Increasing price transparency could reduce healthcare costs, House panel told

July 25, 2008

Increasing transparency in healthcare pricing could play an important role in reducing healthcare costs, Peter R. Orszag, Director, Congressional Budget Office (CBO), told the House Budget Committee.

This material originally appeared in the July 18, 2008, issue of Health Lawyers Weekly, a publication of the American Health Lawyers Association (www.healthlawyers.org).

Increasing transparency in healthcare pricing could play an important role in reducing healthcare costs, Peter R. Orszag, Director, Congressional Budget Office (CBO), told the House Budget Committee in July 16 testimony on opportunities for increasing the efficiency of healthcare delivery.

According to Orszag, the “most compelling evidence” of inefficiency in our healthcare system “is that per capita health care spending varies widely across the United States, and yet the very substantial variation in cost per beneficiary is not correlated with health outcomes overall.”

In fact, roughly $700 billion each year goes to healthcare spending that cannot be shown to improve health outcomes, Orszag said.

One possible solution Orszag pointed to is increasing price transparency. He noted “that making the underlying costs associated with employment-based insurance more transparent might prove to be quite important in containing health care costs.”

According to Orszag, as “transparency increases and workers see how much their income is being reduced for employers’ contributions and what those contributions are paying for, there might be a broader change in cost-consciousness that shifts demand.”

Orszag also offered another possible solution to the lawmakers, telling the panel that “[t]wo potentially complementary approaches to reducing total health care spending involve generating more information about the relative effectiveness of medical treatments and changing the incentives for providers and consumers of health care.”

Orszag also testified July 17 before the Senate Finance Committee in a hearing exploring ways to leverage innovation to improve healthcare quality.

In an opening statement, Committee Ranking Member Charles Grassley (R-IA) said regarding health information technology that "[i]f there was widespread adoption of this powerful tool, then most everyone would be getting the right care and the right time."

In his testimony, Orszag agreed to some extent, but told the lawmakers that "[e]xpanded use of health information technology (IT) has the potential to improve the quality and efficiency of the care that patients receive, but realizing that potential would require broader changes in the health care system."

Orszag also reiterated his earlier testimony that comparative effectiveness and changing incentives for providers could increase healthcare efficiency and decrease costs.

View more information on the House Budget Committee hearing.

View more information on the Senate Finance Committee hearing.