Healthcare price transparency is being built on a false premise
When news came out a few weeks ago about an executive order on price transparency, I noticed many positive headlines heralding the action as a significant improvement that will encourage consumerism in healthcare and drive down prices.
More details are on the way regarding how this directive will actually be implemented (maybe), but expectations were set sky high:
"Hospitals will be required to publish prices that reflect what people pay for services," said President Trump at a White House event. "You will get great pricing. Prices will come down by numbers that you wouldn't believe. The cost of healthcare will go way, way down."
Although I strongly support empowering patients and containing costs, this statement sounds like magical thinking and overlooks a major problem. For transparency to drive down prices and improve patient experiences, it depends on people purchasing healthcare like they do any other product. From an article by NPR:
“The idea is simple. Health care is an industry where consumers don't have access to the kind of information they have when making other purchasing decisions. The executive order could — if it leads to finalized, HHS rules — pressure the industry to function more like a normal market, where quality and price drive consumer behavior.”
Simple? This ignores the complex reality. Healthcare is far from simple and purchasing it is massively different from selecting almost any other consumer product. If anything, shopping for healthcare is closer to shopping for utilities, such as gas, power, water or cable, than it is to buying a car or a new laptop.
Major purchases like a home or car are rarely made without planning and research. Typically, there are lengthy approval processes required to ensure you can afford what you’re buying. You also have a plethora of industry, media and peer resources to help guide your decision-making. Not to mention the lower stakes: You can always rent an apartment instead of buying a house or choose a used car as an alternative to purchasing new.
Healthcare is the complete opposite. The procedures that are the most expensive cannot be “shopped” for in advance. Having a heart attack, having a stroke, suffering a bad fall, etc. are catastrophic, unplanned life events where you will have little to no choice in where you receive care or how much you are willing to pay. Any decisions you are capable of making at all will be done in the most advanced state of personal vulnerability.
Where this proposed transparency effort might help is for procedures where you have time to consider options and conduct research. Orthopedics is a good example of this. Price transparency for these services might help drive some costs down over time, but that spending only affects a slice of what’s driving cost increases overall.
So where does this leave us?
I think a better approach is to help patients navigate through costs, treatment options and care settings more proactively. Just posting prices requires patients to take the initiative to figure things out themselves rather than having health systems and insurers do the heavy lifting for them.
Let’s figure out how to get more people into the right settings of care and limit billing surprises. I think that is where the future is brightest. Let’s stop forcing healthcare to be something it will never become: a consumer product in the traditional sense of that term.