Healthcare Price Transparency Could Save $1 Trillion Annually

Americans deserve healthcare price transparency so they can find affordable and high quality options for their medical care. Unfortunately, compliance with Centers for Medicare & Medicaid Services (CMS) regulations requiring hospital and health plan price transparency is completely inadequate. As a result, far too much of the public remains in the dark about the cost of their healthcare until after they have received it.

The cumulative price of this lack of healthcare price transparency is shockingly high. In an open letter to the U.S. Senate, prominent economists, academics and business leaders cite data indicating that “25% of U.S. healthcare spending is administrative waste, overcharging, and fraud” and state that healthcare price transparency can save the U.S. healthcare system “approximately $1 trillion annually by ushering in a competitive market.”

Lack of healthcare price transparency may double costs for all Americans

According to the letter writers, the opacity in health care pricing contributes to the market failures that have caused healthcare spending adjusted for inflation to double since 2000. They also note that workers pay most of this cost in the form of higher premiums  – the Kaiser Family Foundation reports that the average annual employer-sponsored family healthcare premium has increased fifty percent over the past decade to $24,000 annually – and reduced wages.

The letter also notes that the lack of healthcare price transparency leads to overcharges and wide price variations. U.S. PIRG’s own research in Cleveland and Dallas similarly shows that wide price variations can occur even within the same hospitals or hospital systems for both self-paying and insured individuals.

Healthcare price transparency will help all Americans

US PIRG and the authors of the letter urge the U.S. Senate to pass the bipartisan Health Care PRICE Transparency Act 2.0 (PRICE Act 2.0), co-sponsored by Senators Mike Braun (R-IN) and Bernie Sanders (I-VT).

The PRICE Act 2.0 codifies, expands and strengthens enforcement of the current CMS regulations. It mandates actual, upfront prices throughout the healthcare system, including discounted cash and negotiated rates by insurance plans. It prohibits the use of price estimates and ensures employers receive detailed claims data to manage overbilling and make informed health plan decisions.

Collectively, these provisions of the PRICE Act 2.0 can help foster much needed competition and eliminate the inefficiencies and unnecessary intermediaries that currently plague the US healthcare system. It has the potential to save up to $1 trillion annually in inflated healthcare costs. That’s a lot of money that individuals and our society could use in far more productive ways.