Taking Price Transparency to the Next Level

2 min
May 20, 2014

Millions of Americans have entered the healthcare marketplace as a result of the Affordable Care Act. According to the latest enrollment data from the Department of Health and Human Services, most individuals selected a “bronze” or “silver” plan which feature higher deductibles and coinsurance. This means consumers are responsible for paying a larger share of their healthcare expenses. As consumers begin to play a greater role in their own care, price transparency in healthcare becomes a critical piece of the puzzle. However, to achieve maximum impact, consumers also need information on the quality and effectiveness of care options so they can make choices based on genuine value.

To explore how expanding transparency efforts could produce significant cost savings for the healthcare system, the Gary and Mary West Health Policy Center funded a new analysis that was released last week at the latest West Health IDEA Series in Washington, DC, Healthcare Price Transparency: Policy Approaches and Estimated Impacts on Spending. This report, conducted by former researchers from the Center for Studying Health System Change, finds that implementation of three policy changes can save $100 billion over ten years.

Three proposals to save $100 billion

First, broader acceptance and implementation of state-based all-payer health claims databases (APCDs) has the potential to save up to $55 billion. These databases provide benefit to the full range of healthcare stakeholders. For instance, employers, more aware of price differences, would realize savings from narrower provider networks and tiered benefits as well as increase pressure on high-price hospitals to reduce or justify their prices. Similarly, APCDs would allow policymakers to make informed decisions on other policy options for controlling costs.

Second, electronic health record systems should be required to provide prices to physicians when ordering diagnostic tests, which could save $25 billion by allowing doctors and patients to make informed cost decisions when developing treatment plans. Research has shown doctors are often unaware of costs when recommending tests and treatments.

Third, requiring all private health plans to provide personalized out-of-pocket expense information to enrollees could achieve an estimated $15-20 billion in savings over the next decade. More effective enrollee-facing tools or better incentives to drive utilization of existing tools can increase the cost-saving impact.

Expanding the use of APCDs

We’re excited to announce that the West Health Policy Center and the APCD Council, via the University of New Hampshire, are collaborating on the creation of a manual that states can use in the planning and development of an APCD. Building on the experience and best practices of states that currently have an APCD, the manual will be an instrumental tool in helping other states address common issues and promote uniformity in the way claims data are collected, formatted, and reported. It is important foundational work that can lead to broader adoption of APCDs and the development of national standards for data collection and reporting measures.