Think Tank: Price Transparency May Not Be Silver Bullet In Addressing Health Costs

Nov 12, 2015
Originally published on November 10, 2015 4:41 pm

A non-partisan healthcare think tank is warning increased price transparency may not be a silver-bullet in bringing down costs. The discussion comes as Florida searches for ways to address rising healthcare budget needs.

Florida along with most other states, are grappling with rising costs of healthcare. While more people have insurance today due to the federal Affordable Care Act—what they pay for it continues to go up. Governor Rick Scott has targeted hospitals—where patients tend to incur expensive medical bills. And he’s proposed ideas for making those bills more transparent to consumers. But David Newman, Executive Director of the non-partisan Health Care Cost Institute says while price transparency sounds good, it may not work the way proponents believe.

“There’s a limited amount of shoppable, discretionary scheduled services. As I jokingly say, in the middle of my heart attack, I’m not going to pull out my ipad mini and begin shopping for services and suggest the ambulance drive past two high-priced, moderate-quality hospitals in order to waste another 15 minutes to get me to a value-based hospital in order to receive my healthcare services.”

But he says, price transparency does have benefits: like helping to understand what could be happening in a market. Higher prices, he says could indicate a shortage of physicians. While lower prices may not necessarily indicate more competition, but rather collusion among providers. Newman cites a Congressional Budget office report that examined price transparency in markets similar to healthcare:

"Five doctors getting together in the locker room at the golf course after a round of gold, can’t legally discuss prices. But in an absolute price transparent environment, doctors can easily get online, see what others are charging and conclude 'not that I’m charging too much perhaps, but why am I charging too little?'”

Furthermore, pricing hundreds of thousands of procedures and health insurance plans is complicated—and costs vary wildly across states. To that end, healthcare pricing is local. And Newman says a better way to drive down costs is to make more people pay attention. Especially the majority of people who are healthy. Earlier, Newman cited a statistic which says five percent of the sickest people use half the services:

Consumers need skin in the game. Sick people already have skin in the game. They’re sick. They want to get healthy.  So for 50 percent of the spend, they have skin in the game. It’s their life, and quality of life, to deal with.”

Newman’s presentation was part of Tuesday’s meeting of Governor Rick Scott’s hospital and healthcare funding commission. The group has become a springboard for several healthcare-related proposals state lawmakers will consider during the upcoming legislative session.

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