Thursday, April 2, 2015

Woman TypingHealth care costs continue to increase each year and often vary widely from hospital to hospital. In trying to control these increasing costs, many health insurance plans and employers thought that consumers were too insulated from these costs. We have seen the rise of plans like the high-deductible health plan with the health savings account and the associated higher out-of-pocket costs, such that consumers have a lot more skin in the game than before. If consumers have a stronger incentive to control costs, surely health care consumerism will drive health spending down.

While this approach makes sense on the surface, health care markets are notoriously opaque, and getting a straight answer about health care costs can be very difficult. If you’ve ever tried asking your doctor how much a test or procedure will cost before you get it, you were likely met with “Let me get back to you on that one.” To borrow a common analogy about medical billing, imagine you’re shopping for clothes on a budget. When you get to the store, someone else puts the clothes in your cart, and no prices are listed. You don’t pay anything when you leave, but you get a cryptic invoice 3 months after your purchase. How could you possibly shop responsibly? We really don’t shop for anything other than health care this way, and it makes responsible consumerism very challenging.

One answer to the problem of confusing health care costs is increased cost transparency. This is founded on the principle that consumers can make good decisions only when price and quality information is freely available. Health care cost transparency has been rapidly gaining popularity for the past few years, and we finally see enough information and tools available to begin looking at the real-world effects that these tools have had. Below, we’ll look at several new developments in cost transparency.

Recent Developments in Health Care Cost Transparency

What’s a fair price?

Because of all the secrecy surrounding health care costs, it’s hard to know what a fair price is. Procedure costs can vary enormously between hospitals. is a new website from the Health Care Cost Institute that offers typical prices for care bundles and conditions, both nationally and regionally. Currently, it offers typical pricing for 78 care bundles and 17 conditions. The information is based on cost data from 40 million patients across insurers such as UnitedHealthcare, Aetna, and Humana. The concept is similar to Healthcare Bluebook, except with fewer conditions but more data on which to draw. In both cases, you look up personal rather than typical costs.

What price can I expect through my insurer?

While it’s useful to know a typical price for a procedure, people especially want to know their personal price. More health insurance companies are making their negotiated rates available to their members online. Priority Health has a new app that allows members to compare their specific health care costs across doctors and hospitals. This goes beyond sites like by incorporating individuals’ unique plans and deductibles into the final costs. Other insurer-provided cost estimator apps from UnitedHealthcare and Anthem Blue Cross Blue Shield have had mixed user reviews on app stores. If Priority Health is well received, it could be a real breakthrough.

Massachusetts recently became the first state in the nation requiring insurers to post price tags on procedures and tests online. The new law went into effect on October 1, 2014. So far, prices seem to vary widely and change frequently, demonstrating how unpredictable the costs can be even when publicly available. It’s too soon to measure the law’s effect, but Massachusetts could set an example for other states to follow.

Is anybody using all these tools?

You may wonder how many patients are actually aware of these tools, much less using them. The answer is “more than you might think.” A new nationally representative survey found that slightly more than half of Americans have searched for health costs before obtaining care, and one in five have compared prices across providers. The study was conducted by Public Agenda with support from the Robert Wood Johnson Foundation. Their results mirror results from a recent Altarum Survey.

What are the effects of increased price transparency?

The price transparency environment is rapidly changing, but we can already see some positive effects from transparency tools. A recent 4-year study in JAMA found that patients who use Castlight Health’s price comparison tool saw considerable savings, including 14% lower costs for lab tests and 13% lower costs for imaging, with more modest savings for primary care visits. This is some of the first (much needed) academic validation that cost transparency can bring down overall health care costs.


All these developments happened just within the last few months. No one has quite cracked the code of making health care costs easily available for everybody, but a lot of people are working on it, and there are sure to be many more developments in 2015. The Center for Consumer Choice in Health Care will keep following the trends and keep you updated.

All postings to the Health Policy Forum (whether from employees or those outside the Institute) represent the views of the individual authors and/or organizations and do not necessarily represent the position, interests, strategy, or opinions of Altarum Institute. Altarum is a nonprofit, nonpartisan organization. No posting should be considered an endorsement by Altarum of individual candidates, political parties, opinions or policy positions.


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