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Transparency in Health Care: The Time Has Come

Sara R. Collins

By Fund President Karen Davis, Ph.D., and Fund Senior Program Officer Sara R. Collins, Ph.D.


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Watch a video overview from Karen Davis.

One of the defining characteristics of U.S. health care markets is their lack of transparency. More and better information on the costs and quality of health services could improve the system—by enabling providers to benchmark their performance against their peers, allowing private insurers and public programs to reward quality and efficiency, and helping patients make informed choices about their care.

Transparency could also level the playing field. The widespread practice of charging patients different prices for the same care is inherently unequal, especially when the uninsured are charged more than others.

But it's unreasonable to expect that information on costs and quality will cause health markets to perform like markets for other goods and services. Health care is not a homogeneous commodity; it is not like buying gasoline for a car where all stations sell the same regular unleaded gas and only price matters. Patients will never have as much information about the care they need as the physicians who care for them. And the insurance industry and health care delivery sector are highly concentrated, leaving patients with few genuine choices. The conditions required for true competition, therefore, do not exist in health markets.

Greater Patient Cost-Sharing: The Wrong Prescription
Some argue that greater cost-sharing will make patients more sensitive to the costs of care, and thus less likely to pursue unneeded services. But Americans already pay far more out-of-pocket for their health care than citizens in industrialized nations that have far lower health costs.

Health savings accounts (HSAs) coupled with high-deductible health plans have been put forth as a way to make patients behave more like consumers—giving them price information and the ability to shop for providers and even treatments. But according to the Employee Benefits Research Institute/Commonwealth Fund Consumerism in Health Care Survey—the first national survey of its kind—adults enrolled in high-deductible plans are much less satisfied with many aspects of their health care than those in more comprehensive plans. People enrolled in these plans allocate substantial amounts of income to their health care and are far more likely than those with more comprehensive plans to delay, avoid, or skip needed care because of cost.

Moreover, most health costs are incurred by the very ill—those suffering from heart attacks, strokes, cancer, mental illness, or injuries—often under emergency conditions. Shopping for the best physician or hospital is impractical in such circumstances. Placing a greater financial burden on the sickest and poorest patients is not the right prescription for what ails the health care system.

Scant Information on Quality and Total Costs
Just knowing the prices of health services is of little value without also having information on the total cost of caring for a given condition and the outcomes of that care. Even if a hospital room charge is low, it's no bargain if a patient is more likely to stay longer or be readmitted for a complication. Additionally, the price of an individual service is only one element in the total costs to patients or insurers. The total bill may depend on the tests ordered, length of the hospital stay, and number of specialists involved.

But patients report that they rarely have access to information about the total costs or quality of care. A recent survey found that only 14 to 16 percent of insured adults had information from their health plan on the quality of care provided by their doctors and hospitals. Twelve to 16 percent had cost information for their doctors and hospitals.

What's more, patients themselves have little power to demand greater quality and efficiency. Payers, federal and state governments, accrediting organizations, and professional societies are much better positioned to insist on high performance.

Achieving Real Transparency: What Can Be Done
To achieve real transparency in our health system, the following steps could be taken:

  • Medicare could assume a leadership role in making cost and quality information publicly available. It could forge public-private partnerships to create a multi-payer database, uniform quality metrics, and transparent methodologies for adjusting quality and costs.
  • Create a National Quality Coordination Board within the U.S. Department of Health and Human Services, as the Institute of Medicine recommends. The board would set priorities, oversee the development of appropriate quality and efficiency measures, ensure the collection of timely and accurate information on these measures at the individual provider level, and encourage their incorporation in pay-for-performance payment systems operated by Medicare, Medicaid, and private insurers.
  • Invest in health information technology, which is essential to ensure that the right information is available at the right time to patients, providers, and payers.
  • Make fundamental changes in current payment methods. Medicare's physician group practice demonstration is a step in the right direction and should yield valuable insight into whether gains in efficiency and quality can be achieved simultaneously.
  • Invest in research to generate better information on the cost-effectiveness of alternative treatments.
  • Modify HSA legislation to reduce its potentially harmful effects on vulnerable populations. Modifications might include:
  1. permitting lower deductibles for lower-wage workers;
  2. exempting primary care, preventive services, and prescription drugs essential for management of chronic conditions from deductibles;
  3. guaranteeing choice of a comprehensive health plan to workers covered under employer plans;
  4. allowing greater flexibility in benefit design; and
  5. setting an income ceiling on eligibility for HSAs to reduce the tax subsidy for high-income individuals.

  6. With federal leadership, we can create a national database that contains information about health care costs, quality, and the total bills for the treatment of various acute and chronic conditions. This would go a long way toward improving the transparency—and performance—of the health care system. But even then, the greatest promise for change lies in information and incentives for health care providers, not for patients.

    As always, I'd like to hear from you. Send your feedback to [email protected].


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    April 2006

    Written with the assistance of Christine Haran, web editor.