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Transparency in Health Care: The Time Has Come

Executive Summary

Transparency and better public information on cost and quality are essential for three reasons: 1) to help providers improve by benchmarking their performance against others; 2) to encourage private insurers and public programs to reward quality and efficiency; and 3) to help patients make informed choices about their care. Transparency is also important to level the playing field. The widespread practice of charging patients different prices for the same care is inherently inequitable, especially when the uninsured are charged more than other patients.

But it is unreasonable to expect that information on prices, total bills (total costs to patients and insurers), and quality will cause the health care markets to perform like markets for other goods and services. Health care is not a homogeneous commodity. Patients will never have as much information about the care they need as the physicians who care for them. Health care decisions are often made under emergency conditions and emotional stress. Both the insurance industry and the health care delivery sector are highly concentrated, leaving patients with few genuine choices. In short, all the conditions required for perfectly competitive markets do not exist in health care, making the health care market quite different than markets for other goods and services.

  • Price Information Is of Little Value By Itself

    • Knowing prices of health care services is of little value without information on the total cost of caring for a given condition and the quality or outcomes of that care.
  • The Current State of Information Is Inadequate

    • Patients report that they rarely have cost and quality information available to them.
    • Physicians rarely have comparative information on the quality of their own care or on the quality of the care of the physicians to whom they refer patients.
  • Patient Use of Information Is Not Likely to Transform Health Care

    • Patients are in the weakest position 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.
    • Most health care costs are incurred by very sick patients—patients with heart attacks, strokes, cancer, mental illness, fractures, and injuries—often under emergency conditions. Shopping for the best physician or hospital is impractical in such circumstances.
  • Higher Patient Cost-Sharing and High-Deductible Health Plans Are the Wrong Prescription

    • Placing a greater financial burden on the sickest and poorest patients is not the right prescription for what ails the health care system.
    • Americans already pay far more out-of-pocket for their health care than citizens in other industrialized countries that have far lower costs.
    • Few people are currently enrolled in health savings accounts (HSAs) coupled with high-deductible health plans, and those who are enrolled are much less satisfied with many aspects of their health care than adults in more comprehensive plans.
    • People in these plans allocate substantial amounts of income to their health care.
    • Most troubling is that people in high deductible plans are far more likely to delay, avoid, or skip health care because of cost. Problems are particularly pronounced among those with poorer health or lower incomes.
    • When people with high-deductible health plans do access health care, there is evidence that they are more likely to have problems paying bills and to accumulate medical debt.

What Needs to Be Done

To achieve transparency in our health system, the following steps could be taken:

  • Medicare can assume a leadership role in making cost and quality information by provider and by patient condition publicly available. It should 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 has recommended. The board will 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 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.
  • Modify HSA legislation to reduce its potentially harmful effects on vulnerable populations. High-deductible health plans raise the risk that patients will fail to get the early care that could catch serious conditions at an early stage, and fail to get the medications that could control their risk factors and chronic conditions. Legislative modifications to minimize these risks might include:

    • Permit lower HSA eligible deductibles for lower-wage workers
    • Exempt primary care as well as preventive services from the deductible; exempt prescription drugs essential for management of chronic conditions
    • Guarantee choice of a comprehensive health plan to workers covered under employer plans
    • Permit greater flexibility in benefit design (e.g. actuarially equivalent benefits)
    • Set an income ceiling on eligibility for HSAs to reduce the tax subsidy for high-income individuals

Price transparency is a beginning, but it is unlikely to have a major impact in the absence of better information on quality and the total bills for the treatment of various acute and chronic conditions. Creating such a database is certainly feasible but requires federal leadership. This hearing is an important step toward achieving that desirable outcome.

Publication Details



S. R. Collins and K. Davis, Transparency in Health Care: The Time Has Come, The Commonwealth Fund, March 15, 2006