Understanding health care price variation: evidence from Transparency-in-Coverage data.

Abstract

Competition in health care markets should lead to lower prices and less dispersion, with consumer choice as the driving mechanism. Several studies document price variation, suggesting room for improvement; however, they relied on selected data from insurers who provide access to data, limiting generalizability. We document the nature of price variation in the private US market across geography, payer, and provider by leveraging a new dataset, implementing a descriptive analysis using the most comprehensive data available: Transparency-in-Coverage. We measured health care prices in 3 ways: percentile distribution prices for common services, state-level and insurer-level facility fee price indices, and regression-adjusted mean inpatient and outpatient prices. Variation is large: the mean facility fee for a foot X-ray, for example, is $86 at Anthem and $190 at UnitedHealth. Pricing does not appear to be uniform; there is just 22% correlation between an insurer's inpatient price and outpatient facility price. And there is little difference in ordering of high-price states depending on alternative measures, such as relative to Medicare. Results suggest greater consideration of policies to address high and variable prices for US health care.