Imagine you walk into a grocery store and instead of shopping for food based on quality and price, the market does not post any prices. You fill up your shopping cart with anything that looks attractive. At the checkout stand, a third party, let’s say your employer or the government, suddenly appears and pays for your groceries.
Sounds crazy, yet that is exactly what happens when a patient visits a doctor or hospital. Whether people believe health care is a right or not, everyone can agree that medical care is a necessity of life – just like food. We don’t rely on our employers or the government to provide groceries, or the other necessities of life such as housing and clothing. Price transparency and consumer choice keeps these necessities of life competitive, providing people with a wide range of quality and price.
In the same way, in a perfect world, providers would already be posting their prices. The reality is that roughly 85 percent of health care is paid for by a third party — either employers or the government through Medicare, Medicaid, Obamacare, and the VA system. Both patients and providers are therefore cost insensitive — they have no idea what medical services actually cost.
To solve this problem, the federal administration recently ordered that hospitals must post their contractual price arrangements with insurance companies. Organized hospital associations sued to stop the regulation, but they were overruled by the courts. An appeal is planned.
To ensure that the administration’s regulation remains in place, a new law is necessary. Sen. Mike Braun (R-Ind.) has introduced a bill, the Price Transparency Act, that would require hospitals and insurance companies to post their prices. Common sense would say the bill should have bipartisan support. Unfortunately, hospital associations have been big political donors and have convinced a number of elected officials to oppose any form of price transparency.
A large part of this disconnect between prices and medical treatments is attributable to health insurance, which is fundamentally different than any other type of risk-management insurance. When people say they have “great health insurance,” they actually mean their insurance pays for everything – including vision, dental, and all first-dollar care.
The solution is to reform our health-care delivery system so that patients can control their own dollars when purchasing medical care. Health-care costs can only be controlled by patients acting as consumers, obtaining price information, and using only the health care they need. Price transparency would force providers to compete not only on quality but also on costs. Competition would drive prices down, making health care more affordable for everyone.
Critics of price transparency say that patients don’t have the time or the medical expertise to make informed health-care decisions. But studies show that roughly 90 percent of medical care is elective, meaning patients do have time to gather second opinions and research providers just as they do when purchasing the other necessities of life. Likewise, all professionals have more information than their customers or patients – whether it’s a doctor or dentist or architect or auto mechanic. That’s why we seek help and care from experts.
Americans are the smartest consumers in the world, but they need price transparency to make informed decisions. As long as someone else is paying for our health care, we will use as much as possible and not worry about costs, like filling a supermarket cart and knowing a third party is waiting to pay at the checkout. Health-care reform must include price transparency, which would allow patients to become savvy consumers of medical treatment, increase competition, and hold costs down.
Dr. Roger Stark, MD, FACS, is a Senior Fellow at the Washington Policy Center’s Center for Health Care.