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Consumers May Draw Wrong Conclusions From Medical Prices

Some health policy experts and consumer advocates are pushing for greater transparency in the pricing of medical good and services.  If consumers know the price of an item, so the thinking goes, they’ll make smarter decisions about whether they need it.

But a new study in the Journal of Consumer Research suggests that consumers’ perceptions of prices could lead them to the wrong conclusions. At a low price, something like a flu shot signals “great communal benefit – an item that is accessible because people need it to be healthy,” the authors said.  “Conversely, high prices signal reduced accessibility and hence less need.”

That kind of thinking can lead to bad, possibly dangerous, health decisions if consumers decide there’s less risk in foregoing higher-priced health products and services.

“Price and risk should be very independent from one another, when you think about consumers making informed health care choices,” said Janet Schwartz, a professor in Tulane University’s A.B. Freeman School of Business and a co-author of the study.  “But now we see that they are very dependent on one another, in the same way that price and quality are very dependent on one another, and that can lead to some inconsistencies in health care purchases.”

To understand how and why consumers react to prices, the authors presented two flu shot prices to two groups of people. One group was told the price was $25 and other was told $125. Even though everyone was told their insurance would pay for the vaccine and that it would be good for individual or public health, price was crucial. Participants were “more likely to believe that low price reflects high communal need for the vaccine,” while high prices translated as less accessibility and therefore less need.

The study raises a cautionary flag for policymakers: Making price information available isn’t sufficient. “Increased consumer education” about need and risk are also required, the authors said.

For now, medical price transparency is more dream than reality. It’s hard, if not impossible, to comparison shop, because hospitals and doctors typically don’t post prices in the way retailers do and often charge varying amounts for the same services. Jeanne Pinder is among those consumers trying to do something about this. The former New York Times reporter runs a new website called Clear Health Costs. It presents the highest and lowest sticker prices of various medical procedures, from blood tests to mammograms, and leaves the rest up to the consumer.

“I’m not going to tell you what to do with this information,” Pinder said. “But I am empowering you with this information.” The site offers the Medicare price as well as what’s been reported at various hospitals and medical practices. So far her site looks at 20 different medical procedures offered by providers in New York City and San Francisco.

Pinder said “as we head down the road towards this thing called ‘consumer-driven health care’ we want to know what that really means and in order to do that, as consumers, we need to know how much it costs.”