Thursday, September 03, 2009

Let's Start With the Price

Price is a market signal that should reflect, over time, all the cumulative cost of the components of a product or service. As we ponder the health care system, it seems like the first thing we need to do is break down the prices we are paying to understand why they are so high. Once we understand the thing that drives the price up, we can work to address those areas with market solutions.

Royce Flippin wrote an article that I've been meaning to write for a long time. Titled "The Price is Right: How Greater Transparency Can Help Fix Our Health Care System," the article makes the case that consumers must know what the price of service is before it is rendered so that they can make an informed choice.

One of the reasons people pay so much for health care is that average people are not told what their fees will be at the time of service. And even if a patient takes it upon himself to ask, getting the full answer is far from easy: He can usually find out the basic charge for an office visit--but what about a scan or a lab test? And how about the cost of those prescription medications being swiftly scribbled down? Most likely, the doctor or his or her staff will tell the inquisitive patient he has to wait for his insurance statement--or worse, the bill--to arrive in the mail.

This is so true. I never know what something will cost before I get it in health care with the partial exception of my dentist. When he tells me how much work I need, I do get a predicted bill for the service. The dentist is forced to do this because he doesn't want to perform work that people can't pay for. It is in his interest to give me advance disclosure, so he does. Why doesn't this apply to all doctors?

In a future post, I want to post some examples of prices I've been charged for medical care that astonished me.

1 comment:

Bryant said...

I agree with what you are advocating: that greater transparency can help us better understand how to cut costs in health care. Still, I have a hard time believing that it would make much of a difference. The problem is that, for those of us with insurance, anyway, there is a disconnect between what we pay and what we receive. If I undergo a surgical procedure that the hospital charges $50,000 for while I only pay $1,000 and the rest is paid by my insurance, how much of an incentive is there for me to shop around to find the cheaper hospital willing to charge $49,000?

Some years ago, where I worked, our insurance managing company tried to encourage our employees to save money by making us aware of the costs of name-brand vs generic drugs, the costs of doctor visits, etc. So now I am sure to ask the pharmacist for a generic version. But I still let my wife take the kids in to the doctor for every little sniffle, because it doesn't cost me that much. Satisfying my wife's desire to have a doctor diagnose every cold is worth the co-pay amount to me. It makes everyone pay more, however.