There are no silver bullets for fixing health care, but few things come as close to the mark as price transparency.
A great health market failure is a lack of clear pricing that patients can use to compare providers. The tax code’s unequal treatment of health spending doesn’t help. But so many ills flow from our byzantine pricing method: fee schedules under which doctors charge different prices to different patients, flat co-pays that discourage rational decision-making.
Big companies buy most of the private health insurance in this country. But, unlike with most other purchases they make, they don’t really know whether they’re getting a good deal. They are in part buying an assurance that the insurer has negotiated the best prices from the best network of doctors.
But even the insurers themselves aren’t quite sure about the value they offer; they can’t compare fee schedules with their competitors without colluding. Ditto for the providers.
The result is a system that not only discourages but prevents patients from getting value for money.
Georgia, however, may soon lead the nation in shaking up this system. And the private sector is taking the lead.
It’s doing so through the Georgia Healthcare Leadership Council, an association formed by big companies that buy health care for their workers.
GHLC will collect health-spending data from participating employers. It will aggregate the data by the type of care received — either by single instance (e.g., an annual physical) or by treatment of an entire episode (e.g., a pregnancy).
Then, it will report back the range of prices and average price for each treatment within a given market.
What employers do with that information is up to them. But just having the information could be revolutionary.
“Even if people wanted to make good pricing choices, they couldn’t,” says Mike Cadger, a longtime health executive who leads the new venture. “We think we can take all this complex stuff and boil it down where people can understand it.”
Whether it’s through GHLC — which offers its new service only to firms with 1,000 workers or more — or something else, this is health care’s future.
Once employers know how much health care really costs, they could eliminate provider networks and co-pays, offering instead to cover the market-average price. Employees could pay extra to keep seeing a doctor who charges more. Or they might be allowed to pocket the difference if they choose a less expensive provider.
And before you fret about sacrificing quality for price, know this: The early evidence, GHLC says, is that the best doctors charge the lowest prices.
That’s in part because they tend to see more patients — consumers can’t compare prices, but they do ask friends whether they like Dr. Smith. And it’s in part because, Cadger says, “In health care, when a provider screws up” and has to do further work to fix the mistake, “the patient pays for it.”
If the best doctors are charging lower rates, we need no further proof that this market isn’t working right.
Price transparency changes everything. Patients, not an insurer or government bureau, can decide how to spend their health dollars. We can more easily detect fraud (no more doctors billing five insurers for a total of 30 hours a day).
Get this wrong, and no government action can make a difference. Get it right, and no government action is needed.