Does Price Transparency Improve Market Efficiency? Implications of Empirical Evidence in Other Markets for the Health Sector
Abstract
Consumer advocates, proponents of wider use of market incentives in the health care sector, and some policy makers have called for greater price transparency. Price transparency implies that consumers can obtain price information easily, so they can usefully compare costs of different choices. Price transparency may also mean consumers understand how prices are set and are aware of price discrimination. In health care markets consumers often have difficulty finding useful price data. In particular, few consumers have a clear idea of what hospital stays or hospital-based procedures will cost, or understand how hospital charges are determined. The dispersion of prices for similar health care procedures is high, which suggests that these markets are not working well with respect to price outcomes, as would be expected in ordinary competitive markets. In addition, prices paid by different types of payers vary dramatically. On average, patients without insurance or who pay their own bills pay much more relative to what private insurers, Medicare, and Medicaid pay. Better price information might allow patients, either directly or through their physicians, to obtain better value for health care services. Several states and health insurers now provide online data on hospital costs. These price transparency initiatives, at least so far, have had little visible effect on pricing. Public pressure, which in some cases has caused hospitals to curtail aggressive bill collection tactics, might change hospitals and health care providers pricing behavior. This report will be updated as events warrant.
Document Details
- Document Type
- Technical Report
- Publication Date
- Jul 24, 2007
- Accession Number
- ADA471238
Entities
People
- Andrew Austin
- Jane G. Gravelle
Organizations
- Library of Congress