A market solution to health care pricing
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.
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69 comments Add your comment
Down in Albany
January 31st, 2010
8:37 am
A step in the right direction would be to hold all of the so-called “not for profit public hospitals” accountable for their pricing and resulting profits. In Albany, we have Phoebe Putney Memorial Hospital that totally monopolizes the market here. They have bought just about every practice (doctors offices and free-standing imaging centers) and now price gouge their patients. A recent example: a colonoscopy cost about $800 before they purchased the local gastro practice. The price now? About $2400! They have approx $200 million in the bank (300 days of cash on hand) and made about $18 million last year alone. In the last 9 years they have profited approx $198,000,000!
This while they sue the other hospital in the market to prevent them from providing OB services. The hospital industry needs regulating (I can’t believe I’m saying that!), but, their lobbyist group is powerful beyond belief.
Michael H. Smith
January 31st, 2010
9:14 am
What is continually astounding to me is how liberals portray people that don’t buy there government dependency ideology. Get this liberals, socialists, so-called progressives: Mankind, humanity, is not inherently good, you’ll never perfect humanity. Corporations be they sellers of insurance or Popsicle stick makers all have something in common with your wonderful government(socialist government): Corrupt people, greedy people, lying people, conniving people, even thieving people. So now, how does your political philosophy of government(socialist government) running healthcare, as in a single payer plan or any darn thing else your wonderful in government might do, if in fact your socialists government did every darn thing, rate weighed against that old nasty vile evil craven capitalists private sector?
Thought so, not one blessed bit better.
In fact, your wonderful government has no reason to do anything any better than the private sector for very, very obvious reasons: Government has no incentive, no valid reason to do any better at anything it does. It makes no difference how badly government screws up, government always remains in business. Government never faces having to produce a penny of profit to make a payroll for its lousy under performing employees, not so long as government can confiscate money anywhere anyhow it chooses to take it.
Back closer to Kyle’s blog context: I’m for any cost effect thing that provides true valid marketplace transparency.
@ Rafe Hollister
I’m one of those people who can remember very well the times and days that I paid my family doctor-GP in full right out of pocket and could afford to do so, including the cost of filling any prescriptions without great financial difficulties.
It makes me mourn to think just how much individual liberty we’ve lost in this country. Thank you, government, I’ve finally realized the one thing you have done spectacularly head and shoulders above all the rest in the private sector.
david wayne osedach
January 31st, 2010
9:58 am
The plan would certainly point out the cheapest and most expensive care.
Real Athens
January 31st, 2010
12:42 pm
Here are is a framework for FIXING not retooling or creating a “health care system”. Relatively simple, thorough, it outlines and explains problems and offers well-thought out solutions; easily explained and examples are given of why it would work.
I never hear it talked about or given credible thought. I think that’s because it is non-partisan. Seems like you have to pick a side in this debate and then defend “the side” at all costs — no matter how irrational, unreasonable, untrue claims and allegations by “the side” are. That guarantees nothing will get done.
It contains “free market” solutions that you hear Democrats AND Republicans mention as a way to do things.
It takes 15 minutes to read the entire overview.
http://www.consumerreports.org/cro/magazine-archive/august-2009/viewpoint/overview/our-prescription-for-health-care-ov.htm
Left of Center
January 31st, 2010
1:25 pm
I guess my comments are awaiting moderation, also.Have been thrown out of better dumps than this.
Filo Beto
January 31st, 2010
1:45 pm
Right turn, Clyde.
LA
January 31st, 2010
3:47 pm
“Aw, LA, I suppose your getting kicked off the Bookman blog leads you to try to get somebody–anybody–kicked off this blog.”
Nope, just proving a point that Kyle overlooked.
LA
January 31st, 2010
3:47 pm
“The amount of posts that LA pounds out remind you of anyone?”
Who?
Kyle Wingfield
January 31st, 2010
4:15 pm
Left of Center: I don’t know why your earlier comments (under a different name) weren’t getting through. You can try again. I would put the earlier ones through now, but all of them seemed to be complaints about being stuck in moderation.
Kyle Wingfield
January 31st, 2010
4:18 pm
Good discussion on this topic, btw. Like I said, there are no silver bullets but this is an indispensable element.
Hank Williams Jr.am i still under review?
January 31st, 2010
5:11 pm
I HAVE SERVED MY PROBATION, SO PLEASE MR. KYLE LIFT THE SANTIONS OFF MY NAME.
THANKS,
HANK JR.
Hank Williams Jr.
January 31st, 2010
6:01 pm
Enter your comments here
Hank Williams Jr.
January 31st, 2010
6:03 pm
THANK YOU ,SIR
Michael H. Smith
January 31st, 2010
8:55 pm
The fly in the ointment Kyle remains the prohibition of healthcare insurance sells across state lines, as you well know. Even though GHLC may do a bang-up job cost effectively without conflict of interests, healthcare consumers be they individuals or corporate will likely not be able to truly get the best care at the best price. All of which limits the real value of the service an organization like GHLC offers through no fault of its own. If ever the federal government allowed interstate sells of insurance across state lines, even this is no silver bullet. Gaps would remain in the competitive scheme of seeing that every U.S. citizen would have healthcare insurance. In my not so humble opinion privately owned, controlled and operated consumer non-profit mutual cooperative healthcare insurance entities are the best non-government means to fill any private sector healthcare gap that might remain by allowing individuals or the self-employed the same group pooling benefits and group pooling purchasing power of large corporations and self-insuring companies. In fact, some that already exist provide limited medical services of an HMO or PPO.
Pelosi, Reid and our right honorable Mr. President, Kyle, can have universal, accessible, affordable, portable healthcare for every U.S. Citizen any day of the week they truly want it, so long as it is not served on their big socialist government own and controlled platter complete with bureaucratic union waiters and waitresses.
Michael H. Smith
January 31st, 2010
9:32 pm
Oh yeah, and another thing…
This goes out to our right honorable First Lady, now engaged in the daunting fight against childhood obesity: Include a campaign to reduce daily salt intake as part of the fight for a healthier generation of leaner Americans. As it has been recently reported cutting the daily American salt consumption can be as beneficial as smoking cessation.
Cutting Salt as Good as Quitting Smoking
Half a Teaspoon Less Salt a Day Would Prevent 92,000 Deaths, 99,000 Heart Attacks, 66,000 Strokes
“The [ heart] benefits of reduced salt intake are on par with the benefits of population-wide reductions in tobacco use, obesity, and cholesterol levels,” says Kirsten Bibbins-Domingo, PhD.
The U.S. Department of Agriculture says that 77% of the salt in the American diet comes from processed food. Only 6% is shaken out at the table, and only 5% is sprinkled during cooking.
http://www.webmd.com/hypertension-high-blood-pressure/news/20100122/cutting-salt-as-good-as-quitting-smoking
Did I go out an buy a bottle of Mrs. Dash and start reading the sodium content per serving contained in every processed food thing I buy or eat after reading that article…
Ya dang tootin’, Kyle.
JDW
February 1st, 2010
8:10 am
I love it when people like Michael H. Smith at 8:54 start spouting Thomas Jefferson in defense of Repugincan and corporate philosophy. A couple of more Thomas Jefferson facts for your edification,
Thomas Jefferson founded the Democratic party. If you take a look at some of his quotes you can see why:
I believe that banking institutions are more dangerous to our liberties than standing armies. Already they have raised up a moneyed aristocracy that has set the Government at defiance. The issuing power should be taken from the banks and restored to the people to whom it properly belongs.
Thomas Jefferson
Where do you think he might stand on the current state of banks and our standing armies?
“In every country and in every age, the priest has been hostile to liberty. He is always in alliance with the despot, abetting his abuses in return for protection to his own”
Thomas Jefferson, 1814
What would he make of the religious right?
“I hope we shall crush in its birth the aristocracy of our moneyed corporations, which dare already to challenge our government to a trial of strength and bid defiance to the laws of our country.”
Thomas Jefferson, 1812
How do you think he would view corporate America today or the recent Court ruling on corporate contributions?
FUN GUY
February 1st, 2010
8:26 am
Subject: Clunker Math and Obamacare
The math sounds right to me. You could say it recognizes first
year only, but even so makes a point: many of those cars would have been
off the road over time through natural attritation.
I’d like to share the following with you:
Clunker Math:
A clunker that travels 12,000 miles a year at 15 mpg uses 800
gallons of gas a year.
A vehicle that travels 12,000 miles a year at 25 mpg uses 480
Gallons a year.
So, the average Cash for Clunkers transaction will reduce US
gasoline consumption by 320 gallons per year.
They claim 700,000 vehicles so that’s 224 million gallons saved
per year.
That equates to a bit over 5 million barrels of oil.
5 million barrels is about 5 hours worth of US consumption.
More importantly, 5 million barrels of oil at $70 per barrel
costs about $350 million dollars
So, the government paid $3 billion of our tax dollars to save
$350 million.
We spent $8.57 for every dollar we saved.
I’m pretty sure they will do a great job with our health care,
though.
First Sergeant
February 1st, 2010
8:26 am
joan1
January 30th, 2010
11:06 am
Joan1, sometimes, obesity is cause due to medical issues; also, there are some medications that have been known to cause obesity. My point is that a person’s weight probably wouldn’t be such a good approach to health care cost control. Remember, anorexia is an illness also!
First Sergeant
February 1st, 2010
10:21 am
Michael H. Smith
January 31st, 2010
9:14 am
Michael, and your point is what? Understand your discontent with “government”, but can you put a name on “government”, and stop making “cross the board comments about government”. To imply that everything govenment touches is bad, is totally ridiculous. And, if you listened to the President during the Q&A with the Republican Senators this past week, it is not his intent of trying to introduce a “government run healthcare system”. So, stop with the fabrication of untruths, because that “government run” crap has been discredited.