Selective Transparency

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“Price transparency” has become the new health care mantra, especially with regards to prescription drugs.  However, price transparency is a challenge for the entire health care system. Much of the problem stems from the way we pay for health care, through health insurers and pharmacy benefit managers. Some state lawmakers and members of Congress want to address the price transparency challenge, but there are right and wrong ways to do it.


Rising health care costs, coupled with high-profile stories of price gouging by certain pharmaceutical companies, have energized some lawmakers to push for so-called “transparency” in prescription drug pricing.

But the fact is that price transparency is a problem for all sectors of the U.S. health care system, especially hospitals. At least with prescription drugs you know how much they will cost before you agree to buy. Try finding out how much your surgery and subsequent hospital stay will cost beforehand.

Prescription drugs account for about 10 percent of all health care spending, and have for decades. Hospitals, by contrast, account for about 32 percent and rising; physicians’ services make up about 20 percent.1 But which of the three gets all of the political and media attention? Prescription drugs.

And yet there is pressure on lawmakers at both the federal and state levels to try and hold down costs. The problem is that most political efforts to do so have had just the opposite impact. Consider that the Affordable Care Act—i.e., Obamacare—was supposed to make health insurance more accessible and affordable. And yet premiums are exploding and health insurers are abandoning the Obamacare exchanges. Now some lawmakers want to bring that record of failure to bear on prescription drug prices through so-called price transparency.

Before lawmakers act, they need to understand why it is so difficult for patients—and others—to identify and compare prices for health care products and services. And if politicians are determined to do something, they should ensure that they don’t add to the complexity and costs.  

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