450 to $6,500 at a hospital in Los Angeles.
Hidden prices are the reason hospitals can get away with average markups of seven times their cost of care, health insurers and middlemen occupy eight of the top 22 spots on the Fortune 500, and the U.S. now spends 17.6% of its gross domestic product on health care, nearly twice the developed world average, yet has a lower life expectancy. As a result of these costs, approximately 100 million Americans have medical debt, and two-thirds avoid care for fear of financial ruin.
The first Trump administration recognized this issue and enacted rules requiring hospitals and insurance companies to disclose actual prices, including negotiated and cash rates. Employers and unions, which provide most non-elderly Americans with health care coverage, can use this information to spot price variations, avoid price gouging, design affordable health care plans and remedy overbilling. Technology developers can aggregate price disclosures into accessible online platforms for patients.
Unfortunately, these rules have been widely ignored. According to PatientRightsAdvocate.org, only 21.1% of hospitals nationwide fully comply with the hospital rule four years after it took effect. Most are not publishing prices by insurance companies and plans, as the rule requires, making it impossible for consumers to compare and save. The Biden administration rolled back the hospital rule to allow hospitals to post unaccountable estimates instead of actual prices.
By strictly enforcing these rules and reversing the Biden rollbacks, the Trump administration can finally unveil systemwide health care prices and chalk up an early victory. Robert F. Kennedy Jr. and Mehmet Oz, Mr. Trump’s nominees to run the Department of Health and Human Services and the Centers for Medicare and Medicaid Services, respectively, have spoken favorably about the need for price transparency. Price transparency can be a key part of Mr. Kennedy’s “Make America Healthy Again” agenda because it empowers patients to get the care they need at affordable prices.
Beyond lowering health care costs through choice and competition, price transparency will substantially benefit the American economy and workers. Drawing on a JAMA study that found 25% of the nation’s $4.9 trillion annual health expenditures are waste, overcharges and fraud, I recently signed a letter to Congress with 31 leading economists explaining how price transparency can save the economy approximately $1 trillion annually.
Consider the benefit to ordinary workers, whose wages have long been cannibalized by health care plans, which now cost an average of $25,600 per family. The multinational firm Willis Towers Watson concludes that 40% of low-wage employees’ compensation gains since 2000 have gone to pay for rising health care coverage costs. When up-front prices empower businesses and unions to significantly reduce health care plan costs, they can redirect savings into higher wages and lower premiums for workers.
More money for workers and businesses will generate an enormous economic stimulus for years. By going back to the future and prioritizing health care price transparency, Mr. Trump can hasten the return of American economic prosperity and cement his legacy as the president who reversed runaway health care costs.
• Arthur B. Laffer is the founder and chairman of Laffer Associates.
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