Transparency isn't typically the first thing that comes to mind about the 2010 health care law. However, the law puts more health care information in the hands of consumers and gives the public new tools for combating waste and fraud.

The law's more than 900 pages attest to the complexity of the American health care system. The new disclosure provisions aim to simplify health care and make it more understandable for the average person. Increased transparency not only helps consumers make the right health care choices, but also cuts down on health care waste and fraud, which costs the federal government billions of dollars every year.

Background

After his inauguration, President Barack Obama sought to fulfill one of his major campaign goals: reform of the U.S. health care system. On March 23, 2010, Obama signed the Patient Protection and Affordable Care Act (PPACA) – known informally as "Obamacare" – as well as a related package on March 30. The law's main goals are to protect health care consumers from abusive practices while controlling costs, improving the quality of care, and extending coverage to the nation's 49 million uninsured people.

On June 28, after a high-profile legal challenge, the U.S. Supreme Court upheld the law’s key provisions. Nevertheless, the law continues to be targeted by Republicans, with House Speaker John Boehner (R-OH) calling for the law to be repealed "in its entirety." As our analysis shows, though, fully repealing the law would eliminate a number of helpful transparency provisions in addition to the better-known aspects of the law.

New Nutritional Labels for Healthier Dining Choices

To help Americans make healthier meal choices, the law requires restaurants to list the number of calories per menu item. The requirements will apply to chains with 20 or more locations. In addition, vending machines must provide a sign disclosing the calories in each item. The Food and Drug Administration (FDA) proposed the rules for restaurants and vending machines in April 2011 but has not yet issued final rules.

Such labels will be a big help to anyone watching their weight and could have an important impact on Americans' health. More than one-third of U.S. adults are obese, increasing their risk for conditions including heart disease and diabetes, according to the Centers for Disease Control and Prevention (CDC) – a number which has grown in recent decades. But a recent study in the American Journal of Public Health showed that labeling menus with calorie counts resulted in customers choosing options with fewer calories, a crucial step toward making caloric intakes healthier.

Empowering Insurance Consumers with Information

To inform consumers' choices on insurance, the law requires insurers to disclose certain information about their policies and performance. The data to be disclosed includes information on how the plan sets rates for different customers and the number of claims that the plan denies.

The Department of Health and Human Services (HHS) issued its rules for the disclosures in March. The rules will apply to group health plans, as well as plans participating in the health insurance exchanges established under the law, except for those grandfathered in. The exchanges, which will be marketplaces for individual and small group plans, will begin operation by 2014.

To help consumers understand their choice of plans, the law also requires insurers to provide a simple and standardized disclosure form summarizing their coverage. The form explains key information such as benefits, deductibles, and examples of how benefits of a plan work under common scenarios such as pregnancy. Under the rules issued in February, insurers will have to provide these disclosures starting in September.

Making Medicare More Transparent

The law also makes Medicare data more transparent, which will allow researchers to analyze the performance of doctors and hospitals and to monitor for fraud. Medicare is a federal government health insurance program for Americans over 65 years old. Such research will help inform patients' choices and make Medicare more efficient. Improper Medicare payments were estimated at $43 billion in 2011, the largest of any federal program.

The law requires HHS to make Medicare claims data available to researchers to evaluate providers' performance, including quality, efficiency, effectiveness, and resource use. The data will not be directly accessible to the general public, but only to qualified researchers who agree to keep the data secure.

Those researchers can publicly report their findings, so long as no information identifies any beneficiaries. Such reports can be powerful, as demonstrated by the Wall Street Journal's Pulitzer Prize-nominated series exploring questionable Medicare practices based on data obtained before the new provisions took effect.

HHS issued rules to implement the provision in December 2011. Applications to access the data opened in January. There are several pending bills in Congress that would further expand access to the data.

Encouraging Whistleblowers to Report Fraud

Other provisions in the new law aim to root out and deter health care fraud by encouraging whistleblowers to report wrongdoing.

Under the False Claims Act, an individual who reports fraud against the federal government can receive a share of the money that is recovered. To qualify for an award, the whistleblower must be the original source of the information before it is publicly disclosed. However, this was often difficult to prove under the existing rules, and whistleblowers with useful information could easily be disqualified.

The health care law strengthens the False Claims Act by tightening the standards, making more whistleblowers eligible for awards. The result should be a greater willingness for those with knowledge of fraud to report it – and hopefully to deter fraud from occurring in the first place. The new standards apply to fraud with any federal funds, not just those related to health care.

Reforming Health Care Through Transparency

In sum, the health care law will provide consumers with understandable information so they can make decisions that are right for them and protect important programs such as Medicare from fraud. The provisions discussed here are only the highlights of transparency efforts contained within the law; the law also grants HHS the authority to require additional disclosures in several other areas. By giving people more information, the quality and efficiency of the health care system should increase over time.