Price transparency in health care: will it bend the cost curve?

Lack of transparency regarding pricing of medical services has often been attributed as one of the factors contributing to skyrocketing spending in the health care system. However, the bigger problem is that patients are completely disconnected from the cost of their medical bills because of the growing role of third party payers, says Kathryn Nix, a research assistant for the Heritage Foundation's Center for Health Policy Studies and the Roe Institute for Economic Policy Studies.

According to Heritage experts Robert Book and Jason Fodeman:

  • A major source of these spending increases is a third-party payment system that often leaves the physician and patient insulated from and even unaware of the costs of the various treatment options.
  • Often, the patient faces the same copayment regardless of which treatment is chosen, and the extra costs are passed along to the insurance company, Medicare or Medicaid.
  • These payers may appear to have an incentive to encourage efficient use of resources, but ultimately they do not pay the price for inefficiency.

    Insurance companies offer "generous" benefits and pass on the increased spending to patients (and often their co-workers) through increased insurance premiums, and government programs pass on the spending increases to taxpayers.

    Since price transparency is only part of the reason for the broken link between patients and the spending on their medical care, it can only be part of the solution. To be effective, transparent prices must be accompanied by allowing consumers to own and control their health care choices, including type of plan, says Nix.

    Consumer-driven care is the key to making transparent pricing work. This is currently available to a growing number of Americans through the combination of high-deductible health plans with health savings accounts, giving individuals greater control over the flow of their health dollars, says Nix.

    Source: Kathryn Nix, Price Transparency in Health Care: Will it Bend the Cost Curve? Heritage Foundation, June 28, 2010.

    For text:

    For more on Health Issues:

    First published by the National Center for Policy Analysis, United States

    FMF Policy Bulletin/ 06 July 2010
Help FMF promote the rule of law, personal liberty, and economic freedom become an individual member / donor HERE ... become a corporate member / donor HERE