Reading a hospital bill is like trying to decipher the Rosetta Stone. Policymakers are working to make health care price data more transparent to patients.  Experts aren’t convinced it will help.

Most kinds of insurance coverage work the same way. If you have life or property insurance, your insurer charges you a premium and spreads the cost of catastrophic events among many policyholders. Health insurance is different. It’s the primary payment mechanism for catastrophic and routine medical expenses, no matter how minor. While we would never expect our car insurance to pay for gas or our homeowner’s insurance to cover electric bills, we have come to expect that our health insurance will cover everything from open heart surgery to cheap, generic antibiotics.

In an essay for The Atlantic entitled “How American Health Care Killed My Father,” Dave Goldhill writes that when individuals with health insurance walk into a doctor’s office or hospital, it is implicit that someone else will be paying the bill. As a result, consumers tend to know less about the cost of medical treatment than we do most anything else.

Of course, just because you have insurance doesn’t mean you won’t be paying for anything out of pocket. If you have copays, deductibles, or see an out-of-network provider, you may want to understand exactly what you’re paying for. But our murky system makes health care costs nearly impossible to reliably assess. What are policy makers doing to help Americans understand the price of health care, and are any of these initiatives working?

Massachusetts: A Transparency Case Study
In 2018, Massachusetts launched a price transparency website, MassCompareCare.gov, to help consumers estimate the cost of a medical service and shop around for the best price. A person searching for a competitively priced colonoscopy, for example, can see that the median cost of the test is $1,725 at Beth Israel Deaconess Hospital in Needham, but less than half that at The Endoscopy Center in Worcester. So is Worcester the obvious choice for a patient on a budget? Maybe, but maybe not.

First, did that patient choose the right option from an extensive list of procedures? The price above is for “Colonoscopy-G0121” but it’s not exactly clear how that’s different than “Colonoscopy-G0105.” Perhaps the patient needs a “Colonoscopy-45378-w-Endoscopy,” which is somehow different than an “Endoscopy-43239 w/ Colonoscopy.”

The site also has an important disclaimer: “The cost quotes you are about to see are an estimation of the entire cost of the procedure in 2015. It is the total amount that was paid to the provider, based on what both the insurance plan paid and what the patient paid. To find out what this procedure will cost you, please visit your insurance plan’s cost estimator.” In short, you still need to call your insurance company for an accurate estimate.

Federal Push to Lower Costs
Last November, the White House unveiled new regulations that require hospitals to share once-secret price information and mandate that health insurers explain to patients in advance what their out-of-pocket costs will be. Starting January 2021, hospitals won’t just need to share an average or median cost; they will need to disclose what rates they negotiate with various insurers and how big a discount they offer to patients who pay cash.

The Administration hopes this new data will lead to cost savings. For example, software developers could package it into price shopping apps for consumers. The federal government does not have an estimate of how much the rules could lower costs, but as Secretary of the Department of Health and Human Services (HHS) Alex Azar says, “point me to one sector of the American economy where having pricing information actually leads to higher prices.”

Other experts are unconvinced. Caroline Pearson of NORC-University of Chicago says that even when people have the option of shopping around for less expensive health care, they usually do not. Many health care services are emergencies, she says, leaving no time to compare costs. Further, the structure of insurance (patients pay little) makes it so that price shopping isn’t worth it for most services. Lastly, patients have relationships with their doctors, who may refer them to particular specialists, or they may seek out institutions that have strong reputations.

Hospitals are now suing to block the new federal rules, saying they will create confusion. The response from HHS: “Hospitals should be ashamed that they aren’t willing to provide American patients the cost of a service before they purchase it.”

It’s possible that a little shame will force health care providers to keep their prices within reasonable bounds. But it’s also possible that transparency will have the opposite effect. Many consumers are just as concerned with quality as price. When armed with cost data, they may actually choose a higher-priced option on the assumption that the quality is better, especially if insurance is picking up the tab.

Learn More

Bill of the Month: This ongoing investigation studies all kinds of health care bills to understand exactly what consumers are paying for, whether it’s a $142,938 treatment for a snakebite or $25,865 for a strep throat test –  via Kaiser Health News

Shopping Around: A physician tried to use Massachusetts’ online price transparency tool to get an estimate for his daughter’s eye surgery. It went badly – via Stat

It’s the Prices, Stupid: Health care expert Sarah Kliff writes that transparency might help nudge patients in a more cost-effective direction, but at the end of the day, they aren’t going to make a real dent in prices – via Vox

Hospitals Have the Power: One columnist writes that hospitals have immense power to increase prices and that new federal price transparency rules are calling their bluff – via Washington Post

Transparency in the Real World: Researchers tested six highly ranked health care transparency tools with real consumers, and found that most did not emphasize the information those consumers wanted. Most importantly, insured consumers tended not to shop based on price – via Altarum