The Secret of Healthcare Prices: Why Transparency is in the Public Interest

Abstract

In 2018, California lawmakers sought to design and create a state Health Care Cost Transparency Database, an all-payer claims database (APCD), to collect information on the cost of health care in the state. The law tasks the Office of Statewide Health Planning and Development (OSHPD) with designing a database to best fit the needs of the state. Of specific interest for this project, California’s APCD may collect information about amounts paid for health care services, including data about negotiated rates between insurance plans and providers. Many health care providers and payers seek to maintain the confidentiality of these paid amounts as trade secrets, claiming their secrecy provides a competitive advantage. Yet the public has begun to demand greater price transparency in health care.This report examines the legal and economic implications of collecting and releasing these paid amounts, reviews the practices of existing APCDs, and concludes with recommendations for California’s policymakers about best practices to ensure the effective use of increased transparency to control costs and increase access to health care services.

Keywords: health care prices, all-payer claims database, insurance, price transparency, trade secrets, negotiated rates, competition, antitrust

JEL Classification: H75, I00, I1, I11, I13, I18 I19, K32, P46