How to make price transparency work

With the Trump administration increasing efforts to force healthcare stakeholders to publish drug and care services prices online and in TV ads, will the initiatives actually do anything to lower costs?

That’s the question raised by two faculty at Boston University School of Public Health, who penned an article in JAMA Forum on the topic. While the concept of transparency aims lower price by empowering patients and consumers and boosting competition in the market, the outcome hasn’t been very successful in the past, according to Gilbert Benavidez, MPH, policy analyst at Boston University, and Austin Frakt, PhD, a professor at Boston University and health economist and Director of the Partnered Evidence-based Policy Resource Center at the Boston VA Healthcare System.

“Evidence shows that transparency does little by itself,” they wrote. “Giving consumers information alone does not mean they will actively use it to shop around for lower costs.”

Recently, HHS has engaged in a legal battle with the drug industry to require manufacturers to include the wholesale acquisition price of medications in television advertisements, while HHS wants hospitals and health systems to publish the negotiated rates of their services with health insurers online. In addition, patients will soon see more access than ever before to their digital health records––for free.

But the underlying ideal of price transparency as a solution might not work out. For one, consumers don’t seem to actually use price comparison tools in healthcare even when they are available, the authors argued, noting recent studies that consumers don’t really shop around for the best price of a scheduled healthcare services.

Other ideas, like increasing cost sharing to incentivize consumers to shop for lower-cost services, also hasn’t really worked, according to Benevidez and Frakt. When consumers with high deductible health plans may have to shoulder more of their costs of care, no decrease in health spending has been found, a 2016 analysis published in JAMA found.

However, there are ways that price transparency initiatives can actually have an impact on overall healthcare costs, the two authors wrote. Beyond deductibles, pushing other incentives on consumers could work, such as setting reference prices that require employees to pay the price difference out of pocket when they go above the threshold.

In a two-year study of price referencing, health plans members did end up shopping around more often for services, and prices decreased, the authors cited from the American Journal of Health Economics.

Adding a rewards program alongside reference pricing that offers rebates when health plan members same money can also have a real cost impact by boosting price comparison shopping.

“Both reference pricing and rewards programs increase engagement with price transparency tools,” the authors wrote. “But reference pricing seems much more effective in lowering prices.”

Despite evidence that price transparency hasn’t really worked in the past to lower costs, some of these pushes could make new initiatives from the Trump administration more effective.