Price Transparency: The Consumer Perspective

As American consumers have struggled with the cost of health care, health executives have fought price transparency efforts. Consumers can’t obtain the price they’ll pay for even the most basic services, and they don’t understand why. Here’s their perspective.   

• What is it? In 2011, the U.S. Government Account Office defined it. “Transparency” is providing price before consumers receive care. “Price” must reflect any negotiated discounts and include all costs associated with care (hospital, physician, lab, etc.). Most importantly, it must define a consumer’s out-of-pocket cost.
• Who is the consumer? In the U.S., the median family income is $61,937. Their health costs (premium and deductible before coinsurance and maximums) are $8,823 per year. These consumers spend at least 14 percent of their income on health care. Some want to comparison shop for services or budget for their care.
• Where is it being done well? Hospitals that have a cost estimator through their electronic health record or on a stand-alone basis are doing it best. Consumers can estimate their out-of-pocket costs—though not always based on negotiated rates or all-inclusive services—at their fingertips.
• Why is it complicated? Lots of reasons. Hospitals have historically used charges, which are now often irrelevant. Carriers have negotiated rates with hospitals, which are considered proprietary. Services are often difficult to define prospectively, which makes an all-inclusive price nearly impossible.

Just because it’s hard doesn’t mean it’s not worth making happen. Ten years after the GAO defined price transparency, the Administration has required hospitals to make prices publicly available on January 1, 2021. The information is not perfect, but it is a start. In the meantime, consumers are Mastering Health Insurance.

Sources: KFF (2018), U.S. Census Bureau (Annual Household Income 2018), and U.S. Government Accountability Office (Health Care Price Transparency 2011).