Price Transparency in Healthcare

Price Transparency in Healthcare

What is Price Transparency and How Does it Relate to Healthcare?

Price transparency is exactly what it sounds like: a push for information on the prices of certain healthcare services to be made available to consumers. As healthcare in the U.S. becomes more and more expensive, and as patients find themselves contributing a larger share to that cost, each year, the demand for price transparency in the healthcare industry is mounting quickly.

Additionally, price transparency is widely thought of as a cure for the disease of inefficiency and inequity that plagues the healthcare industry. Some believe that price transparency will promote price competition which will hopefully promote some reduced prices and, by further extension, improve access to healthcare.

The two areas people fixate on, when discussing price transparency in healthcare, is Pharmaceuticals and Hospitals.

The Issue of Price Transparency in Healthcare

On the whole, healthcare in America is a hotly debated issue, but what are the major problems? First off, the U.S. spends twice as much on healthcare as other high-income nations, according to a recent study. Our healthcare costs are sky-high across the board – from insurers to hospitals to drug companies.

But it’s not just that our healthcare costs are high. The same study revealed that America had the worst population health outcomes and worst overall health coverage. The big concern: Are Americans really getting what they’re paying for, when it comes to healthcare?

It’s debatable whether our high healthcare expenditures are actually improving patient care and health. Variations in price, for the same procedure, can differ by thousands of dollars. That’s even true for hospitals in the same area, not just across the country. All that green has consumers seeing red.

In addition, there have recently been several high-profile cases that reveal price gouging and have turned a harsh light on what many view as arbitrary pricing in the healthcare industry. Not good. Some providers have even utilized non-disclosure agreements and “gag” clauses as a means of keeping healthcare prices opaque and hidden from the consumer.

The Public and Price Transparency, At a Glance

Here are some numbers and stats for you. Healthcare costs are expected to increase by more than 85% over the next 20 years. In 2011, national healthcare spending amounted to a whopping $2.7 trillion. If this trend persists, healthcare spending will account for 20% of the total Gross Domestic Product by 2020.

Dollars aren’t the only trend on the rise. More and more people are becoming savvy about their spending and they want more information on the cost of their care! 82% of people are making a habit out of comparing healthcare prices. 69% of people want insurance companies to disclose what they’re paying for procedures, so that consumers can understand what they’re paying for and make more informed decisions.

Price transparency does not only serve an educational purpose to consumers. Price transparency in the healthcare industry has a number of positive consequences; like the fact that it can actually lower the cost of healthcare.

Both price transparency and reference pricing have helped reduce costs in the long run. Reference pricing refers to the cost that consumers can anticipate paying for a given health service. When pricing is vague and unclear, it can inhibit the efficiency of a delivery system. The Robert Wood Johnson Foundation expands on this with the claim that “Experts are convinced that significant cost containment cannot occur without widespread and sustained transparency in provider prices.”

Healthcare is one of the largest industries in the U.S., boasting total costs of $3.3 trillion in 2016. That’s about $10,348 per person per year. That number gets even more impressive once you compare healthcare costs from the past and present. As of 2016, healthcare equaled 17.9% of gross domestic product. In 1960, it only accounted for 5%. These increases mean that the cost of healthcare is eating up more and more of the American citizen’s average income.

Why is this happening?

What is causing these sky high healthcare costs? Experts place the blame in two areas:

  1. Government Policy
  2. Lifestyle

Government Policy

Though government programs like Medicare and Medicaid exist to help those without insurance, on the whole, our country relies on company-sponsored private health insurance. That doesn’t mean that those government programs didn’t have significant impact. Medicare and Medicaid cover more people and allow them to use more healthcare services.

Like with anything, once the demand increased the prices soon followed. Since then, gaining control over healthcare costs has been a tug-of-war between the government and health insurance companies. This over-reliance on corporate health insurance has driven many people to more expensive hospitals because, without a primary care physician, it was the only place they could go to for healthcare.


Here are the Top 4 leading causes of death in the U.S.:

  1. Heart disease
  2. Cancer
  3. Chronic obstructive pulmonary disorder
  4. Stroke

What do these things have in common? They’re chronic conditions. Furthermore, they are escalated by lifestyle factors such as poor nutrition, obesity, and smoking.

The “Big 4” are often considered preventable or, at least, easily treatable if caught early on. These diseases cost, on average, an extra $7900 per patient. Five times the healthcare costs of a healthy person, annually.

What can be done to address price transparency?

One solution is to involve state governments. By giving providers and insurance personnel the tools and support to openly discuss pricing, and incentivize those providers to guide people toward reliable price information and explain varying costs across providers, we can assure peace of mind and transparency. The Catalyst for Payment Reform suggests that states combat price opacity through legislation.

Additionally, increasing frustrations with the lack of price transparency has led to local governments and advocacy groups establishing online databases and passing the legislation that applies pressure on providers to disclose prices.

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