CDHC Drives State-Level Policy Changes

Published January 1, 2008

In an effort to help consumers comparison-shop, several states are now pushing hospitals to disclose their price lists for various procedures–a move that is being prompted by the growth of consumer-driven health care.

Three states–Massachusetts, New Hampshire, and Oregon–have taken the lead. New Hampshire discloses the median amount that specific health plans would pay hospitals or clinics for about 30 procedures, and Oregon discloses the median prices for more than 80 procedures. Massachusetts has plans to begin doing so this spring.

“[The states] are doing this because patients are frustrated with the lack of price transparency,” explained John R. Graham, director of health care studies at the Pacific Research Institute, a think tank in San Francisco. “As more patients take responsibility for spending their own health care dollars, this [lack of transparency] is becoming increasingly unacceptable.”

Spurring Competition

The coming wave of transparency in hospital pricing could take some getting used to, however–especially for providers.

“For consumers used to other markets where prices are much more visible and competitive, it may come as a shock to observe the pricing differences in health care,” said Christopher J. Conover, director of the Health Policy Certificate Program at Duke University. “Ideally, this will spur greater competition among providers.”

Twila Brase, president of the Citizens’ Council on Health Care, a group based in Minnesota, said laws shouldn’t be needed to accomplish the goal.

“Comparison-shopping for medical services can and should be done without legislation,” Brase said. For example, Lasik surgery prices are not only available, “they’re advertised everywhere–without any legislative requirement. Why? Because patients are paying the bills, not health plans or government.

“Until people have an incentive to care about prices–their own cash or credit cards–they won’t demand access to prices,” Brase said, “or more importantly, they won’t look at price lists to make decisions even if state law requires that those prices be disclosed and available.

“Lasik surgery proves that one of the best ways to reduce costs is to have health insurance pay for fewer services, not more, especially for routine, minor, and preventive services,” Brase concluded.

Defining Costs

Any effort to disclose procedure prices, Brase said, must first be clearly defined.

“We must be clear about what these disclosed figures are. Are they prices, charges, or actual costs? Are they before or after discounts are secured by health plans?” Brase asked.

“Dollar figures are meaningless unless they represent the true cost to the patient,” Brase continued. “Patients don’t care how much the health plan pays. They only care about what they have to pay. And if they find out that health plan B has a lower cost, but their employer only offers health plan A, of what use is the price list?”

Brase doesn’t think other states should follow the example set by Massachusetts, New Hampshire, and Oregon.

“Instead, remove the employer-insurance connection, put the insurance and health care dollars back into the hands of individuals, and let the medical market and charitable forces do the work of lowering prices, increasing patient satisfaction, and restoring the critical patient-doctor relationship,” Brase said.

“If we don’t, we could find much of our medical industry–and many American patients–outsourced to India and Thailand, where all the bureaucratic burden is nonexistent and prices are cheaper by far,” Brase noted.

Dr. Sanjit Bagchi ([email protected]) writes from India.