How many studies does it take to confirm that price transparency is good for consumers and good for the health care system as a whole? Apparently, at least one more. Yesterday the Upshot highlighted a study in the Annals of Surgery on price transparency and appendectomies. There are two different kinds of surgeries that doctors use to remove a child’s appendix. One is cheaper, but in general the outcome is the same for both. (The reason one costs more is because it is less invasive and leaves a smaller scar—but it is not more medically effective). The study found that when parents were given the choice between the two, and informed of the price differential, they went for the less expensive option:
The study offers a compelling case for price transparency combined with medical consumerism as one strategy that could help reel in the nation’s $2.8 trillion health care bill. […]Dr. [Eric] Scaife [who was on the study] said one lesson for him is that doctors should tell patients the price of procedures, and hospitals should inform doctors of the amount they are charging for their services, which are often billed separately. He said the information from the hospital could be surprisingly hard for even surgeons to obtain because hospitals consider their price lists proprietary.“Imagine I’m in clinic and I tell a parent I’m going to fix a child’s hernia, and they ask, ‘How much is it going to cost?’ And I have to say, ‘I don’t know,’ ” Dr. Scaife said. “That’s very strange, isn’t it?”
Yes, that is very strange—almost as strange as the fact that we are still in the process of learning this lesson. Some liberal paternalists want us to believe that consumers cannot think rationally about health care, given that it can often involve emergency conditions that overwhelm a person’s ability to bargain. That consumers respond to price signals is, however, common sense—and study after study has supported it. That most U.S. states nevertheless get “F”s in price transparency is a scandal.