Price Transparency Be Damned – I’m Insured Through OPM Insurance Company

“Americans usually put relationships ahead of money” because the money is not really theirs. “Once patients find a physician they trust and a hospital they like, they tend to stick with them even if there is a lower-cost alternative nearby” because, after all, they use Other People’s Money. No one ever cares about health care costs when using Other People’s Money (insurance). Transparency be damned………………………

Fallacy: Price transparency Can Bring Down Health Care Costs

MyHealthGuide Source: Ezekiel J. Emanuel and Victor R. FuchsFour Key Things You Should Know About Health Care, 9/12/2019, New York Times

Editor’s Note:  This Newsletter has published articles promoting price transparency. However, here is an article citing studies questioning the value of medical care price transparency.  Thanks to Frank Pennachio, Principal, Oceanus Partners for referring this article.

NY Times Excerpt

Fallacy No. 4: Price transparency can bring down health care costs.

Demonstrations of price transparency have been tried many times in many places, and in reality, it has not reduced the cost of care.

One recent study by Harvard Medical School researchers involved hundreds of thousands of employees and used a website telling them what they would pay out-of-pocket if they chose particular physicians and hospitals. The result: no savings.

  • Harvard Medical School Study Conclusion: Among employees at 2 large companies, offering a price transparency tool was not associated with lower health care spending. The tool was used by only a small percentage of eligible employees.

A follow-up study using another set of employers and another price transparency tool found the same result: no savings.

Since 2007, New Hampshire has had a state website, N.H. Health Cost, that allows patients to select a medical procedure, insurer and ZIP code and then get a list of prices for the procedure from various providers. The most promising study of N.H. Health Cost suggests a few million dollars in savings per year. That works out to be about $5 per New Hampshire resident.

The fact is, price transparency will not make health care costs “go way, way down.” Health insurance insulates the patient from price. Over 80 percent of the cost of medical care is paid by private and public insurance. Patients have little incentive to seek out the cheapest provider. When pricing websites exist, few patients use them. Even in the most favorable studies, when offered a price transparency tool, only 12 percent of patients took advantage of it; usually it’s less than 4 percent of patients.

Furthermore, price considerations are useful for choosing only about 40 percent of procedures — routine services like colonoscopies, M.R.I. scans and laboratory tests. Most of the expensive services — think heart catheterizations, cancer chemotherapy and organ transplants — are not the kind of thing you decide based on price.

Finally, in health care, Americans usually put relationships ahead of money. Once patients find a physician they trust and a hospital they like, they tend to stick with them even if there is a lower-cost alternative nearby.

About the Authors

Ezekiel J. Emanuel is a vice provost at the University of Pennsylvania. Victor R. Fuchs is an emeritus professor of economics at Stanford.