Reducing healthcare costs in the United States: Does price transparency help?

Background: Price transparency in healthcare is gaining popularity as a strategy to reduce costs by fostering cost-conscious consumer behavior and enhancing competition among providers. Despite these intentions, the effectiveness of price transparency tools in reducing overall healthcare spending at the individual and system levels remains uncertain. This creates significant gaps. Moreso, there is limited recent evidence on how these tools affect different stakeholders, including patients, providers, and insurers, and the conditions under which transparency leads to impactful cost reductions. Methods: We conducted a literature review to synthesize evidence on the impact of price transparency on healthcare costs, focusing on studies that assessed their effects on consumer, provider, and purchaser behaviors and outcomes. Results: The findings revealed that the impact of price transparency on healthcare costs is mixed. Positive impacts were observed when patients used price information to select lower-cost services, resulting in savings for both consumers and insurers. Disclosure of negotiated prices often led to increased competition among providers and price reductions for shoppable services. However, other studies reported negative or negligible effects, with limited consumer uptake, minimal influence on provider pricing, and no significant reduction in overall healthcare spending due to persistent market factors such as limited competition and price adjustments by providers and less usage by consumers. Implications for Policy and Practice: These findings suggest that price transparency alone may not be sufficient to achieve significant reductions in healthcare costs. For transparency strategies to be effective, policymakers must ensure that they provide actionable and easily interpretable cost and quality information, target engaged consumers and focus on services where price shopping is feasible. Future research should explore the contexts in which transparency is most effective, including which types of services and patient populations are most likely to benefit. There is also a need to assess long-term effects on provider pricing behavior, market dynamics, and the integration of quality metrics with price data to guide consumer decisions. Conclusion: Price transparency tools have shown potential to influence consumer and provider behaviors, leading to individual cost savings. However, their impact on overall healthcare spending is limited and inconsistent. To maximize their effectiveness, price transparency initiatives should be part of a broader strategy that includes regulatory oversight and value-based care models. Without these complementary measures, the potential of transparency to curb healthcare costs may remain unrealized.