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Health Care / Free-Market Reform

Study Finds Health Care Price Transparency Should Be a Top Policy Priority

By Patrick Ishmael on Jan 28, 2016

We have talked many times about market-based reforms that would help to bend down the cost curve of health care in this country. One important reform is the promotion of price transparency to make it easier for health care purchasers to compare prices for and save money on routine health care procedures. Transparent health care pricing helps keep health care costs down, and this fact was made clear in an important study published just last year.

For years, hospital executives have defended these prices saying it’s about quality, or that they see sicker patients, or lots of folks on Medicare.

“That’s just not true,” said co-author Yale economist Zack Cooper.

Cooper said the team, including John Van Reenen from the London School of Economics and the University of Pennsylvania’s Stuart Craig, controlled for all those factors. And Cooper said market power matters more than the rest….

Change starts, says Cooper, when people who buy the MRIs and the C-sections can simply see real prices. And change may happen when those same people negotiate next year’s deals knowing what they know now.

You can find the full report here. Its implications are straightforward. For one, a hospital that holds and can maintain monopoly control over a health care in its region can charge higher prices than if it had competition. For another, concealing the prices of health care services serves to fatten providers' wallets. Without readily available prices, it is harder for patients to determine whether they're being overcharged. That was true before Obamacare was passed… and has continued long after Obamacare was implemented. The problem in health care is not the free market. The problem is the lack of a free market in health care.

Market reforms like price transparency are important tools to make health care in this country better, less expensive, and more accessible. Rather than go farther down the hole of failed government-run health care, we need to move toward freeing our health care system to make sure that patients' needs—both their health needs and their financial needs—are in the center of the system. Price transparency would be a step in the right direction after far too many steps in the wrong.

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About the author

Patrick Ishmael

Director of Government Accountability

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