Estimating the Impact of New Health Price Transparency Policies

Abstract

This analysis investigates and scores the impact of new health price transparency rules. Using a set of novel data sources, we estimate substantial savings are possible following the implementation of the insurer price transparency rule. Specifically, we estimate annual savings to consumers, employers, and insurers by 2025, assuming a robust set of tools to allow consumers to purchase medical services. We matched claims with 70 HHS defined shoppable services by CPT and DRG codes and replaced them with an estimated median commercial allowed payment multiplied by a reduced cost of 40% based on estimates found from literature for the difference in cost between negotiated and cash payment for medical services. We consider 40% to be an upper bound estimate of the potential savings based on existing literature. Several databases are used to estimate the potential benefits of insurer price transparency. Two different all-payer claim databases were used, representing the entire insured population in the US. For this analysis, only the private insurer commercial population was examined, comprised of over 200 million covered lives as of 2021. The estimated impact of price transparency will vary significantly by region and income level. The national upper bound estimate is $80.7 billion. The national lower bound estimate is $17.6 billion. For the upper bound, the region with the most significant impact in the US will be the Midwest, with $20 billion in potential savings and an 8% reduction in medical expenditure. The region with the lowest impact will be the South, with only a 5.8% reduction. Concerning income, those at lower levels of income will have the most significant impact with a −7.4% (<100% Federal Poverty Level) to −7.5% (100%-137% Federal Poverty Level) impact. Overall, the total impact could be a 6.9% reduction for the whole privately insured population in the United States. In summary, a unique set of national data resources were used to estimate the cost savings impact medical price transparency. This analysis suggests price transparency for shoppable services may yields significant savings between $17.6 to $80.7 billion by 2025. Consumers may have strong incentives to shop with the rise in the use of high deductibles, health plans, and health savings accounts. How these potential saving are to be shared by consumers, employers and health plans has yet to be determined.

Counting the Cost of Pins and Needles: A Case Study of Paresthesias and the Cost of Healthcare in the United States

“…This is true for all services provided including lab-tests, pharmaceuticals, medical devices, provider pay, and hospital reimbursement. The Hospital Price Transparency rule went into effect on 1 January 2021, with studies such as Parente’s, estimating annual savings to consumers, employers, and insurers by 2025 [ 6 ]. The concept of this policy started during George W. Bush’s presidency (2001-2009) with the goal for Americans to note significant savings in their health expenses, having foreknowledge of price-of-care ahead of time, and the opportunity to choose among cost-effective options.…”

“…Despite the barriers to price transparency, the benefits of price transparency drive the effort of its own expansion. A study reported that price transparency may yield between $17.6 and $80.7 billion in savings for patients, employers, and health plans by 2025 [ 6 ]. Benefits for patients include no surprise medical bills, ease to compare and choose providers, and more affordable healthcare services.…”

Price Transparency in United States’ Health Care: A Narrative Policy Review of the Current State and Way Forward

“…Given the novelty and scope of the price transparency rule change, a full analysis of the outcomes of the price transparency rule change will require years of data. 52 Other issues confound the goal of a robust, unbiased academic study. In addition to lawsuits, low initial compliance with the rule change and the lack of national data before the rule change are 2 additional obstacles.…”

“…Parente used an upper bound analysis to estimate the impact of the price transparency rule for the commercial population by 2025 for income level, region, and state. 52 Using the 40% reduction in expenditures for “shoppable” services by shifting from negotiated commercial prices to cash prices suggested by the analysis from Lawrence Van Horn et al 54 —the same estimate used by the White House and HHS in 2019—Parente estimated the overall impact of price transparency for the commercial population in 2025 to be as high as $80.1 billion. 52 The analysis notably projected greater percent savings for low income beneficiaries at or below 137% of the Federal Poverty Line and variation across regions and states.…”

“… 52 Using the 40% reduction in expenditures for “shoppable” services by shifting from negotiated commercial prices to cash prices suggested by the analysis from Lawrence Van Horn et al 54 —the same estimate used by the White House and HHS in 2019—Parente estimated the overall impact of price transparency for the commercial population in 2025 to be as high as $80.1 billion. 52 The analysis notably projected greater percent savings for low income beneficiaries at or below 137% of the Federal Poverty Line and variation across regions and states. It also projected that the growing use of high deductible health plans may reinforce potential savings from price transparency, because recent research has shown that price information leads to a shift to lower cost providers, in particular for those beneficiaries subject to high deductibles.…”