Regulating Through Information: Disclosure Laws and American Health Care

Posted: 9 Aug 1999

See all articles by William M. Sage

William M. Sage

Texas A&M University School of Law

Date Written: 2000

Abstract

Efforts to reform the American health care system through direct government action have failed repeatedly. This article evaluates an alternative strategy that has emerged from these experiences: requiring insurance organizations and health care providers to disclose information to the public. Mandatory disclosure laws have become a focal point of current health care regulation, particularly as a response to the growth of managed care. The article traces the current popularity of disclosure laws to several developments, ranging from technical advances in health policy research to changes in social attitudes towards government. The article identifies four arguments for mandatory disclosure in health care, associates each with evolving trends in the law, and analyzes their implications for public policy. The article reveals that the most commonly articulated goal of disclosure laws, improving the efficiency of private purchasing decisions by giving purchasers complete information about price and quality, is the most complicated operationally. Other justifications for disclosure laws hold greater promise, but make different, sometimes conflicting assumptions about sources and uses of information. For example, using disclosure to ensure that intermediaries upon whom patients and consumers rely are in fact serving their interests suffers from potentially crippling ambiguities because agency relationships in health care are not limited to contractable matters. Similarly, public disclosure can stimulate innovation and improve the performance of the health care system in achieving organizational and national goals, but setting those goals implies influencing rather than honoring consumer preferences. Finally, although information can expose to democratic deliberation the social tradeoffs implicit in current health policy -- including public investment and procedural fairness -- the welfare consequences of transparency are indeterminate. The lessons that emerge from the article's analysis have implications not only for health care, but for other regulated practices and industries.

Suggested Citation

Sage, William Matthew, Regulating Through Information: Disclosure Laws and American Health Care (2000). Available at SSRN: https://ssrn.com/abstract=169275

William Matthew Sage (Contact Author)

Texas A&M University School of Law ( email )

1515 Commerce St.
Fort Worth, TX Tarrant County 76102
United States

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