Research: Price transparency could save billions in health care costs

Image of glass by Tim Caynes via flickr.

Image of glass by Tim Caynes via flickr.

It’s widely assumed that when patients have more information about the cost of care they drive down health care costs by voting with their feet. To date, this assumption has been just that: a theory.

In an attempt to address the debate, researchers will release an analysis from the West Health Policy Center on May 15 that estimates that more price transparency in health care could be a source of more than $100 billion in savings over 10 years. The potential for significant savings is intriguing, and the fact that the analysis comes from highly respected health care researchers is significant.

The researchers include Paul B. Ginsburg, Ph.D., the former president of the Center for Studying Health System Change (HSC) who is a professor at the University of Southern California, and Chapin White, Ph.D., a former senior researcher at HSC who is now at the RAND Corporation. Others working on the analysis include former HSC researchers who are now at Mathematica Policy Research: Kristie Liao, James D. Reschovsky, Ph.D., and Ha T. Tu. Another researcher contributing to the analysis is Joseph M. Smith, M.D., Ph.D., the chairman of the West Health Policy Center board of directors and chief medical and science officer of the West Health Institute.

HSC ceased operations as an independent organization in December when it merged with Mathematica Policy Research.

The press event, “A Clearer View – Can Price Transparency Save $100 Billion in Healthcare?, will be May 15, 7:30-9:45 a.m. EDT, at the Knight Studio at the Newseum in Washington, D.C. Journalists can attend in person or online and can register here. AHCJ board member Scott Hensley will moderate the discussion.

Less than a week later, Catalyst for Payment Reform will host a half-day webinar, “What Is Keeping Price Transparency From Becoming A Reality?” This event on May 20, 11 a.m.-3:15 p.m. EDT, is free to the media.

In March, CPR released a report on price transparency that says objective, timely and comprehensive information on the cost of health care in each state is mostly unavailable to consumers.

The “Report Card on State Price Transparency Laws” by Catalyst for Payment Reform (CPR) and the Health Care Incentives Improvement Institute (HCI3) shows that with a few exceptions, state efforts to collect and publish price information have failed. The report also shows that many of the transparency tools that states make available to consumers are not user-friendly.

All but five states received a failing grade of F (on a scale from A to F), the report showed. No state earned an A grade. There were two Bs and three Cs. When CPR and HCI3 issued their first “Report Card on State Price Transparency Laws” (PDF) in March 2013, 29 states got a letter grade of F. And two states (Massachusetts and New Hampshire) received an A, the highest grade.

But this year, CPR and HCI3 examined not only laws that states have passed, but also regulations in the states on price transparency, and websites devoted to price transparency. They also evaluated all-payer claims databases, which are the ideal source of data for transparency sites.

The more rigorous evaluation this year resulted in lower grades overall. Among the states, 45 got Fs this year; Maine and Massachusetts got Bs; and Colorado, Vermont and Virginia got Cs.

Last year, New Hampshire got an A but it dropped to an F this year, because its website is inoperative and could remain that way for a while, the report says.

“Some states have robust price transparency laws and regulations, requiring them to create a publicly available website with price information based on real paid claims information; but in reality, the public can’t readily access that information because the website is poorly designed or poorly functioning,” explained Suzanne Delbanco, Ph.D., executive director of CPR, and Francois de Brantes, executive director of HCI3. “Given that so many state-mandated websites are inadequate, once we included websites into our review and grading, no state received an ‘A’ in this year’s Report Card.

In addition to the lack of functioning public sites, several states have voluntary price transparency websites that hospital associations, foundations and nonprofits host, the report says. But these sites may not always be available to the public and so could not be included in the grading criteria, the report says.


3 thoughts on “Research: Price transparency could save billions in health care costs

  1. Avatar photoNorman Bauman

    Do I understand this correctly?

    They haven’t done a randomized, controlled trial that shows that patients with more information will make choices in the free market that will lead to lower costs.

    They haven’t even done a demonstration project, where they gave patients more information and patients spent less money.

    This is a computer model, where they fed in their assumptions about consumer choice, and saw what their computer predicted based on their model.

    If their consumer choice assumptions are wrong, then the results of their model are wrong. And they’ve never tested their consumer choice assumptions in the real world.

    Is that right?

  2. Avatar photoJoseph Burns

    You are asking great questions, Norman, and I hope you will attend the West Health presentation to ask these questions. I do not believe an RCT has ever been done on price transparency. I do know that researchers at the U of Chicago reported in October that their analysis predicted prices would come down by about 7 percent as a result of more price transparency and their research seemed very thorough. Here’s the link (it’s a pdf):

    Hope this helps.

  3. Pingback: Transparency=Efficiency??? |

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