Can transparency in health care happen in the United States?

Most people, regardless of their political leaning, can agree that the market for health care in the United States isn’t really working well. Take one step further, though, and disagreement rapidly ensues.

On the left, the common understanding is that a market failure has occurred, and that the proper thing to do is have government intervene to correct that failure — usually by expanding public insurance programs, subsidizing private insurance, and the like.

On the right, the common understanding is that the market hasn’t exactly failed, but that it could certainly be improved if we got government out of the way, stopped insulating people from the costs of their care, and made consumers better informed. In other words, take care of the information asymmetry that exists in health care, and the market will right itself.

There are some obvious limitations to health care markets. For example, even with perfect information, someone with a heart attack is highly unlikely to comparison shop for the best doctor or hospital in their area. Yet, just as it’s hard to disagree that the market isn’t working well, it’s hard to argue that there isn’t a problem with information on health care prices and quality that a consumer needs to make rational choices. Moreover, while it won’t solve all of our problems, I do think that increasing people’s access to information about health care prices and quality could help to bring some of our market inefficiencies under control. But the real question is this: Can transparency in health care happen in the United States?

Across the country, eleven states have indicated that they believe it can, by attempting to increase pricing transparency for health care procedures. The rationale is simple: Tell people what different things cost, and they’ll more likely opt for lower-cost providers, which will lead to an overall reduction in costs as providers begin competing with one another on the basis of price.

There are a few problems with this, though. First, it requires a pretty sizable data collection effort. For instance, Colorado has begun work on an all-payer claims database. Second, interpreting the cost data can be a challenge, because the out-of-pocket cost someone pays is largely a factor of their insurance coverage. In other words, if you have excellent coverage, you probably care little about how much your provider charges, and more about what you actually pay. And, finally, we humans can make the mistake that higher priced goods and services must inherently be better goods and services. After all, you get what you pay for, as the saying goes.

Of course, we know that’s not always true. But in health care, measuring quality can also be a rather elusive goal. Sure, we can capture process measures for recommend treatments like administering a beta blocker to a heart attack patient, but is that really what consumers care about? On some level, yes, but they also care about how nice the waiting room is, and how the staff and the providers treat them. We have things like Google Reviews and Yelp for consumer reviews of hotels, restaurants, and other businesses. And, in fact, there are numerous sites out there for reviewing medical providers. The question is: Are they useful?

A recent survey study, just published in JAMA finds that people aren’t really engaged with these sites the way they are with others. In fact, just 5% of respondents indicated that they had reviewed their own provider online, 23% of respondents reported using such reviews when selecting a primary care provider, and only 19% considered the reviews to be very important in their decision. Of course, these types of reviews are only part of ascertaining provider quality, but their limited use raises the issue of whether other efforts at transparency will be more effective. Unfortunately, I don’t have an answer for you, but I’d be extremely curious to hear what you think as an existing or potential consumer of health care.

Brad Wright is an assistant professor of health management and policy, University of Iowa who blogs at Wright on Health.

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  • Peter Elias

    “But the real question is this: Can transparency in health care happen in the United States?”

    Yes. Look at OpenNotes.

    Most of what this article talks about is not transparency in care, but transparency in billing. Not the same thing.

  • Margalit Gur-Arie

    I think that “you get what you pay for” is a decent rule, and as all decent rules, it has exceptions, that fall under the category of “rip off”. An exception may occur with the purchase of any good or service, but by and large a $500 hotel room is better than a $50 dollar one, a $50,000 car is better than a $15,000 one, a $200 meal is better than a $20 one, etc. Attempting to convince people otherwise will never work.
    I also think that health care, is somehow connected to primal instincts of survival, and moral judgements, and hence people are less inclined to evaluate it in terms of care for the dollar, as they would when buying say, a lawn mower.
    Forcing people to cheaper venues of care, or cheaper therapies, will always be viewed with suspicion. So if we want to reduce health care costs, we should get busy on the other side of the equation and weed out the institutionalized “rip off” agencies. Since people don’t decide how much anything costs, we should price things differently. A good place to start would be to make primary care cost a fortune……

    • SherryH

      Sometimes more is not better, sometimes more is just more. For example, I was charged $300 for a walking boot and saw the EXACT same one at a medical supply store for $60. Also, after what was painful and difficult to find information, I finally managed to find an MRI that cost me $400, but the one that was “recommended” to me (in other words, at their facility) cost $1400. Sometimes a higher cost is just that, a higher cost. It doesn’t necessarily mean a higher quality.

      • Margalit Gur-Arie

        True and I would classify these as “rip offs”, but please read what buzz wrote below (or above depending on how you sort). That’s not where the bulk of the money is….

        • ninguem

          So where is the bulk of the money?

          Where do you think it is?

          A factoid pops up in books from time to time, we spend more on incontinence products than cancer treatment. I must say I’ve never tried to verify that factoid.

          And assuming it’s true (that the bulk of cost is elsewhere), what’s wrong with taking some small shave off the cost of healthcare by shopping price for elective diagnostic imaging, surveillance colonoscopy, etc.?

          Why is price control OK if government or big business imposes it, but somehow a problem if the patient does it?

          • Margalit Gur-Arie

            There is nothing wrong with that, but it won’t solve the problem. It’s like trying to lose weight by insisting on Diet Coke with your nightly box of Thin Mints… or something like that :-)

          • ninguem

            Do you know a place where the problem of health care cost has been “solved”?

            I’d like to know about it. No matter where you are, the problem with healthcare cost is like trying to get ten pounds of potatoes into a five-pound bag.

            All you can do is look for savings wherever you can.

          • Margalit Gur-Arie

            I don’t know of a place where the problem has been solved, but I do know of other places where the problem is not as bad. Maybe because they figured out that out of the ten pounds of potatoes that we are asked to carry around in our five pound sack, at least four pounds are just rocks.
            Keeping us busy scrubbing dirt off each piece we try to put in the sack, because every little bit helps, won’t solve the rocks problem.

          • SherryH

            No it won’t solve the problem as a whole, but it will make a difference to the person paying out of pocket for things.

  • ninguem

    There are some obvious limitations to health care markets. For example,
    even with perfect information, someone with a heart attack is highly
    unlikely to comparison shop for the best doctor or hospital in their

    you don’t “shop price” with a heart attack

    the insurance company does the price shopping

    it’s called a “network”

    the price shopping an individual does is with elective services

    We went through this, when you claimed it was impossible to shop price for imaging services when you were in North Carolina, and I found price comparisons in your area in about five minutes.

    It’s the same in Iowa City.

    So, as the right generally points out, the idea is to get a high-deductible health plan with a Health Savings Account.

    • SherryH

      Not every employer offers an HSA plan.

      • ninguem

        I thought “Obamacare” was going to cure all that.

        I dunno, you’re right of course, not all employers offer the HDHP (high-deductible health plan) needed for the HSA.

        I haven’t paid attention, I have a HDHP for my practice. Doesn’t “Obamacare” offer a HDHP option?

        I don’t know.

  • buzzkillerjsmith

    People are generally unable to make informed decisions about medical care on their own. That’s kind of the whole point of having doctors.

    Most HC is spent on supersickies who don’t spend up much time looking up comparative costs and benefits because they are generally more focused on trying to breathe or trying to get that gastrointestinal hemorrhage to slow down a bit. They are unlikely to fly to Bulgaria to save a few bucks.

    Non-supersickies have more time, but again, most of them are old. And old people….

    The market works pretty well for wheat and pork bellies. I suspect that those who try to push the analysis too far in our field or either morons or free-market shills or both.

    • ninguem

      Hey buzz

      The idea for emergency work, tertiary care, etc………I feel like a broken record…….is the insurance company does the shopping for you, it’s called a “network”.

      I price-shop for elective work, when able to choose options or medications, and price-shop imaging and other services.

      The MRI facilities are starting to post their prices on billboards for Pity’s sake.

      • buzzkillerjsmith

        I get you.

      • SherryH

        My guess is that it is different in different areas and different states depending on state laws and providers/insurers. I hear 11 states have transparency laws. If theses states can do it and other industrialized countries can do it, the rest of this country can do the same. It’s the right thing to do.

  • SherryH

    Always the shills for “it can’t work, everything is an emergency, the sky is falling”. As a person with high co-pays and a high deductible plan I do try to find out the prices of things before following thru on a recommended treatment. Most people don’t have insurance that covers everything anymore. Most health care is for chronic conditions, therefore they have time to shop around. There is no reason why we shouldn’t be able to get HONEST answers on cost for things like medical supplies (walking boots, for example) and common tests (X-rays, MRI’s, etc.) I have continually tried to find out the prices of things so that I can make the best decisions for myself (and MY money) but have been lied to and/or deceived at every turn. If an insurance company has a contracted price with a vendor we should be able to find out that price before hand. I should be able to sit down with the provider and discuss an issue with my insurance company to find out what each session of physical therapy is going to cost before deciding how long I really need to go (I certainly needed far fewer than was recommended). It is all such an immoral money grab. Price transparency is the key to controlling costs.

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