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Research & Commentary: Health Care Price Transparency

March 11, 2016

Access to transparent health care prices remains elusive for most U.S. health care consumers, who are often insulated from price considerations by the standard third-party payment systems commonly used for medical billing.

stethoscope and insurance docs

Access to transparent health care prices remains elusive for most U.S. health care consumers, who are often insulated from price considerations by the standard third-party payment systems commonly used for medical billing. This leaves patients unaware of the cost of the treatments they receive. Patients are not given an incentive to shop around; they pay the same copay regardless of the services they choose and are not penalized for ineffective choices. Extra costs are passed on to the insurer, and premium prices increase as a result.

Missouri is the most recent state to consider health care price transparency legislation that would give patients greater access to price information. In February, an amendment was introduced to a Missouri health care bill that would require the state Department of Health and Senior Services to create an online web portal where hospitals and health care providers would be required to share service costs for 100 common health care procedures. This is a positive step towards empowering consumers and creating real competition in the health care market.

Consumers seeking price estimates for basic medical services often have great difficulty obtaining any information from providers in a timely manner. A recent study by the Pioneer Institute surveyed 54 hospitals in six metropolitan areas across the United States and found consumers seeking a price estimate for a routine medical procedure face a “difficult and frustrating task.”  

In the survey, Pioneer researchers contacted hospitals in and around Dallas-Ft. Worth, Des Moines, Los Angeles, New York City, Orlando, and Raleigh-Durham to request price information for a fictional patient looking to receive an MRI. Their results show in 57 percent of the hospitals, “it took more than 15 minutes to get a complete price that included the radiologist’s fee for reading the MRI,” said the study’s authors. “Two-thirds of the time, researchers had to call a separate number or organization to obtain an estimate for the reading fee.”

In five of the six cities tested, there were laws already on the books to create price transparency provisions. A recent report published by the Health Care Incentives Improvement Institute and Catalyst for Payment Reform examined state price transparency laws and found very little progress being made by states to improve health care price transparency. The report card found “45 of 50 states fail when it comes to disclosing health care price information to the public.”

Many current price transparency laws need to be improved, but research shows they do work. In a 2013 study published in the Journal of the American Medical Association, researchers looked at the medical claims paid by employers after a price transparency tool was made available. The study was extensive; it covered 500,000 individuals in 253,000 households between 2010 and 2013 and examined three basic medical services: laboratory tests, advanced imaging services, and clinician office visits. The results were positive: Costs for consumers using the price transparency tool were “14 percent lower for lab tests and 13 percent lower for imaging services compared to those who did not use the tool. Costs associated with office visits declined by 1 percent.” The amount of money saved by the patients was also noteworthy. For instance, consumers using the price transparency tool for imaging services saw an average reduction of $124.74 per service. 

Price transparency promotes competition and helps to enhance product quality. When consumers are able to actively shop and compare prices, market pressures encourage providers to produce a more affordable, high-quality product. If they don’t, they risk losing out to their competitors. State legislators should work to promote health care price transparency in their states to help empower consumers and lower health care costs. 

The following documents examine health care price transparency in greater detail.

Ten Principles of Health Care Policy
http://heartland.org/policy-documents/ten-principles-health-care-policy
This pamphlet in The Heartland Institute’s Legislative Principles series describes the proper role of government in financing and delivering health care and provides reform suggestions to remedy current health care policy problems.

Price Transparency in Health Care: Will it Bend the Cost Curve?
http://dailysignal.com/2010/06/28/price-transparency-in-health-care-will-it-bend-the-cost-curve/
Kathryn Nix writes in this Daily Signal article about a new trend toward greater health care price transparency, which she says has arisen because new companies are now aiming to lower costs by making health care price information readily available. “Lack of transparency regarding pricing of medical services has often been attributed as one of the factors contributing to skyrocketing spending in the health care system, a concern which drew considerable attention during the recent debate over health care reform.” 

Transparency in Health Care: What Consumers Need to Know
http://www.heritage.org/research/lecture/transparency-in-health-care-what-consumers-need-to-know
In this 2006 presentation hosted by The Heritage Foundation, the Hon. Alex M. Azar II, Thomas P. Miller, David B. Kendall, and Walton Francis discuss the potential of health care price transparency and how it could affect choice and pricing. “In a free market, where consumers make their own decisions, technology and techniques rapidly improve. Quality rises and prices drop. In short, freedom fosters prosperity.” 

Empowering Patients as Key Decision Makers in the Face of Rising Health Care Costs
http://www.heritage.org/research/reports/2011/12/empowering-patients-as-key-decision-makers
The current trend of rapidly rising health care costs is unsustainable. Many proposed reforms to curb spending rely on some type of rationing imposed by an unaccountable government body. A better alternative would be to allow individual consumers to make their own decisions about care, including the self-rationing of medical services, based on cost and their own desires. Such a policy is compatible with the principles of limited government and individual liberty. State and federal policymakers should adopt measures to facilitate personal control of health care decisions.

Transparency and Disclosure of Health Costs and Provider Payments: State Actions
http://www.ncsl.org/research/health/transparency-and-disclosure-health-costs.aspx
This report from the National Conference of State Legislatures describes a number of actions taken by states over the past two decades to promote the advancement of health care price transparency. 

Study: Price Transparency Benefits Consumers
http://news.heartland.org/newspaper-article/2015/01/16/study-price-transparency-benefits-consumers
Kenneth Artz reports in this Heartlander article about a new study published by the Journal of the American Medical Association that found increasing health care price transparency lowers total claims payments for common medical services. 

Health Care Prices Remain a Secret in Most States
http://news.heartland.org/newspaper-article/2015/07/08/health-care-prices-remain-secret-most-states
Only five states adequately make health care prices available to the public, says a new report about health care price transparency. Kenneth Artz reports in this Heartlander article about a report on health care price transparency titled Report Card on State Price Transparency Laws, which was published by the Health Care Incentives Improvement Institute and Catalyst for Payment Reform. The report card shows little progress has been made in recent years to provide consumers with greater price transparency in health care, even though the report’s authors note there has been more discussion in state legislatures regarding the need for consumers to have access to price information. The study reports 45 of 50 states “fail” when it comes to disclosing health care price information to the public. 

Healthcare Prices for Common Procedures Are Hard for Consumers to Obtain
http://pioneerinstitute.org/healthcare/national-survey-finds-limited-access-to-price-estimates-for-routine-hospital-procedure/
A survey of 54 hospitals in six metropolitan areas across the United States reveals consumers seeking a price estimate for a routine medical procedure face a difficult and frustrating task, despite the existence of price transparency provisions contained in the Affordable Care Act and state price transparency laws in five of the six cities, according to this Pioneer Institute Policy Brief.

Price Transparency in Health Care Report from the HFMA Price Transparency Task Force
https://www.heartland.org/policy-documents/price-transparency-health-care-report-hfma-price-transparency-task-force
In this paper, a multi-organizational task force offers guiding principles and recommendations for price transparency, which, if enacted, would help hospitals, physicians, and health insurance providers share reliable health care pricing information with consumers. 

 

Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this subject, visit Health Care News at http://news.heartland.org/health, The Heartland Institute’s website at http://heartland.org, and PolicyBot, Heartland’s free online research database, at www.policybot.org.  

The Heartland Institute can send an expert to your state to testify or brief your caucus; host an event in your state; or send you further information on a topic. Please don’t hesitate to contact us if we can be of assistance! If you have any questions or comments, contact State Government Relations Manager Logan Pike at Lpike@heartland.org or 312/377-4000.

Article Tags
Health Care
Author
Matthew Glans joined the staff of The Heartland Institute in November 2007 as legislative specialist for insurance and finance. In 2012, Glans was named senior policy analyst.
mglans@heartland.org @HeartlandGR