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Blog & News

Transparency and Health Costs: Why it Matters

To keep health plan costs in check, it is imperative that benefits managers at self-funded companies have access to updated, accurate information about the specific costs of medical procedures, equipment and treatment, among other data points. 

In fact, medical costs have increased three times faster than wages over the past decade, making price or cost “transparency” a hot commodity. But, at the employee level, determining the actual price you’ll pay versus the price you should be paying can be a tedious and challenging task.

While health care costs vary significantly from market to market, and some areas have higher operating expenses, price transparency is considered one of the ways to stabilize health spending and – in turn – long-term, macro financial stability in the United States. That’s why more than 30 states have passed or have proposed legislation to increase healthcare cost transparency.

The value of transparency, then, is the access to pricing information that is weighted and utilized as a guide for health plan optimization. Without a tool that can access and structure this information, the full value of price transparency cannot be met.  

However, there are some who are not so quick to drink the transparency “Kool-Aid,” as it was put by David Newman, executive director of the Health Care Cost Institute in aModern Healthcare article. Mr. Newman argues that “in markets where pricing is very transparent, pricing tends to narrow and the average cost rises.”

Mr. Newman then suggests that “in healthcare specifically, hospitals may become price-competitive only on selective services or those they are required to publicize,” and that “in a medical emergency situation, for instance, patients aren’t going to begin price shopping while waiting for an ambulance.”

Still, advocates such as Catalyst for Payment Reform believe price transparency has real potential in improving care delivery and bending the healthcare cost curve.

In her essay, published by IHC, CPR Executive Director, Suzanne F. Delbanco, writes, “Our members see price transparency as a necessary building block for a higher-value health care system, including playing a critical role in new benefit designs, provider networks and in payment reform.” 

Regardless of its true value, transparency cannot reach said value without a system in place which can collect, organize and present price reporting to employers and employees quickly and efficiently. Transparency is a key component of any health plan – for cost allocation purposes benefits managers should know where their healthcare dollars are being spent in order to improve plan performance via optimized plan management. Benefit managers looking to better understand their health plan and how it functions in relation to transparency need to look to tools with the sophistication to aggregate massive amounts of data they can drill into in a matter of clicks.

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