Barriers to Price and Quality Transparency in Health Care Markets

Consumers of health care in the United States often lack information on the actual prices of the care they receive and can also lack access to information about the quality of their care. RAND researchers gathered information on how health care prices are set, price variation in health care markets, barriers to price and quality transparency for consumers, and the extent to which price and quality information is used in marketing efforts. Public payers typically set prices for physicians and hospitals prospectively, and commercial health plans negotiate with physicians and hospitals to determine prices. Some research has shown substantial variation in negotiated prices, while other research suggests more moderate variation in some markets. Although the government does not directly affect prices paid by commercial health plans, commercial prices tend to be positively correlated with Medicare fee-for-service prices. Medicaid receives mandated rebates from drug manufacturers for dispensed prescriptions. Commercial health plans negotiate both the prices paid to pharmacies and any discounts and rebates received directly from drug manufacturers. Self-pay prices faced by consumers in pharmacies are set by individual pharmacies. The barriers to consumer price and quality transparency identified through this work generally represented limitations of existing tools. Consumer price transparency is being pursued by federal and state governments. Most commercial insurers have created price transparency tools to help members estimate the costs of various services. However, these tools can be difficult to navigate and do not always provide accurate pricing.