Increased Health Care Disclosure: Will It Help?

Increased Health Care Disclosure

The federal government has taken steps to increase the amount of information available to consumers about health care costs. Will it help?

Disclosure is currently all in rage in the U.S. healthcare system.

In recent weeks the federal government has taken a number of steps to increase the information available to consumers. Most notably:

•      The Centers for Medicare & Medicaid Services (“CMS”) has recently proposed regulations that require direct-to-consumer (DTC) television advertisements of prescription drugs and biological products to include the Wholesale Acquisition Cost (WAC, or ‘‘list price’’) of that drug or biological

•      CMS has also issued final regulation to require that hospitals make public a list of their standard charges via the internet in a machine-readable format at to update the information annually (or more often as appropriate. This is an expansion of current rules requiring the availability of such information.

•      President Donald Trump has sign two bills that ban “gag order” clauses in contracts between pharmacies and insurance companies or pharmacy benefit managers. Such provisions prohibited pharmacists from telling customers when they can save money by paying the pharmacy’s lower cash price instead of the price negotiated by their insurance plan. The Patient Right to Know Drug Prices Act applies to group plans sponsored by employers and plans offered in the individual market ( and the Know the Lowest Drug Price Act applies to Medicare plans ( These bills do not actually require disclosure of this information; rather, they just prevent insurers and PBMs from prohibiting such disclosure.

These actions are hailed by supporters as important steps in reducing health care costs for consumers. However, the author views these actions a bit more cynically: as ways for Congress and the Administration to say (in the run-up to the midterm elections) that they are acting to reduce health costs — while taking steps that, in reality, are likely to have little real effect on costs.

The author’s perspective reflects several realities that must be acknowledged in order for any this (or any other) enhanced disclosure initiatives to have any meaningful impact:

•      Low levels of health literacy (in effect, health illiteracy) remains a significant issue in America and this health illiteracy severely limits the ability of consumers to utilize any enhanced disclosure. As defined by the U.S. Department of Health and Human Services (“HHS”) health literacy is “the ability to obtain, process, and understand basic health information and services to make appropriate health decisions.” Most troublingly, HHS found that only 12 percent of U.S. adults had “proficient health literacy” and that “over a third of U.S. adults—77 million people—would have difficulty with common health tasks, such as following directions on a prescription drug label or adhering to a childhood immunization schedule using a standard chart.”

In effect, telling consumers the Wholesale Acquisition Cost of a prescription drug or they can compare the cost of different procedures across hospitals is not likely to prompt any meaning action by those consumers.

•      It is a well-established principle of behavioral economics that too much choice (“overwhelming choice”) can adversely affect the quality of decisions made, can cause stress and anxiety in the consumer, and can reduce people’s satisfaction with their decisions. In effect, throwing more information at consumers does not necessarily enhance the decisions made or satisfaction with those decisions. See, for example, this article from Harvard Business Review on why More Isn’t Always Better (

This does not mean that enhanced disclosure has no value. However, for enhanced disclosure to have an impact in an area as complicated as health care, it is the author’s position that the disclosure should consist of meaningful data that is shared with a knowledgeable and motivated intermediary. For example, retirement plan fees (in 401(k) and 403(b) plans) have decreased in the years following the implementation of 2012 Department of Labor rules requiring enhanced retirement fee disclosure. This is not to say that individual participants went shopping for “better” retirement plans. Rather, plan fiduciaries (e.g., knowledgeable and motivated intermediaries) focused on the new fee disclosures in carrying out their fiduciary responsibilities.

Which brings us back to this new wave of health care disclosures. At first blush the kinds of information now being disclosed to consumers in this new wave is information that is not necessarily useful to individuals (after all, the WAC cost of prescription drugs and hospital standard charges do not represent the actual cost paid by consumers) and was already available to knowledgeable intermediaries (such as insurers and self-insured employers). In other words, these new disclosures do not represent breakthroughs in transparency and do not seem likely to change the current market dynamics behind healthcare costs. Instead, they appear to represent advances in posturing and optics. This represents a lost opportunity — as we have seen in 401(k) fees, well thought-out disclosures can move markets — but don’t look for any real movement in drug prices based on these recent initiatives.