Healthcare is one of the only markets where consumers buy services without seeing the price ahead of time. Patients are routinely expected to agree to tests, scans, and procedures with no idea of the price—only to find out weeks later, if they ever do, that the same service could have been provided for thousands of dollars cheaper down the street. This is a failure of basic market information. When prices are hidden from patients, competition breaks down, and providers face little pressure to keep costs low. Restoring price transparency is the first step to making the healthcare market that work for patients again.
Patients are shielded from prices through copays and deductibles. Transparency only works if patients have both price visibility and financial incentives to act on it. Paired with high-deductible plans and health savings accounts (HSAs), patients would have both the information and the incentive avoid over-paying. These plans cost less in premiums while allowing patients to save pre-tax income, including the savings on the insurance premiums, to cover their medical expenses. By giving patients upfront prices and control over their own medical finances patients are incentivized to find low-cost and high-quality care, reintroducing competition into the healthcare market.
Not all medical services are shoppable—services for which patients can take the time to compare providers—but about 30 percent are. While that may not sound like much, it represents a significant share of an industry that cost Americans $5.3 trillion in 2024. Allowing market forces to operate in this market would drive down prices and improve quality. With access to prices, patients could shop between providers for services ranging from imaging and lab tests to outpatient procedures, from consultations to surgeries. These services currently vary wildly in price. A knee replacement, for example, can cost as little as thirteen thousand dollars or more than one hundred thousand dollars depending on where it is performed.
As with groceries, computers, or any other product, when patients can see prices in advance they can choose the lower-cost option—pressuring others to reduce their prices. If one MRI costs $400 and another $1,500, patients can simply decline to pay more. Higher-priced providers must either justify the difference with additional value or lower their price to compete.
Transparency can also reduce costs for outpatient hospital visits. In many cases, a hospital’s cash price is lower than the rates insurers have negotiated. Patients could save by paying directly for certain services, and by selecting insurance plans that only cover services for which insurance lowers the price. Transparency also strengthens insurers’ ability to negotiate better rates for non-shoppable services, such as emergency care.
While little has been done to make imaging or lab prices transparent, some progress has been made with hospitals—though not much. Since 2021 the Center for Medicare and Medicaid Services has required hospitals publish pricing information in both machine-readable files and consumer friendly formats, including insurance negotiated prices and discounted cash prices for hundreds of services. Yet as of 2023, only one quarter to one third of hospitals fully comply. Even when hospitals do publish data, it is often incomplete or difficult to use, making meaningful comparisons challenging.
The consequences of non-compliance are largely insignificant. Large hospitals faces fines of up to $5,500 per day, or just over $2 million per year, regardless of the number of violations. For hospitals with revenues in the billions, this is negligible. If a hospital with $2 billion in revenue expects to lose more than one-tenth of one percent by disclosing prices, it is financially rational to pay the find instead.
For transparency to meaningfully lower costs, it must extend beyond the small share of providers that comply voluntarily. Enforcement of existing rules for hospitals must increase. As long as hiding prices carries only trivial penalties, hospitals have little reason to bother. Fines must increase to reflect the revenues of the industry to create a real deterrence. Transparency must also extend beyond hospitals to include imaging, lab tests, physician services, and pharmaceuticals. Without comprehensive price visibility across all shoppable services—and even negotiated by insurers—patients will remain unable to shop effectively and the benefits of competition will remain unrealized.
