Progress in Healthcare Price Transparency, but Who Knew?

Our nation’s $4.5 trillion healthcare system is not only expensive relative to those of its developed country peers, but its costs are notoriously opaque to the average consumer – that is, until after they receive treatment. However, there is more price transparency in the system than ever before, though it is clear that most consumers don’t know it.

Why It’s Important ?

The most obvious and well-publicized problem with lack of price transparency is that patients are frequently and sometimes very unpleasantly surprised by the magnitude of the bills they receive after treatment when they are no longer able to affect the financial outcome. The more pernicious aspect of this on the system as a whole is that consumers’ inability to anticipate costs prior to treatment prevents them from comparing treatment options and providers, which in turn removes any market discipline from the process of securing care and leads to generally higher costs.

Until a couple of decades ago, this didn’t matter much to most consumers because most of the cost of their healthcare was borne by third parties – employers, health insurers, and government payors. As healthcare costs continued to rise at annual rates that generally have exceeded the rates of inflation, these third parties have increasingly pushed a greater portion of the costs to their employees and members in the form of higher deductibles, co-pays and co-insurance, as well as through annual coverage limits. Now more than ever, healthcare price transparency matters to individual consumers, and it is essential to creating a more efficient system.?

New Regulations

Understanding the importance of increasing healthcare price transparency to their constituents and the system as whole, legislators began taking action a few years ago, first to require hospitals (in January 2021) and then health insurers and self-funded employers (in July 2022) to publicly post their list and negotiated prices for an expanding range of services. However, these price lists were only required to be revealed in “machine readable” formats, which rendered them next to useless for the average consumer.

But, beginning in January 2023, insurers were required to provide consumers with interactive, web-based tools (paper versions are also required to be available) that enable them to compare provider-specific prices and receive personalized, real-time cost-share estimates for 500 specified covered services (including pharmacy); and beginning in January 2024, all services and items must be included.

Low Consumer Awareness

This is a major step in the right direction, but most consumers clearly don’t know it yet. The results of a Gallup poll published on January 31, 2024 showed that only 17% of U.S. adults know how much their healthcare services will cost before receiving them, and these results are consistent across all demographic groups, including by race/ethnicity, gender, age, education, geographic region and health insurance coverage status – “suggesting a society-wide lack of awareness about one’s healthcare costs, regardless of personal background” – while 95% of consumers believe that healthcare organizations should make costs more transparent before providing care.

The reasons for the gap between the increased availability of personalized healthcare price information prior to treatment and consumer awareness of this availability are unclear, but this gap must be closed as quickly as possible – for the benefit of individual consumers, and as a key step in making our nation’s healthcare system more sustainable.

Respectfully,

Web Golinkin