Health care pricing transparency for all: Our view

Cars are one of the most expensive things most people ever buy, so today's auto-buyers have easy access to information on quality, reliability and price. Empowered consumers help keep the prices of cars down and the quality up.

On the other hand, shopping for another one of the most expensive things most people ever buy — health care procedures such as colonoscopies or hip replacements — just doesn't work. Prices are shrouded in secrecy.

People with typical employer insurance have little incentive to look for a good deal. Insurers negotiate prices with providers. The uninsured, meanwhile, can face outlandish prices no matter where they turn, and they have almost no leverage.

This dysfunctional system works fine for providers and insurers, but the disconnect between consumers and providers creates a situation that is driving up health care costs — and insurance premiums — at a rapid and unsustainable pace.

As that trend drives people to opt for plans with higher out-of-pocket deductibles, or ones that give customers a fixed amount of money and essentially wish them luck, the lack of transparent pricing will pose an escalating problem. Greater transparency would help them, and it would have another benefit: exposing and shaming institutions charging absurd prices — such as the hospital that journalist Steven Brill, writing in Time, found putting a 10,000% markup on a generic Tylenol pill.

As it is, prices are all over the place. Hospitals and doctors typically have numerous charges for the same procedure, depending on who's buying. Someone without insurance gets the list price, which can literally be high enough to bankrupt a typical person within days.

Comparison shopping, while not a complete solution, could contribute to one. But shopping around isn't easy.

Recently, for example, a student researcher set out to find the price of a hip replacement by calling more than 100 hospitals and asking what it would cost her (fictitious) grandmother, who supposedly had no insurance but could afford to pay out of pocket. As detailed in the Journal of the American Medical Association, many hospitals wouldn't answer, and those that did quoted prices from $11,100 to almost $126,000.

As both parties in Washington seek ways to control health costs, they are trying to address the market disconnect. Republicans are promoting voucher plans that would expose older Americans to market forces. Democrats are seeking to discourage "gold plated" employer-provided and Medigap plans that leave patients with no deductibles and co-pays. But if individuals are going to have more skin in the game, they will have more need to know how much things cost.

Health insurance is largely regulated by states, and their attempts to force price disclosure have been disappointing. Though 40 states have laws that require or encourage price disclosure, transparency advocates such as Suzanne Delbanco of Catalyst for Payment Reform consider most of those laws toothless.

Some change in transparency is happening anyway, thanks to innovative websites such as Fairhealth.org and Clearhealthcosts.com, which have begun to uncover comparative prices. Some insurers are moving to help customers price shop, and an effort in New Hampshire helps state employees compare costs.

Big hospitals and insurers worry that divulging prices could erode their competitive edge. But the money they make from hiding charges and discouraging comparison shopping comes from the pockets of patients, taxpayers and employers. That's not the way markets are supposed to work.