This past June, President Trump issued an Executive Order on Improving Price and Quality Transparency in American Healthcare to Put Patients First (“Order”), intending to increase price and quality transparency for American health care consumers. According to the Order,
patients often lack both access to useful price and quality information and the incentives to find low-cost, high-quality care. Opaque pricing structures may benefit powerful special interest groups, such as large hospital systems and insurance companies, but they generally leave patients and taxpayers worse off than would a more transparent system.
But whether greater transparency has any beneficial effect on consumer choices is equivocal at best. In fact, a recent study concluded that “[t]here is minimal evidence that making prices more transparent for consumers will drive healthcare value.”
On the other hand, and as the Federal Trade Commission (“FTC”) previously concluded, “[t]oo much transparency can harm competition in any market, including in health care markets.” This is because “some types of information are not particularly useful to consumers, but are of great interest to competitors.” In particular, when competitors have knowledge of what their rivals are charging, it both decreases the incentive to offer a lower price and increases the likelihood of coordinated behavior leading to higher prices.
Furthermore, health care providers typically compete against each other to be included on a health plan’s list of preferred providers. According to the FTC, “When networks are selective, providers are more likely to bid aggressively, offering lower prices to ensure their inclusion in the network. But when providers know who the other bidders are and what they have bid in the past, they may bid less aggressively, leading to higher overall prices.”
While the high cost of health care continues to be an issue, “transparency” may not offer much of a solution—and perhaps might exacerbate the problem.