The idea behind price transparency is that informed consumers can price shop for medical services that have widely varying prices, like elective surgeries or magnetic resonance imaging (MRI). The concept is very popular, both in the United States and abroad. Most recently, President Trump signed an executive order aimed at requiring hospitals to disclose what patients will “actually pay” for care. But evidence shows that transparency does little by itself. Some argue health care prices may actually go up in some cases. Giving consumers information alone does not mean they will actively use it to shop around for lower costs.
That’s from my piece at JAMA Forum with Gilbert Benavidez. It’s mostly the sad tale of woe about how price transparency isn’t working out the way many hoped. But, there’s a glimmer of optimism at the end.
For example, a recent article in the American Journal of Health Economics by Christopher Whaley, PhD, and colleagues at the University of California, Berkeley, examined pairing price transparency with reference pricing for Safeway employees. […]
The study watched for employee health care behavior changes over 2 years, looking at laboratory and imaging test prices. After the first year, during which only price transparency tools were offered, the authors confirmed the findings of previous studies: health plan members rarely shopped.
But when the reference pricing information was added in the second year things changed. Shopping picked up and prices decreased. Specifically, laboratory test prices dropped 27% and imaging test prices decreased 13%. The authors concluded that price tools will capture the attention of consumers only if the consumers have strong financial incentives to shop in the first place.
It’s only one study. Clearly we need to see a lot more work on price transparency paired with reference pricing. Still, it’s the most promising thing in this area I’ve seen.
Research for this piece was supported by the Laura and John Arnold Foundation.