While transparency reforms to the healthcare system are often supported by the public, they often fail to achieve meaningful outcomes. As noted by a recent report released by the Mercatus Center, implementing price transparency measures can do nothing to reduce costs and has little to no benefit for consumers.
The Trump Administration has pushed policies that aim to introduce more transparency into the healthcare system. While this effort to reduce the opacity of the system is laudable, these reforms should consider the past pitfalls with transparency policies and ensure they provide tangible benefits to consumers.
There are several challenges for consumers to properly process and understand healthcare prices. When shopping for goods or services, consumers must understand and compare the options that are available to them. However, searching takes time, money, and energy, especially when products are not well understood by consumers. This is the case when it comes to healthcare – consumers usually do not have a strong understanding of the costs and alternatives already available.
In addition, consumers often lack the incentive to use these tools to search for lower spending options. Healthcare is frequently consumed during emergencies, so consumers are less price sensitive. Presenting consumers with more information on prices does nothing to actually lower the prices. According to one study in 2011, only about 40 percent of the total dollars spent on healthcare services went toward shoppable services. Therefore, most services may have been situations where browsing scrutinizing the price of health care options that would not have been the top priority.
Consumers are also already shielded from medical costs through their health insurance plans. While consumers are responsible for paying for premiums and deductibles, they rarely pay full price when consuming healthcare. Instead, insurers negotiate with providers for reduced payments and cover their customers from the full financial burden of their health decisions. In 2018, out-of-pocket payments accounted for only 10 percent of overall healthcare spending.
While tools help consumers search for lower prices are widely available, they have been unsuccessful in lowering costs.
Most private health insurers offer platforms to compare expected out-of-pocket costs, however these platforms are rarely used. In 2012, an estimated 70 percent of enrollees in private plans had access to a price tool. However, of the 140 million health plan members surveyed in a study published in the American Journal of Managed Care, only 2% used available health pricing tools.
Government price transparency tools have also failed. For instance, the New Hampshire Insurance Department and the Center for Studying Health System Change (HSC) conducted a study in 2007 where New Hampshire attempted price transparency by launching its HealthCost website. The site contained costs of 30 common healthcare services and included insurer-specific cost estimates. Outside evaluators tracked the prices of five of those services, some more shoppable than others, to evaluate the program. These studies showed no impact on prices or price dispersion over two years.
Given these findings, future proposals to implement healthcare transparency should be heavily scrutinized to ensure they actually benefits consumers. While any effort to reduce opacity to consumers should be applauded, it is important to remember that past efforts to bring transparency into the healthcare system have been barely used when implemented and have proven ineffective in helping consumers better understand prices.