Physician Jeffrey Singer–who wrote a great May piece for Reason about how government interference makes the practice of medicine less and less attractive to many doctors–is in the Wall Street Journal today with a useful article about how a medical market that actually had prices that were both known and meaningful to the consumer might function.
Singer writes of a patient who learns the very valuable lesson–if you are tenacious and don't use insurance, you can potentially get a reasonable price from a doctor:
Hospitals and other providers make their "list" prices as high as possible when negotiating contracts with health plans and Medicare regulators. No one is ever expected to pay the list price. Anybody who has seen an "Explanation of Benefits" statement from a health plan will note a very high charge from the provider, and an "adjusted charge" based upon the contracted fee schedule, which usually leaves the patient with little or nothing in out-of-pocket expenses.
This process taught us a few things. First, most people these days don't have health "insurance." They have prepaid health plans. They pay premiums to take advantage of a pre-negotiated fee schedule arranged for and administered by a third party. My patient, on the other hand, had insurance.
Second, even with the markdown for upfront "cash-pay" patients, none of the providers was losing money on my patient. Otherwise they wouldn't have agreed to the prices. With the third-party payer taken out of the picture, we got a better idea of the market prices for the services. It is the third-party payment system that interferes with true price competition, so "market clearing prices" can't develop.
Take the examples of Lasik eye surgery or cosmetic surgery. These services are not covered by insurance. Providers compete on the basis of quality, outcomes and price. And prices have continually dropped as quality an…d services have improved—unlike the rest of health care….the only way to make health care more affordable is to diminish the role of third-party payers. Let consumers and providers interact through market forces to drive down prices and drive up quality, like we do when we buy groceries, clothing, cars, computers, etc….
I have had many hospital experiences in which, contra this experience with the good Dr. Singer, even after asking very emphatically, they refused to give me the slightest clue as to what a service they were expecting me to agree to pay for cost. (These negotiations were generally with clerks rather than directly with physicians, but many of the costs of hospitalization don't directly have to do with the physician, like for example the $6,000, though they don't tell you that, decision to rest in a bed covered with a crinkly paper sheet for a half hour after a procedure.) This has applied to both customer portions while insured or just "the real price." That this is even legal always strikes me as curious under any respectable system of consumer law. But the almost constant fact of price opacity in the medical market makes any discussion of "free market failures" in it a a bitter joke. If consumers don't have to care and/or can't know prices, there is no market in an effective sense.
In the time-dimmed beginnings of this century, I bitched about health care systems at Suck.com.