Clarifying Costs

Note from the Digital Editor: In order to highlight the high-level of research and scholarship from the authors who have published in the William & Mary Policy Review’s peer-reviewed print journal, we have reproduced the abstracts from Volume 4, Issue 2 along with a link to an electronic copy of the full form of the piece. 

(image by Evan Blaser)

Can Increased Price Transparency Reduce Healthcare Spending?

As healthcare expenditures continue to climb, politicians, business leaders, and patients avidly search for new methods to reduce healthcare costs. In an eleven-point plan released in 2012, a group of the nation’s top healthcare experts listed “full transparency of prices” as one potential solution to reduce healthcare costs. The experts, some of whom helped write the Patient Protection and Affordable Care Act, argued that price transparency would allow consumers to compare prices before choosing a provider or hospital and, consequently, better anticipate their overall costs. In turn, they argued that making price information publicly accessible would also reduce excess healthcare spending by encouraging providers to offer more competitive pricing.

Other health services research, however, suggests that legislative and regulatory effort to promote price transparency may result in increased healthcare costs depending on the market conditions and the various stakeholders targeted. Consequently, any price transparency initiative must not only make prices transparent, but also account for the differences between markets, either by reducing the economic inefficiencies that keep price transparency from being effective or by precisely targeting the specific regions where the market would support such an initiative.

This article analyzes whether price transparency initiatives can effectively reduce healthcare costs, and if so, what conditions must exist for them to do so. The features of a well designed price transparency initiative will vary depending upon the targeted population (patients, employers, providers, or insurers) and the particular features of the target market. We argue that the most effective solutions will mandate disclosure of price and quality information at the appropriate stakeholder levels and, simultaneously, break down provider market leverage where it prevents price transparency from helping consumers. Together, these two elements have the potential to lower healthcare costs. Finally, we present four possible price transparency initiatives that represent a range of possible alternatives,including litigation, legislation, regulation, and consumer driven initiatives.

Find the full version of this article in PDF form here.

Morgan A. Muir is a Research Fellow at UCSF/UC Hastings Consortium on Law, Science and Health Policy; Attorney, Morgan Muir Law.

Stephanie A. Alessi is J.D. at University of California, Hastings College of the Law; Research Fellow, UCSF/UC Hastings Consortium on Law, Science and Health Policy.

Jaime S. King is a Professor of Law at University of California, Hastings College of the Law and Associate Director of the UCSF/UC Hastings Consortium on Law, Science and Health Policy.

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