Price Transparency, In as Few Words as Possible

I’m ready to move on from everything being about coronavirus (although the memes have been very entertaining), so let’s talk more about price transparency this week. After that, as requested by a reader, I’ll spend some time looking at Senator Sanders’s Medicare for All Act of 2019 to get more details about what flavor of M4A he would push for as president (since, if you recall, his official campaign website details were pretty scant).

Months ago, I read this interesting Vox article about President Trump’s healthcare price transparency efforts. They asked a number of experts what they thought the results would be of these policies.

Let me summarize what they said:

• Consumers will start shopping for and finding lower prices
• High-priced providers will be shamed into lowering their prices
• Policy makers would see how high prices actually are and would be more motivated to enact policies to reduce them
• People still wouldn’t shop for healthcare services even with price information because (1) they can’t during emergencies, (2) they will often hit their deductible and therefore not end up paying more for more expensive providers anyway, and (3) patients will continue to go to the same providers even if they’re more expensive because they’ve already established a relationship with them
• Price information will only be actionable when it’s in an easy-to-understand consumer interface plus paired with insurance benefit design changes
• Without being paired with quality information, people might incorrectly assume the expensive providers are higher quality
• Providers could see the prices insurers are paying other providers and demand they get those higher prices as well

All of those predictions are, to various degrees and in certain situations, likely to come true. But they don’t tell the whole story.

What would I say, in as few words as possible?

Price transparency, by itself, will only remove one of many barriers to people making price-sensitive decisions in healthcare–other barriers will remain, especially insurance plan designs that negate price differentials between providers via their cost-sharing requirements for patients. But, in the big picture, getting more price-sensitive decisions in healthcare is not the goal. The goal is to get as many purchase decisions as possible to become value sensitive, which requires knowledge of both price and quality. Only when patients start making value-sensitive decisions will higher-value providers start to win market share and enhanced profitability, thus stimulating innovation toward greater value over time. So while the short-term observable benefits of a price transparency policy will be minimal, it is one of many essential steps toward fixing incentives and improving value in our healthcare system.

Maybe that wouldn’t be short enough to be quotable, so instead they’d just say they asked Dr. Taylor Christensen, who said, “the short-term observable benefits of a price transparency policy will be minimal.”