Analysis: Giving price data to wider audience would save $100 billion in 10 years

Joseph Burns

About Joseph Burns

Joseph Burns (@jburns18), a Massachusetts-based independent journalist, is AHCJ’s topic leader on health insurance. He welcomes questions and suggestions on insurance resources and tip sheets at joseph@healthjournalism.org.

Image via wordle.net

Image via wordle.net

Most health care price transparency efforts are aimed at giving patients more information on costs at the point of care. Armed with this information, consumers will shop comparatively just as they do for cars, computers and appliances, driving down prices, health policy experts say.

Now a report released today says that not only should patients have more information on the cost of care but physicians, employers and policymakers should get cost information too. If all these groups had more information on what care costs, the effect would be a reduction in health care spending of $100 billion over 10 years, according to an analysis done by researchers for the Gary and Mary West Health Policy Center.

Health care price transparency information is not widespread, although many organizations recognize the value of giving such data to patients to promote comparison shopping, said Joseph Smith, M.D., chairman of the West Health Policy Center Board of Directors. If more groups had such data, there would be more awareness among all, and thus the potential for more shopping and more savings.

The report, Healthcare Price Transparency: Policy Approaches and Estimated Impacts on Spending, (PDF) was done by researchers from the former Center for Studying Health System Change (HSC). The researchers made three specific policy recommendations:

  1. All states should develop all-payer health claims databases (APCDs) to report hospital prices. Doing so could save as much as $55 billion by making employers more aware of price differences and by increasing pressure on high-priced hospitals to reduce or justify their prices.
  2. Electronic health record systems should provide prices to physicians ordering diagnostic tests. Several recent studies have shown that physicians are often unaware of the costs of tests and procedures they order. Providing cost information to physicians could produce as much as $25 billion in savings over 10 years.
  3. All private health plans should be required to provide personalized out-of-pocket expense information to enrollees. Many plans already do so, and health insurers say they have some of the most sophisticated price-comparison applications for members’ computers and smart phones. Few members use these tools, however, the researchers said. If all plans offered these tools and gave consumers incentives to use them, the savings could total $15 billion to $20 billion over 10 years, the researchers said.

“Price transparency alone isn’t going to change the structural factors that support excessive spending in our health care system, but in concert with the transition to newer health plan designs, and newer ways of paying providers, it plays an essential role,” said Chapin White, Ph.D., lead author of the analysis and a former HSC senior researcher now at the RAND Corp.

In addition to announcing the results of the study, the WestHealthPolicyCenter said it would contract with the University of New Hampshire to create a manual for APCD development. The university and the National Association of Health Data Organizations staffs the APCD Council, which was founded in 2007 to help states facilitate the planning and implementation of APCDs.

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