The ‘More Transparency In Health Care’ Debate Misses The Forest For The Trees

transparencyYesterday, the Energy and Commerce health subcommittee held a hearing on health care transparency and considered several bills that would require “providers, payers and vendors to publicly disclose the cost of their services.” Instinctively, more transparency sounds like a good thing and Republicans are always claiming that empowering consumers will significantly lower health care spending. But over at the WSJ Health Blog, Katherine Hobson points out that too much transparency could actually increase health care spending. Why? Peter Orszag explains:

On the provider side, more transparency would make information about the prices that hospitals, physicians, and drug companies charge insurers more visible, but whether such disclosure would lead to higher or lower prices for consumers on average is unclear and depends on the nature of competition in the relevant market. The markets for some health care services are highly concentrated, so increasing transparency in such markets could lead to higher, rather than lower, prices because higher prices are easier to maintain when the prices charged by each provider involved can be observed by all of the others. However, aggregated information or information on average prices would make it more difficult for providers to coordinate higher prices because individual providers’ prices would not be obvious. Whatever the effect on average prices, more transparent prices would probably reduce the range of prices.

If we’re going to drag Orszag to the hill to explain how greater transparency will affect health care spending, we should probably mention that posting the prices of essential services could also discourage patients from investing in needed care, leading them to allude the kind of preventive services that would prevent more expensive chronic conditions.

But generally, the back and forth about transparency misses the forest for the trees. If we’re really trying to lower health care spending, then we should stop looking at care in pieces — this service costs this, and that service costs that — and think about treating the patient more holistically through care coordination, accountable care organizations, medical homes and the like. The new health law will invest in these kinds of reforms, but lawmakers will have to stop believing that transparency is some kind of silver bullet — after all, other countries don’t have transparent systems and their prices are lower — before we can see real delivery reform and lower costs.