News Release
Setting Hospital Prices Can Achieve Greater Savings Than Increasing Competition or Price Transparency
Feb 18, 2021
The authors analyze the spending impact of policy options to reduce hospital prices paid by private health plans, with various design choices and effectiveness levels for each approach. They estimate that price regulation could have the largest impact on hospital prices and spending but would likely face political challenges, while improving price transparency and competition could help reduce prices—but to a lesser extent than price regulation.
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Hospital spending—the largest health spending category in the United States—accounts for one-third of national health expenditures; in 2018, U.S. hospital spending totaled $1.2 trillion. In response to high health care spending and concerns about affordability, policymakers have proposed a variety of reforms to increase health insurance coverage and modify how providers are paid. In this report, the authors analyze the spending impacts of policy options to reduce hospital prices paid by private health plans. The authors estimate the potential impact on hospital prices and spending for a range of policy designs and assumptions for each option.
The authors consider three policy options—regulating hospital prices, improving price transparency, and increasing competition among hospitals—with various design choices and effectiveness levels for each approach. They estimate that price regulation could have the largest impact on hospital prices and spending but would likely face political challenges, while improving price transparency and competition could help reduce prices—but to a lesser extent than price regulation.
Chapter One
Introduction
Chapter Two
Options to Reduce Hospital Prices
Chapter Three
Rate Regulation
Chapter Four
Price Transparency
Chapter Five
Increasing Competition
Chapter Six
Other Effects of Reducing Hospital Prices
Chapter Seven
Conclusion
Appendix A
Technical Specifications
Appendix B
Detailed Results
This research was funded by a grant from Arnold Ventures and carried out within the Payment, Cost, and Coverage Program in RAND Health Care.
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