December 7, 2021


Patients Need to be Able to Use Price Transparency

By: Tanner Aliff

With so many domestic issues facing the nation, it’s hard to prioritize what needs to be addressed first. Although, in today’s partisan age, when both the Obama and Trump administrations are in agreement that price transparency amongst health providers needs to be redressed, it’s apparent what desperately needs work.

The American healthcare system is anything but simple, yet one thing is clear: lack of transparency will only enable large health provider networks to stay shrouded in crony pricing practices. Make no mistake, transparency is absolutely essential, but the impact of it hinges on what patients do with information that becomes available to them.

The opaqueness in healthcare pricing is simply out of control. We are living in a nation where hospitals can charge $60 per ibuprofen tablet and $21,000 for cesarean sections. Unless challenged, states like Texas will continue experiencing 6% annual increases in health care spending and be set on a trajectory of compensatory tax hikes which will ultimately further burden us, the patients.

Aside from large providers furtively resisting price clarity laws, one of the largest obstacles hindering the cost-saving efficacy of price transparency is passively created by patients themselves. When a patient is insured and relatively insulated from paying out-of-pocket costs they are effectively disincentivized to shop around. 

For example, one study found that the average MRI recipient drives past six lower-priced providers on their way to a hospital MRI appointment that is 76% more expensive. Even with hospitals listing their prices publicly, it’s unlikely anyone will shop for cheaper MRI providers just to save their insurance companies $200 and themselves $10.

To combat patient indifference towards price transparency, we should encourage innovative private development of comparison services and rewards for being smart healthcare consumers. 

The American people shouldn’t have to rely on hospitals’ inscrutable price tables for guidance. As Josh Archambault points out, insurance companies could simply reward their enrollees with a portion of the savings they would receive for choosing a cheaper health service.

The concept exists already and it’s taking shape in programs called Shared Savings Arrangements. The arrangements have manifold applications and can be tailored to pass savings in a variety of ways. For example, when a patient chooses a high quality, but lower-cost provider, insurance companies can lower the patient’s deductibles, premiums, copays, or send untaxed dollars to an HSA, HRA, and FSA. Some programs are even playing with the idea of ordering a direct deposit to a patient’s checking account. There are many ways to incentivize patients to shop around for their care. 

While there is an array of emergency issues where patients don’t have the luxury to shop around, there are still studies showing that 43% of healthcare spending is spent on “shoppable” services. Chances are patients will be in a situation where they need a test, scan, or elective procedure. It’s in these types of services where large providers extort the most, and where health shared saving arrangements can help cut costs while rewarding patients.

The American insurance model is not going to disappear overnight and the fight for transparency will have to account for ways to incentivize patients to actively care about prices once they’re listed. Thousands of Americans are dying and going bankrupt because established health providers would rather maintain the status quo instead of adopting common-sense reforms. It’s up to patients to advocate for programs that can make use of the growing price transparency movement.