The problem posed by rising health care prices can seem agonizingly complex, but one part of the solution may actually be quite simple: telling people how much services cost. Vox profiles the results of an experiment conducted by Blue Cross Blue Shield over the last two years. Researchers looked at MRI scans, a basic procedure. They gave consumers in some cities advance data about how much an MRI cost at different area health care providers, while withholding that information from consumers in other cities. Here’s what happened:
Just providing the data proved to be powerful: in the course of two years, the average price per MRI fell by $95, according to data published in the journal Health Affairs. Prices at hospitals that didn’t post charges rose by $124 […]
This was mostly the product of consumers shifting their business to the less expensive MRI options, rather than the prices falling.
The transparency did, however, reduce variation in prices. Hospitals, for example, typically charge more for MRI scans than imaging that happens in a doctor’s office or free-standing center. But in the intervention cities, they started lowering their prices to be more similar to the doctor office MRIs — while doctor offices inched their prices upwards a bit towards the hospital rates. All together, price variation fell by 30 percent in the intervention cities.
This experiment highlights a fundamental point: Markets that empower consumers eventually bring down costs. Not always, not perfectly, but they tend to work in this direction. People may not always be rational, but if they are given access to price information they can compare different care providers and choose the less expensive one. As the NYT story on the experiment points out, copays pushed some of the people in the study to choose cheaper options (if the copay is fixed at 20 percent of the overall cost, most people will look for the cheaper option); others chose better value on principle. And most importantly, a similar study conducted several years ago gave the same information to doctors without seeing any meaningful downward shift in prices. When it comes to managing expense, patients tend to be better at it than doctors.
One of the very first goals of any meaningful health reform has to be getting that information to consumers, and removing any barriers that make providers unresponsive to consumer demand. The more we do to bring down costs in the near term, the easier any subsequent, long-term reform becomes.