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Healthcare Price Transparency

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Healthcare Price Transparency

Midwestern State University


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Healthcare Price Transparency

The purpose of this research is to find whether price transparencies can increase competition between healthcare providers to reduce healthcare prices in U.S. Due to the secrecy of healthcare prices, patients are not able to make the fully informed decisions. Price secrecy in the U.S. distorts the market. Hence, the healthcare providers charge patients excessive amounts, as well as the different bill amounts, for the same services.

Today’s health policy initiative in the U.S is to slowly reduce the growth of healthcare costs to achieve long-term stability (Sinaiko, & Rosenthal, 2011). According to the Center for Medicare and Medicaid (2012), the health expenditure in the U.S. was $2.7 trillion approximately 18% of Gross Domestic Product (GDP). The spending was estimated to rise over 25% of GDP, and the total federal spending was expected to grow above 40% by 2037 (Congressional Budget Office, 2012). Moreover, the federal, state, and private sectors have all tried multiple approaches to improve cost by price transparency. According to Sinaiko & Rosenthal (2011), three bills were introduced in Congress in 2010 to increase price transparency. Additionally, 34 states require reporting of hospital charges and more than 30 states are working to improve price transparency (Hostetter & Klein, 2012; Sinaiko & Rosenthal, 2011). Moreover, many commercial health insurance companies have adopted price transparency by releasing information to their members (Sinaiko & Rosenthal, 2011).

From the available information the evidence suggests that high healthcare prices are one of the reasons why healthcare spending is rising. Some providers are paid higher rates than other in the same area for the same medical procedure. The reason for this difference is that the insurer can negotiate prices directly with the provider. The provider with greater market power can negotiate higher rates. As a result of this method health care prices have very little connection between the cost of care and the quality of that care (Mitts, 2014). Moreover, the consumers who pay for health care usually cannot get reliable information on the negotiated prices. In some cases of uninsured patients, consumers can get access to provider prices called Chargemaster (Mitts, 2014). However, these costs are not accurate and are just an estimate of expenses that insured consumers pay for care out of pocket. The consumers consequently pay higher prices for the services (Mitts, 2014). Evidence has shown that consumers firmly hold the belief that high cost is equivalent to a better quality of care. So, in many cases, the consumer chooses a higher price for treatment and the improved response to treatments, though the treatment procedure, is actually a placebo (Sinaiko & Rosenthal, 2011). At present, insurance companies and employers are asking consumers to pay higher amounts for their care. The employer sets high prices with the insurer that has a significant effect on the consumers out of pocket cost.

The buyer or consumer will not be in a strong position when it comes to emergency care. No one has time to compare prices during an emergency. Consumers can have an opportunity to select responsibility for medical services that are elective and can be scheduled in advance. Getting that out of pocket cost information or comparing the cost with different providers is very difficult. Thus, it is essential to understand which price information is necessary and helpful for the consumers to make an informed decision. Hence, price information such as the total price of care, negotiated rates, consumer share of the bill, and binding estimates (Mitts, 2014).



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