Price Transparency in American Healthcare: Public Policies to Support Market-Based Solutions

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Ubel, Peter A

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Mortimer, Laura

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2014-05-04T13:39:00Z

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2014-05-04T13:39:00Z

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2014-05-04

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The Sanford School of Public Policy

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The United States has the most expensive healthcare system in the world. We pay more money per capita for care than any other country – around three times the OECD average. Healthcare accounts for nearly a quarter of our federal budget, and the average family of four in America pays over $20,000 out-of-pocket each year for care. And yet, our health outcomes are no better than those of countries that spend far less money on care; we receive considerably less bang for our buck.

As prices rise and we spend both more public and private dollars on healthcare, policy makers and other stakeholders must find ways to build more rational economic decision-making into the system. Unfortunately, the fee-for-service model makes this change difficult because it fundamentally misaligns incentives between patients, payers, and providers. Absent a complete overhaul of fee-for-service, several regulatory reforms and market innovations are essential to bending the healthcare cost curve.

Health policy experts agree that lack of price transparency is a major part of the problem. Patients often do not know the amount they will pay for care until they receive a bill, weeks or even months later. As consumer-driven healthcare becomes more the norm and patients pay more out-of-pocket for care, their ability to make value-based decisions is severely limited by the absence of treatment cost information. Functional, competitive markets require that all participants have access to complete, correct information regarding their choices. The American healthcare market is far from this ideal.

This paper reviews the price transparency problem in four parts. Part One explains the issue in more detail and provides a basic economic framework through which to understand the problem. Part Two presents an overview of government involvement in healthcare price transparency and includes policy initiatives at both the state and federal levels. Part Three covers private market involvement in the price transparency movement and shows how digital, cloud-based private market tools are making patients better healthcare consumers. Part Four looks ahead to future challenges in healthcare price transparency and outlines policy recommendations to ensure the movement’s success.

The following chart summarizes these key policy recommendations. State governments may be better positioned to implement some of these changes, such as establishing all-payer claims databases, whereas federal policy makers should enact others, such as Medicare data disclosure guidelines. These policies can all support market-based healthcare price transparency reforms and effectively allow for public-private incentive alignment and collaboration. As long as fee-for-service payment remains in United States healthcare, these types of policies and partnerships are essential to creating more competitive markets and ultimately improving population health.

Policy Recommendations to Support Healthcare Price Transparency:

➢ Mandate disclosure of physician quality and patient outcomes data alongside price information to illustrate value or cost-effectiveness

➢ Simplify payment models and offer clinical decision aids to help patients – particularly those with high deductible insurance plans – understand financial toxicity of treatment options and make decisions as savvy consumers

➢ Use value-based insurance design to better align payers’ and patients’ incentives and nudge patients towards higher value care

➢ Ban gag clauses in contractual agreements between insurers and providers

➢ Establish mandatory all-payer claims databases in every state

➢ Revise the Qualified Entity program under ACA Section 10332 to ensure all entities – public, private, or nonprofit – access to Medicare claims data

➢ Standardize public disclosure process and clarify data management guidelines to prevent abuse and misunderstanding of medical claims data

➢ Limit time period or scope of financial data released to prevent provider collusion around healthcare prices

➢ Provide additional resources to study the effects of price transparency on patients’ treatment and insurance purchasing decisions

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https://hdl.handle.net/10161/8616

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en

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healthcare price transparency

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Price Transparency in American Healthcare: Public Policies to Support Market-Based Solutions

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Master's project

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