6/16/2015

Let People Shop for Health Care - Bloomberg View

H E A LTH C A RE R EF OR M

LetPeopleShopforHealthCare

OCT21,20144:12PMEDT

ByPeterR.Orszag

aA

Ifpeopleknewthepricesofmedicaltreatments,andiftheypaidpartlyfromtheirownpockets,
theymightshoparoundandsavemoney.Thisstandstoreason,andanewstudyintheJournalof
theAmericanMedicalAssociationshowsit'strue.Thiscomesasveryencouragingnewsforthe
widerefforttokeepgoingtheprofounddecelerationinhealthcostswe'veseenoverthepast
severalyears.
AteamofresearchersledbyChristopherWhaleyoftheUniversityofCaliforniaatBerkeleyand
CastlightHealthexaminedwhathappenswhenhundredsofthousandsofpeoplearegivenaccess
toawebsitethatprovidespricesforvariousmedicalprocedures.
Historically,consumershavehaddifficultyfindingoutthepricetheywillbechargedforaspecific
procedureorvisit.Butit'sreasonabletoexpectthatifpriceswereprovided,andifthepatientshad
skininthegameintheformofcostsharing,theywouldseekoutlowerpricedoptions.
Thatisexactlywhattheresearchersfound.Useofthepricetransparencytoolwasassociatedwith
a14percentdeclineinpaymentsforlaboratorytests,a13percentdeclineinpaymentsfor
advancedimagingtests,anda1percentdeclineinpaymentsforclinicianofficevisits.Giving
moreinformationtoconsumersaboutthepricesoftheircare,inotherwords,ledthemtochoose
lessexpensiveoptions.
Theseencouragingfindingscomewithfourimportantcaveats.Thefirstisthatalthoughprice
transparencyisagoodstart,ourhealthcaresystemneedstoprovidebettervalue,notjustlower
prices.Littleornoevidencelinkspricetoqualityinhealthcare,somystrongguessisthat
consumerswhochoosesomewhatlowerpricescanhelptoshiftthesystemtowardsomewhat
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6/16/2015

Let People Shop for Health Care - Bloomberg View

highervalue.Butconsumersshouldnthavetomakesuchguesses.Expandedinformationabout
qualityisbecomingavailable,andit'simportanttokeeppressingformore.
Thesecondcaveatisthatpricetransparencyinconcentratedmarketsmayfacilitatecollusion
amongproviders,whichIhavenotedbeforeandwhichisalsounderscoredinaneditorialby
ProfessorUweReinhardtofPrincetonUniversitythataccompaniesthenewstudy.Localhospital
marketsaregrowingmoreconcentrated,makingthisconcernavalidoneinmanyareasofthe
country.Ontheotherhand,theconcernismostsalientwhenpricesarepubliclypostedwhen
accesstothepricesisrestrictedtoatoolaccessiblebyindividualbeneficiariesthroughapersonal,
securewebsite,thedownsideisattenuated(assumingthecompetinghealthprovidersdonothave
directaccesstothesystem).
Thethirdcaveatisthatthesavingsinvolvedinthestudywereverysmall.Theaveragelabtest
paymentreduction,forexample,amountedto$3.45,andfortheclinicianofficevisit,itwas$1.18.
Theadvancedimagingresultwaslarger,at$125,butstillnothuge.
Thismayhelpexplainwhysofewpeopleconsultedthepricewebsite:Only6percentoflabtests
wereprecededbyapricesearch,forexample.Italsounderscoresthelimitedgainsweshould
expectfrompricetransparency:Healthcarecostsareconcentratedamongthehighestcostpatients
(thetop25percentofMedicarebeneficiariesrankedbycostsaccountsfor85percentofMedicare
spending).Andpatientswillandshouldhavedeepinsuranceagainsthighcosts(whichisthe
wholepointofinsurance),constrainingtheabilityofpricetransparencytohaveenormouseffects
ontotalspending.Thatiswhy,whileweexpandpricetransparencyforconsumers,ourprimary
focusshouldstillbeonchangingincentivesforproviders.
Thefinalcaveatisthat,especiallywithsuchsmallparticipationrates,onealwayswonderswhether
thepeopleusingthepricewebsitewerefundamentallydifferentfromnonusersinsomeway.The
researchersdeployawidevarietyofteststominimizethisrisk,butnoneofthemprovidesthe
assurancethatyou'dgetbyrandomlyassigningpeopleaccess.(Afuturecolumnwilldiscussthe
relativepaucityofrandomizedcontrolledtrialsinhealthcaredeliverystudieswhichisodd
giventheemphasisattachedtotheminotherpartsofhealthcareresearch.)
Despitethesecautionarynotes,thetransparencystudyisverywelcomenewsintheongoingeffort
toproducebettervalueinhealthcare.Thenextfiveyearswillbeacrucialperiodinthe
transformationofourhealthsystem,andweshouldbeaggressivelyexpandingeffortslikethe
transparencytoolsthathavehelpedconsumerschooselowerpricedoptions.
Tocontacttheauthoronthisstory:
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Let People Shop for Health Care - Bloomberg View

PeterROrszagatporszag3@bloomberg.net
Tocontacttheeditoronthisstory:
MaryDuenwaldatmduenwald@bloomberg.net

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