EXCLUSIVE: Requiring price transparency from hospitals and insurance companies could drastically slash national health care costs and extend the average American life expectancy, according to a new report published by advocacy group Patient Rights Advocate (PRA).
System-wide health care price transparency could reduce federal spending by more than $1 trillion annually, while simultaneously improving health outcomes and lifting the average life expectancy in the U.S., according to the report, which was co-authored by PRA founder and Chair Cynthia Fisher and Art Laffer, a former economic adviser to former President Reagan.
The idea is that by making prices public, hospitals will face pressure to be more competitive on price, quality, outcomes and access. When patients have the ability to see the actual prices for treatments, they can identify major cost differences for the same care and choose more affordable care at market rates. That in turn will force hospitals to lower prices in order to become more competitive.
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"When prices are known, consumers choose affordable care at best-market rates and benefit from competition," the report said. "Consumers will avoid price-gouging providers and insurance companies, applying pressure to lower prices."
Prices charged for health care vary dramatically depending on several factors, including whether a patient is in or out of the patient's insurance network and what price the hospital negotiated with the insurance company. For instance, the cost of a mammogram ranges widely from $50 at a hospital in New Orleans, to $86,000 at a hospital in Massachusetts, according to Clear Health Costs, which publishes information on health costs.
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"Price transparency will unleash a competitive, affordable health system that eliminates widespread waste, overbilling, and price gouging under the opaque status quo," the report said. It will also "shine sunlight on the market distortions, inefficiencies, and asymmetries that drive up expenditures and worsen health outcomes."
The U.S. has one of the most expensive health care systems in the world, spending more on it than any other high-income nation, both as a proportion of GDP and per person, according to a recent report published by the Organization for Economic Cooperation and Development (OECD). Spending is expected to increase with health care as a proportion of GDP forecast to reach 20% by 2030.
Despite that, high levels of spending have not translated into people leading longer lives.
Life expectancy at birth was two years below the OECD average – and actually fell by two months in the five-year period between 2012 and 2017. In addition, U.S. life expectancy has declined in recent years from 28.9 years in 2014 to 76.4 years in 2021 – four years below the OECD average of 80.4 years.
"The American people are paying twice as much for healthcare to die four years earlier than in other developed countries," Fisher said in a statement. "Price transparency provides the opportunity to lower runaway costs and provide access to care with knowledge of quality and outcomes. The opportunity is to save lives while saving money."
Hospitals and health insurers are already required to post their actual prices, including negotiate health plan rates, under two laws passed in 2021 and 2022.
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However, the report found that compliance rates are low. Only 36% of hospitals reviewed are fully complying with the rule, with many exploiting a loophole that allows them to use cost estimates that "neither empower consumers to shop nor protect them from bills that are far higher."
