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GAO on Price Transparency

By November 7, 2011Commentary

We want consumers to be engaged in their health care and one area we would like them to pay attention to is the cost of services, which consumers are increasingly inclined to do anyway because so many insurance plans now shift very significant costs to them.  For a consumer to be a cost-sensitive purchaser, however, requires reliable, timely, accurate access to data on the prices for specific services charged by different providers.  A new report from the Government Accounting Office underscores how difficult accomplishing that basic predicate to consumer price-shopping is.  (GAO Report)   The report was constructed by examining the literature, some specific price transparency efforts and interviewing experts, and doing an anonymous survey of some providers to ask about prices.

GAO found that in general price transparency efforts aren’t doing well and that there are substantial barriers to creating an effective initiative.  Some of these barriers are legal, such as contractual provisions which prohibit payers or others from disclosing providers’ negotiated rates, or providers considering their prices proprietary or even antitrust concerns about price sharing.  The biggest problem, however, is that while consumers may be interested in comparing listed charges for a specific service across providers, or even their negotiated rates with various payers, what consumers need most is a very concrete understanding of what they will pay out-of-pocket for obtaining a particular service from a particular provider.  To get this requires knowing not only the provider’s charge to the consumer’s insurance plan, if they have one, but also the status of the consumer’s deductible, copays or other out-of-pocket costs or limits, including whether the service is even a covered benefit.  It also requires knowing in advance exactly what services a consumer is going to need, which often isn’t the case until they see a physician.

GAO found that most price transparency initiatives are not particularly useful because of these difficulties.  The ones that were, were insurer-sponsored and given to the insurer’s members, so the member’s benefit status and the provider rates were known and a fairly accurate assessment of likely out-of-pocket expense could be calculated.  The incompleteness of claims processing at any point in time, however, makes it hard for even a person’s insurer to know with certainty deductible and out-of-pocket limit status.  GAO recommends that HHS continue to expand its transparency efforts for Medicare beneficiaries and consider what steps may need to be taken to facilitate broader access of usable information for patients, as well as educational efforts to ensure they know how to use the data.  Too many people may still find that high price is an indicator of quality.

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