PBGH Policy Brief: Price Transparency

The Institute of Medicine estimates that $105 billion of annual waste in health care spending can be attributed to lack of competition and excessive price variation. A lack of public information on the price of health care services contributes to this waste by denying employers, purchasers, and consumers the information they need to make smart choices.

This brief from the Pacific Business Group on Health explains the problems created by the lack of price transparency and outlines what can be done to reveal health care prices more. The brief recommends that state and federal government work with the private sector to develop and implement public policies ensuring health care markets support consumers and purchasers using price information. The following are specific state- and federal-level policy recommendations:

State-Level Policy Solutions

  • Prohibit contractual gag clauses that bar insurers from disclosing providers’ prices.
  • Create all-payer claims databases.
  • Require plans participating in the new state insurance marketplace or “exchanges” to submit claims data.
  • Require plans in the state insurance marketplace or “exchanges” to provide cost calculators.
  • Prohibit other anti-competitive practices.

Federal-Level Policy Solutions

  • Assert employers’ rights to access and use their own claims data.
  • Use financial incentives to encourage states to improve transparency.

The brief also suggests that while necessary, revealing the price of health care services will not be enough to drive the significant change required to improve health care outcomes and reduce costs. Price transparency is instead a foundational element that needs to be combined with the appropriate consumer and provider incentives, such as value-based benefit design or the reference pricing of services.

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