Internet Explorer 11 is not supported

For optimal browsing, we recommend Chrome, Firefox or Safari browsers.

How States Can Shine a Brighter Light on Health-Care Prices

It's hard for consumers to find the true costs of health services. Strong transparency laws in some states are showing the way toward giving citizens access to the information they need.

When times are difficult and money is tight, as they are now for tens of millions of Americans, most of us return to basic budgeting principles, cutting unnecessary costs and choosing the most economical options. We know from the bills we pay what goods and services we buy and how much we spend on them, and when we shop we can compare prices. Except in health care.

Historically, it has been difficult for consumers to find the cost of health care. But as deductible limits and out-of-pocket spending on care have risen, shopping selectively for health-care services and prices has become much more relevant. However, puzzlingly few consumers actually check prices before they seek care, choose a treatment or follow a doctor's referral to a specialist.

Nevertheless, more Americans have come to expect access to health-care prices. The private sector has stepped in — first some large employers, then the major health insurance companies — to give a sizeable swath of the public access to prices. Health-care providers have increasingly posted what they charge for services as well, though these amounts usually differ from what consumers actually end up paying out of pocket since most insurers negotiate a discount off of those charges, making them more like the sticker price of a car that no one really pays.

Now, with our current public health and economic crisis, consumer shopping for health care may rise substantially, and we must be ready. Insurance companies may be best suited to provide their health plan members with prices that also take into account benefit design — the deductibles, co-insurance and co-pays — but not all of the plans offer price information. And for people who are uninsured, the amounts insurance companies pay to providers don't apply.

Public policies can play an important role in supporting consumers — insured and uninsured alike — who need to know health-care prices. This is why Catalyst for Payment Reform, along with The Source on Healthcare Price and Competition at the University of California Hastings College of Law, developed a Report Card on State Transparency Laws that grades states on the laws and consumer-accessible websites they have in place to ensure that citizens have access to health-care price information.

As the 2020 report card shows, 16 states have taken steps toward ensuring that their citizens have such access, and two states, Maine and New Hampshire, earned an A by getting to a stage that is fully practical and operational for consumers. Colorado, Connecticut, Maryland and Massachusetts are close behind with B grades. But 34 states do not have sufficient laws in place to get a passing grade.

In future iterations of the report card, we will take a more expansive look at how states are ensuring health-care price transparency. This may include examining laws targeting "surprise" and "balance" billing (when the provider bills the patient for the difference between its charge and what insurance allows) as well as laws requiring insurers to offer incentives for consumers to shop for health care. We also will likely look at laws increasing access to "all payer claims databases," mandated databases that combine health-insurance claims data from public and private sources to create a more complete view of the value offered by different health-care providers.

Consumers are not the only ones who can benefit from knowing health care prices. Price information is also valuable for employers and other health care purchasers as well as for policymakers. Recent research, such as the RAND Hospital Price Transparency Study, has documented wide variation in prices for the same services within and across markets — a tenfold difference in some cases. Consolidation among health care providers and provider market power have been significant drivers of this variation, as providers with greater market power can command higher-than-competitive prices.

What will happen to the health-care provider landscape during and post COVID-19 is unclear. It is quite possible we will see both more horizontal and vertical consolidation among providers, as community and rural hospitals are hit hard by a combination of COVID-19 costs and the lack of revenue for elective services. Independent physician practices also are struggling to stay afloat with the enormous drop in patient visits. Public sentiment toward providers has deservedly turned sympathetic during the pandemic, but this could unintentionally position them to raise prices further.

By shining a brighter light on health-care prices, we can arm consumers with valuable information to control their costs, help employers direct insurance-plan members to more affordable options, and aid policymakers in understanding when to step in to ensure that there is adequate competition. A little sunshine on the health-care system is good for our budgets and may even give us all a lift we need.

Governing's opinion columns reflect the views of their authors and not necessarily those of Governing's editors or management.

Executive director of Catalyst for Payment Reform
Special Projects