Can price transparency drive down health costs? The jury is still out

Price transparency has been a key focus for policymakers looking to address rising health costs, but experts say breaking through that black box won't solve the problem wholesale.

For example, providers and health plans are both required under federal regulations to post their prices online. However, provider compliance has been spotty, and insurers' data releases have proven difficult to use. For these regulations to work, industry organizations must actively participate and ensure the data can be combed effectively, according to a blog post from the Georgetown University Center on Health Insurance Reforms.

Multiple pieces of bipartisan legislation aim to take these regulations further, such as requiring insurers to make the data available in a more readily usable format. However, these policies are still working their way through Congress, according to the post.

"Millions of workers are struggling with the affordability of their employer-based coverage," the authors wrote. "The high level of provider consolidation is a key factor in those high prices, but the problem is exacerbated by the fact that most employers have little to no access to data on the prices they are paying, the relationship of prices to the actual costs of delivering care, or whether or not the prices being charged are correlated with higher quality or better patient outcomes."

Policymakers have also weighed all-payer claims databases, which are either in place or on the way in 26 states. The variance in regulations between states, however, can limit the utility of these data.

To address this, legislators at the federal level have pitched a potential national database, which could have significant benefits such as greater visibility to the data, standardization and comprehensiveness. A recent analysis suggests that a national claims database could lead hospital prices to decline by 2.2% to 2.7%, the Georgetown researchers said.

That said, while there's evidence of the benefits, skeptics remain, according to the blog posts.

"However, there is reason for some skepticism that price transparency, by itself, will change employers’ behavior," the authors said. "As [the Congressional Budget Office] points out in its report, a national APCD won’t change the factors, such as geographically dispersed workers and a consolidated and complex health care system, that limit employers’ ability to tackle health care prices.

In addition, the blog post noted that stakeholders are taking steps to better expose the incentives that drive pharmacy benefit managers and third-party administrators and could play into driving up costs. PBMs, in particular, operate with limited transparency in a highly consolidated market, which leaves employers with little wiggle room.

Congress is considering legislation that would require PBMs to report data on utilization and spending to the Government Accountability Office. States are also mulling similar measures.

Despite the motion in this space, the Georgetown authors warn that transparency on its own "is a means to an end, not an end in itself." Employers and patients need more than just data to address rising drug costs.

"Price transparency does nothing to change the market power of provider systems that enables them to set and increase prices as they wish," they wrote. "Ultimately, the future security of ESI as a source of affordable health coverage will require public policies that leverage newly available data and rein in unreasonable provider prices."