Price Transparency Can Work to Control Health Care Costs

Aug 06, 2014 - 1:30pm

Senior Editor, Digital Content

Empowering consumers with health care price and quality information can result in lower costs, a new study finds. Vox’s Sarah Kliff explains the research:

For the experiment, the Blue Cross Blue Shield plans used a very standard procedure, an MRI scan, where there's little (if any) variation in quality from one provider to another.

In St. Louis and Atlanta, for example, patients would be told how much an MRI would cost at different providers. But in Chicago and Kansas City they wouldn't get that information; they would go about setting up an MRI at their facility of choice, without any data on price.

In the cities where price data was available, there was no penalty for choosing the higher-priced option; consumers weren't told they couldn't go get scanned in the more expensive MRI machine.

But just providing the data proved to be powerful: in the course of two years, the average price per MRI fell by $95, according to data published in the journal Health Affairs. Prices at hospitals that didn't post charges rose by $124.

The conclusion is Economics 101. If the information is available, “prices do influence where people seek their health care,” Kliff writes.

Unfortunately state efforts on greater health care price transparency have been disappointing. Earlier this year, Catalyst for Payment Reform and the Health Care Incentives Improvement Institute released a Report Card on State Price Transparency Laws. Only five states got a passing grade.

Transparency has gained steam in the private sector. Dow and Boeing have developed tools to give their employees access to price and quality information on numerous medical procedures.

The U.S. Chamber of Commerce’s Health Care Solutions Council report offers additional recommendations to inject more transparency into our health care system:

  • Companies should work to develop and promote the use of consistent quality measures, which are outcome-oriented and reflective of patient experience, as part of their payment contracts with plans and providers. He adds that the federal government should avoid mandating cost information disclosures that might not be relevant, or, more importantly, personalized.
  • Medicare should provide summary data to facilitate the development of quality measures on providers and treatments.
  • The federal government should provide financial support for initiatives that offer consistent quality information on health care providers.
  • Employers, the federal government, and others should do more to increase awareness and availability of tools that help people obtain and use meaningful information about the cost of services.
  • Identify and promote best practices in helping consumers choose among health plans.

The lesson here is that more transparency will lead to more well-informed shoppers. As Brendan Buck at America's Health Insurance Plans blog writes, "By giving consumers more information, they can make the choices that are right for them – which often means more money in their pockets."

Follow Sean Hackbarth on Twitter at @seanhackbarth and the U.S. Chamber at @uschamber.

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About the Author

About the Author

Sean Hackbarth
Senior Editor, Digital Content

Sean writes about public policies affecting businesses including energy, health care, and regulations. When not battling those making it harder for free enterprise to succeed, he raves about all things Wisconsin (his home state) and religiously follows the Green Bay Packers.