Healthcare Cost Transparency

In the discussion on prescription drug pricing, the topic of transparency has been gaining traction in both state legislatures and in the media as the primary cause for the high cost of healthcare in the U.S. But the issue does not only lie with prescription drug pricing; lack of price transparency in both hospital and health insurance settings are also a principle driver of the high cost of healthcare.

According to the Commonwealth Fund, between 2003 and 2013, out-of pocket costs for health insurance premiums and deductibles has doubled to nearly 9.6 percent of household income. Eighty percent of people surveyed list price transparency as a factor in choosing a healthcare provider, and 79 percent said they would be more likely to pay their bills on time if pricing was provided before receiving care.

In a perfect world, the cost of healthcare would be clear and accessible information that individuals use to make comparisons among different providers. It would help patients make meaningful judgements about the treatments they receive. And it would also be easy to use, easy to communicate, and provide the information individuals need to fully understand what is included in the price of their medical treatments.

However, the reality is there is a serious lack of price transparency in healthcare, which affects both those who both have health insurance and those who do not have health insurance. Because of this, patients are faced with the increased exposure of healthcare costs and, as a result, have an urgent need for meaningful and transparent information.

For insured patients, health plans should serve as the primary source of price information and also include the total estimated price of the service; clear information indicating that the provider is in the health plan’s network and information to locate the provider; a clear statement of the out-of-pocket costs; and other information that is important, including clinical outcomes, safety, etc.

For uninsured or out-of-network patients, the provider should be the principle source of information. The patients should be offered an estimated price for a standard procedure without complications and an explanation of what the cost would be if a complication were to occur. Clear communication makes it easier to discuss the potential changes in the plan, such as the services that are and are not included in the price estimate and the outcome and safety factors.

In support of the rising transparency issue, the American Hospital Association (AHA) has developed “Achieving Price Transparency for Consumers: A Toolkit for Hospitals” Their goal is to use this resource to help hospitals gain knowledge from case examples and increase efforts to work toward price transparency in hospitals.

Another organization, the Health Care Incentives Improvement Institute (hci3) graded each state on their performance regarding price transparency, with some of the factors they accounted for include utility, consumer experience, scope, and accuracy/data source. New Hampshire received an A, Colorado and Maine received a B, and Vermont and Virginia received a C.  Each of the remaining states received an F.

In 2015, New Hampshire went from an F to an A rating after developing a website that shows pricing for treatments and procedures for both insured and uninsured patients seeking care in their state. Colorado developed a similar tool, however that website provides price information limited to specific kinds of care for hospitals and is not consistent across the industry.

The financial responsibility for patients has increased as well, and when price information is unavailable, lack of transparency becomes the topic of public criticism and often results in legislative action. Because of that, states are introducing legislation to change the ways of price transparency.

As of March 1, 27 bills have been introduced within states that will regulate the price of prescription drugs. Out of those 27, Florida introduced seven, ahead of Tennessee, which introduced four bills, and New York, which introduced three bills.

Among health insurance plans, hospitals and pharmaceutical companies, providing the cost of medical services and treatment options is a critical and emerging issue. Forbes predicts retailers will begin to fully execute their strategies as front line health care providers and that everyone from payers, employers, and state and federal governments will be offering a wide range of technology to address this issue. If properly executed, implementing effective pricing strategies could significantly impact how people manage their choices for healthcare in the U.S.

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