Health care price transparency tools increase prices? Ask economists
Some economists and trade groups have argued that health care price transparency efforts will do more harm than good.
Posting easy-to-understand health care price data may do more to help providers increase their prices than to help patients shop for cheaper care.
A team of economists has published evidence for this idea in a new working paper.
The researchers worked with FAIR Health, a health claims data organization, a nonprofit health care price data bureau, to create a randomized, controlled price transparency trial aimed at residents of New York state who went outside health plan networks to get “shoppable” outpatient medical services, such as acupuncture, plastic surgery and ultrasound scans.
After Fair Health published more detailed price data, providers’ prices increased by 0.75%, and the providers who started out with prices below the median increased their prices more than the more expensive providers did, the researchers found.
“These price increases are consistent with tacit collusion, or conscious parallelism, between providers who realized that they are under-charging relative to their peers,” the researchers concluded.
Study mechanics: The paper’s authors are Kayleigh Barnes of the Federal Reserve Board, Sherry Glied of New York University, Benjamin Handel of the University of California, Berkeley, and Grace Kim of NYU.
The data bureau they worked with, FAIR Health, normally posts typical health care prices for a given market, not individual providers’ prices. Its website gets about 10,000 visitors per month.
For the experiment, when visitors searched for price information, FAIR Health showed some individual providers’ prices for 107 procedures.
The researchers then looked at a big commercial claims database to see what had happened to claims.
Trends in the number of claims for the lower-cost providers were similar to the claim count trends for the expensive providers. That suggests that “our intervention had no meaningful impact on the extent of consumer price shopping,” the researchers wrote.
The researchers posted their paper on the National Bureau of Economic Research.
A working paper is an academic paper that has not yet gone through a full academic journal peer review process.
Many NBER working papers relate to health care and employee benefits. Authors of an NBER working paper published in 2023 concluded that health system consolidation increased quality a little and increased prices a lot.
Related: Most hospitals not in compliance with federal price transparency rules
Authors of a third NBER working found only a complicated connection between hospital prices and the quality of hospital care.
The history: One of the founders of modern capitalism, Adam Smith, argued that businesses would use price guides and even ordinary business directories to drive down wages for workers and push up prices for customers.
In modern times, some economists and trade groups have argued that health care price transparency efforts will do more to help providers increase prices than to help patients be better health care consumers.
In 2019, for example, America’s Health Insurance Plans argued that Trump administration efforts to have hospitals disclose competitively negotiated, proprietary rates would reduce competition and increase prices.
Economists have written many papers about the interaction between price disclosure programs and patient health care shopping activity.
What’s new about the Barnes team paper is that the researchers created an experiment, rather than simply analyzing existing survey, billing and claims data.