The Problem
The lack of transparency in healthcare pricing means that patients don’t know the price of the treatment they receive until they get the bill and that hospitals are shielded from competition.
The Solution
Arm consumers with the information they need to make healthcare decisions.
Key Facts
- In Missouri, prices for the same service can differ widely depending on a patient’s insurance. For example, the price of a pelvic CT scan at a single hospital can vary by a multiple of 20.
- After several years of increasing compliance rates, hospital compliance with the federal price transparency rule, which went into effect in 2021, has fallen nearly 40% in the past year.
What We Don’t Know Is Costing Us
Advocates of government-run healthcare often claim that market forces do not operate in healthcare. However, they neglect to mention that competition has been artificially suppressed by a lack of price transparency. Studies have found wide variation in prices paid for healthcare procedures across regions, among hospitals, and most alarmingly, within the same hospital based on the type of insurance or lack thereof.
With total healthcare spending rising from 16% of gross domestic product (GDP) in 2007 to 25% of GDP today—and with projections estimating it will eclipse 37% by 2050—price transparency is critical for both the insured and the uninsured because it creates several ways to control costs:
- It allows patients to compare providers.
- It helps insurers negotiate lower rates.
- It aids employers in offering cost-effective plans to workers.
- It facilitates alternatives to fee-for-service payment models.
- It enables physicians to partner in cost-containment efforts.
- It forces hospitals to compete with each other on price and quality.
Hospitals Are Ignoring Transparency Rules
In June 2019, the Trump administration issued an executive order requiring hospital price transparency. Since January 2021, hospitals have been required to provide not only list prices but also negotiated charges for 300 shoppable services. Hospitals must make this information available both in machine-readable and consumer-friendly formats. However, a report from PatientRightsAdvocate.org found that, as of November 2024, only 14% of hospitals in Missouri and 21.1% nationwide are fully compliant. Alarmingly, the same website’s prior-year analysis showed significantly higher compliance rates of 25% and 34.5%, respectively. Furthermore, providers are only half of the healthcare equation; not only should all providers be subject to the same price transparency requirements, payers for services such as health plans should be required to publicly post the rates they negotiate. Until patients can be informed consumers of the care they purchase, we can’t expect to keep the cost of medical services under control.
Policy Recommendations
- By state law, require that hospitals and other healthcare providers publish pricing information to the public in user-friendly and machine-readable formats.
- Prohibit providers from pursuing medical debt collection if they are found to be noncompliant with transparency requirements.
