Fictional Grandmother Reveals Need for Health Care Transparency
The net news was abuzz yesterday over a made-up grandmother shopping around for a new hip and the difficulties she faced in getting a price quoted over the phone for the surgery. The New York Times "Well Blog" summed it up rather nicely:
The quotes she received might surprise even hardened health care economists: only about half of the hospitals, including top-ranked orthopedic centers and community hospitals, could provide any sort of price estimate, despite repeated calls. Those that could gave quotes that varied by a factor of more than 10, from $11,100 to $125,798.
Predictably and justifiably, there is a call for transparency in pricing for health care services. But the more we do to insulate patients from the true cost of their treatment, the more we encourage hospitals to keep prices on a sliding scale that varies with their ability to pay.
Patients with health insurance and fixed copays have absolutely no incentive to shop around for "good value." Rather, they seek out the best possible care that will be covered by their insurance company. Meanwhile, hospitals have strong incentives to keep prices hidden and elevated so long as they draw the bulk of their water from the deep wells of the insurance companies.
The result is a total lack of transparency and the extraordinary inflation of health care costs that we have seen over the past twenty or so years. But we aren't just paying for this with greenbacks, it's killing us.
There are two ways to begin solving the problem. The first (and far more likely to be enacted in today's political climate) is a federal mandate requiring hospitals release up-to-date information on prices and quality measures like safety scores and accident rates, among others. This alone would encourage health insurance companies to do the research for us, "recommending" certain hospitals by refusing to cover procedures at those that don't measure up.
Another way-and one that would empower the consumer—is to reestablish a connection between who receives the care and who pays for it, at least in part. It's more possible and less draconian than it sounds. Singapore, for example, has a universal health care system that charges out-of-pocket fees for each and every service, discouraging wasteful "just-to-be-sure" visits and encouraging value-shopping.
Private versions of Singapore's health savings account system are already working well in the United States, and would be a cheaper alternative to Obamacare.