Transparency in Health Care: Can It Happen?

24 Feb

Most people, regardless of their political leaning, can agree that the market for health care in the United States isn’t really working well. Take one step further, though, and disagreement rapidly ensues. On the left, the common understanding is that a market failure has occurred, and that the proper thing to do is have government intervene to correct that failure–usually by expanding public insurance programs, subsidizing private insurance, and the like. On the right, the common understanding is that the market hasn’t exactly failed, but that it could certainly be improved if we got government out of the way, stopped insulating people from the costs of their care, and made consumers better informed. In other words, take care of the information asymmetry that exists in health care, and the market will right itself.

There are some obvious limitations to health care markets. For example, even with perfect information, someone with a heart attack is highly unlikely to comparison shop for the best doctor or hospital in their area. Yet, just as it’s hard to disagree that the market isn’t working well, it’s hard to argue that there isn’t a problem with information on health care prices and quality that a consumer needs to make rational choices. Moreover, while it won’t solve all of our problems, I do think that increasing people’s access to information about health care prices and quality could help to bring some of our market inefficiencies under control. But the real question is: can transparency in health care happen in the United States?

Across the country, eleven states have indicated that they believe it can, by attempting to increase pricing transparency for health care procedures. The rationale is simple: Tell people what different things cost, and they’ll more likely opt for lower-cost providers, which will lead to an overall reduction in costs as providers begin competing with one another on the basis of price. There are a few problems with this, though. First, it requires a pretty sizable data collection effort. For instance, Colorado has begun work on an all-payers claims database. Second, interpreting the cost data can be a challenge, because the out-of-pocket cost someone pays is largely a factor of their insurance coverage. In other words, if you have excellent coverage, you probably care little about how much your provider charges, and more about what you actually pay. And, finally, we humans can make the mistake that higher priced goods and services must inherently be better goods and services. After all, you get what you pay for, as the saying goes.

Of course, we know that’s not always true. But in health care, measuring quality can also be a rather elusive goal. Sure, we can capture process measures for recommend treatments like administering a beta blocker to a heart attack patient, but is that really what consumers care about? On some level, yes, but they also care about how nice the waiting room is, and how the staff and the providers treat them. We have things like Google Reviews and Yelp for consumer reviews of hotels, restaurants, and other businesses. And, in fact, there are numerous sites out there for reviewing medical providers. The question is: Are they useful?

A recent survey study, just published in JAMA finds that people aren’t really engaged with these sites the way they are with others. In fact, just 5% of respondents indicated that they had reviewed their own provider online, 23% of respondents reported using such reviews when selecting a primary care provider, and only 19% considered the reviews to be very important in their decision. Of course, these types of reviews are only part of ascertaining provider quality, but their limited use raises the issue of whether other efforts at transparency will be more effective. Unfortunately, I don’t have an answer for you, but I’d be extremely curious to hear what you think as an existing or potential consumer of health care.


Posted by on February 24, 2014 in Uncategorized


3 responses to “Transparency in Health Care: Can It Happen?

  1. Patrick Pine

    February 24, 2014 at 12:46 pm

    The problem with asking consumers to determine ‘value’ in health care is that even the most well informed individual is generally incapable of determining a correct diagnosis or if the most appropriate prescription is written by a physician or if the surgery is a success or failure until after the fact, if at all.

    The purchase of health care is not at all like the purchase of many other goods and services. And in cases where the provider screws up, I or my insurer will still pay the costs of that screw up. Perhaps if a car mechanic fails or the TV I bought fails I may be able, with effort, to obtain a fix or a replacement without additional cost – that is virtually impossible in health care short of litigation.
    Bad health care also may not manifest itself in some cases for years after the fact.

    Finally if I live in a rural area or even some exurban areas my choices are likely to be extremely limited – it is virtually impossible to create competition for many health services in less populated areas.

    I remember learning about markets in college (both undergraduate and graduate) and have always contended that health care lacks most of the necessary attributes of a market good and/or service.

  2. NR

    April 1, 2015 at 6:32 pm

    The most important aspect of quality that consumers care about is outcomes.


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