Seeing Through the Patient CARE Act: Why Transparency Won’t Fix Our System

March 31, 2015
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price transparency in healthcareThe Burr-Hatch-Upton proposal known as the Patient CARE Act would like us to move towards a system of transparency in health care that will “inform and empower patients.” The longstanding belief is that if we just give consumers more information about their health care, they will make more rational decisions, there will be increased competition, and the quality of health care will imp

price transparency in healthcareThe Burr-Hatch-Upton proposal known as the Patient CARE Act would like us to move towards a system of transparency in health care that will “inform and empower patients.” The longstanding belief is that if we just give consumers more information about their health care, they will make more rational decisions, there will be increased competition, and the quality of health care will improve as the cost of health care comes down. A little over a year ago, I wrote about why I think this won’t work.

A lot of things have changed since then, but my opinion on this issue is not one of them. I’m not suggesting that improved transparency in health care is a bad thing. Far from it. It can certainly help by putting pressure on providers to improve quality, and for some more elective procedures, it may even bring costs down, but it’s not going to dramatically change our health care system. The simple reason is that health economics is a field unto itself.

The typical notion of a rational consumer, supply versus demand, and the market clearing price are not givens in health care. On the contrary, when you fall to your knees with chest pain, you go to the nearest hospital that will take you when the ambulance radios them. You don’t comparison shop and insist on being taken to the highest quality hospital. But this rational model falls apart without requiring an emergency. Thanks to the asymmetry of information that exists between your highly educated and skilled health care provider and yourself, you are quite likely to get the test they order, take the medicine they prescribe, or undergo the surgery they recommend. You may Google your symptoms or see an ad for Cialis on TV and ask your doctor some questions, but most of us still defer to the person with the medical degree.

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What types of information does the proposal want to make more transparent? Here’s a list:

  • “Require health insurance plans to disclose covered items, drugs, and services; any plan limitations or restrictions; potential cost sharing; the actual cost of services; the claims appeal process; as well as the providers participating in the plan”
  • “Incentivize states with enhanced Medicaid grants if they establish and maintain requirements regarding the disclosure of information on hospital charges and make such information publicly available”
  • “Require hospitals who participate in Medicare to provide to consumers the average amount paid by uninsured and insured patients for the most common inpatient and outpatient procedures”
  • “Publicly post their charity care policies along with the amount of charity care provided”

Again, none of the things in the above list are bad. I would be generally supportive of requiring health insurers to spell out more details about their plans (although I’d argue that most of this information is already made available to beneficiaries). I also think it’s a great idea to document charity care provision by non-profit hospitals that are enjoying a rather sizable tax break.

On the other hand, I’m not too keen on the “enhanced Medicaid grants” if only because I don’t agree with the idea of block granting Medicaid at all to begin with. And I also don’t think that hospitals making their prices (well, amounts paid) public will do that much to bring prices under control. Still, this is, on the whole, one of my favorite sections of the Patient CARE Act.

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