Price Transparency: Friend or Foe? How Price Transparency May Impact Competition in the Health Care Industry

The U.S. health care system is in the midst of disruptive changes designed to expand access, improve quality, and lower costs. Price transparency is now a hotly debated issue in the wake of the government’s recent push for transparency in certain sectors of the health care industry. This paper argues that while price transparency in the health sector is necessary, price transparency, standing alone, will not solve the problem of growing health care costs. While the notion of injecting free-market principles into health care is intuitively sound, this paper argues that if the Administration’s price transparency rules are implemented as proposed, provider rates may actually increase to the detriment of consumers and thwart the rules’ efficacy. Instead, legislators and industry experts should consider a more targeted approach that balances consumer preferences with antitrust principles.

By Dionne Lomax & Sophia Sun¹

I. INTRODUCTION

The U.S. health care system is in the midst of disruptive changes designed to expand access, improve quality, and lower costs. The U.S. continually spends significantly more on health care than any other country in the world and also spends the greatest proportion of its Gross Domestic Product (“GDP”) on health care.² For example, health care spending now accounts for 17.7 percent of the GDP, compared to 8.8 percent for the average country.³ Moreover, total health expenditures in the U.S. have increased substantially over