With the election (mostly) settled, attention now turns to what it might mean for important corners of federal policy, one of them being health care price transparency. In health care, the possibilities are not well defined because the campaign ruled very little out, or in. What is clear is that the incoming administration should not repeat the mistake of 2017, which was to promise sweeping change without having a plan to offer to Congress. In 2025, the targeted areas of reform should be more narrowly drawn and offer high potential payoffs for acceptable levels of political risk. Helping consumers take advantage of health care price transparency fits the bill.

Setting an agenda starts with seeing the problem of health care price transparency clearly. The primary challenge in health care that needs sustained attention is the pervasive lack of cost discipline. The usual political formula is to impose stricter public regulation of prices. Some changes in that regard are certainly justifiable. For instance, Medicare overpays in many settings. Also, dividing Medicaid’s costs between federal and state governments has become hopelessly distorted because of cost-shifting gimmicks. Fraud remains appallingly common in both programs.

But public regulation has limitations too. The federal bureaucracy tends to set payments for public programs based on arbitrary criteria and old data that may or may not reflect current market realities. Once in place, the rules tend to protect incumbents and discourage new market entrants. Providers then lobby to pull back the cuts based on the need to keep access high for patients. The end result will be unsatisfying and reversible half-measures.

There is more potential for lasting change from the introduction of strong incentives for providers to voluntarily cut their costs and lower their prices (or at least have them grow at a slower rate), incentivizing health care price transparency. That is what will lead to higher productivity and less waste, and thus also to cost savings without lowering the quality of care given to patients.

The first Trump administration made some progress toward such a health care price transparency solution by forcing hospitals and insurers to disclose more pricing. But those regulations, which the Biden administration supported too, are unlikely to deliver the savings that is desired, or possible, for two reasons.

First, the market for medical services is too complex for the average patient to navigate because of the lack of health care price transparency since pricing is not based on standardized sets of services. One hospital might include ancillary care in a posted price for a surgical intervention, while a competitor might exclude those services. It is not reasonable to expect a consumer to make the needed adjustments to determine the low-cost provider.

Read the full article about health care price transparency by James C. Capretta at American Enterprise Institute.