ON THE AGENDA | OCTOBER 20TH, 2016 | Allison Rizzolo

Lack of Price Transparency in Health Care May Drive Rising Costs

Providers that don't share price information with consumers tend to have significantly higher prices and drive up health care costs overall.

A few short years ago, few Americans felt the need to know the consumer costs of health care. Yet as Americans pay for more and more of their own medical costs, due to rising deductibles and other out-of-pocket costs, calls for increased transparency in health care prices are rising.

In a 2015 Public Agenda survey, funded by the Robert Wood Johnson Foundation, 56 percent of Americans told us they had tried to find out what health care would cost them out-of-pocket before receiving care. Among people who had never sought price information for medical services, 57 percent said they would be interested in knowing this information.

Lawmakers are endorsing price transparency legislation at an increasing rate, often in an effort to protect consumers from surprise medical bills and also in the hope that consumers will choose low-cost, high-quality care. Insurers, providers, government agencies and organizations are developing more and more transparency tools and platforms.

Yet a new study from Castlight Health indicates that the health care market still lacks transparency. It also suggests that providers that don't share price information with consumers tend to have significantly higher prices and drive up health care costs overall.

Castlight, an organization that supports health care price transparency, analyzed hospital claims data and found that 20 percent of providers are what they call "anti-transparency." These anti-transparency providers (ATPs) do not make price information readily available to consumers. On average, 2015 prices by ATPs nationwide were 51 percent higher than non-ATP providers, Castlight found. Moreover, in metro areas with an ATP, health care prices are 17 percent higher on average than metro areas without an ATP.

Castlight concludes that: "While a number of drivers contribute to rising healthcare prices, ATPs represent one of the primary factors driving national healthcare price inflation. This is true despite the fact that they only account for nearly 20 percent of the market."

Price transparency is not a magic bullet for our health care spending woes. Health care prices are largely determined by factors far removed from patients’ control, such as negotiations between hospital systems and insurers. Prices also don't tell a complete story – information about health care quality is also important. Moreover, Americans are split on whether people should be expected to compare prices for medical care, with 43 percent calling the expectation unreasonable.

Yet the Castlight research, together with our survey demonstrating a public demand for price information, suggests that boosting price transparency would likely help rather than hinder efforts to rein in health care costs. Increased transparency could help reduce the price distortions Castlight identified. And members of the public who seek lower-priced care could help move policymakers, insurers, employers and providers toward more comprehensive action to address high prices and costs.

Some providers may continue to put up barriers against price transparency. In fact, Castlight suggests that growing consolidation in health care will likely boost the number of anti-transparency providers.

Still, many policymakers, insurers, employers and providers are actively working to boost price transparency and engage more Americans in comparing prices. Here are a few suggestions, based on our research, for them to do so effectively.

  • Strengthen the capacity of providers, staff and insurance company personnel to discuss prices: Many Americans are already trying to get price information from receptionists and hospital staff, insurance companies, doctors, hospital billing departments and nurses. This suggests a need to strengthen these professionals’ capacity to provide and discuss price information.
  • Help people understand that prices vary: Most Americans are not aware of price variation. This may keep them from comparing prices or looking for less expensive providers when they are quoted a price that they cannot afford. Policymakers, insurers, employers and providers may wish to consider how to help more people understand the types of care for which prices do and do not vary.
  • Help people understand how to find price information: Most Americans who have not ever sought price information say they would like to know the prices of medical services in advance. Half of them, however, say they do not know how to find it. This suggests a need for more outreach and education about reliable sources of price information.

We are releasing an update of our 2015 price transparency survey in early 2017, as well as findings from a separate study on how the public views health care quality. Be the first to receive both reports. Register for our newsletter today.


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