Price Transparency May Lower $27 Billion in Healthcare

Price transparency or providing incentives to direct consumer behavior would actually have minimal effect on reducing healthcare spending.

Price transparency in the healthcare industry is becoming more and more pertinent and sought after. Research has shown that there is still insufficient price transparency within the medical field including hospital services. However, a new report from the Health Care Cost Institute called Spending on Shoppable Services in Health Care reveals that offering greater price transparency so that consumers can shop for high value non-urgent medical services or products does have a “modest effect” on cutting medical spending.Total Healthcare Spending

While 43 percent of healthcare spending does implicate consumer shopping based on price, only around 7 percent of total medical spending is paid out-of-pocket by consumers, according to a press release from the Health Care Cost Institute.

As such, the researchers explain that price transparency or providing incentives to direct consumer behavior would actually have minimal effect on reducing healthcare spending as a whole or making medical services more affordable. The report looked at medical claims information from 2011 among people under 65 years of age with employer-sponsored health plans.

“There is not that much savings to be gained from consumer shopping for many non-emergency services,” Amanda Frost, a researcher from the Health Care Cost Institute who authored the report, stated in the press release. “While we strongly believe that consumers are entitled to price information and to know what they are going to pay prior to any health care service, we shouldn’t rely on price transparency as a way to create savvy shoppers to save health care dollars.”

The study involved looking at “shoppable healthcare services,” consisting of any medical care than can be scheduled in advance. Some of the potential services may include non-emergency hip and knee replacement operations, flu shots, blood tests, colonoscopies, and urine analysis.

However, the list of shoppable medical care did not include healthcare products like prescription drugs or medical devices. The results from the report show that 57 percent of healthcare spending in 2011 does not relate to shoppable services or anything that could benefit from price transparency.

In 2011, 43 percent out of the $524.2 billion in healthcare spending was related to shoppable services. Among commercially insured individuals, 15 percent of total healthcare spending was done out-of-pocket, which amounted to approximately $81 billion.

The results also illustrate that 7 percent or $27.7 billion was spent out-of-pocket on services that could have decreased costs if greater price transparency was established and consumers gained more ability to shop around..

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