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    Replacing ObamaCare: Price Transparency

    While defending ObamaCare before the Supreme Court, Solicitor General Donald Verrilli kept returning to one larger point: the health care market is different. Unique, even. What he failed to mention is that every market is unique and different. Perhaps he meant that the health care market is important

    That’s perfectly accurate. However, that just means we need to do health care reform the right way. Handing the government extraordinary power just to say that we’re “doing something” is foolish if we’re only making things worse. Certainly, we need to do something. Conservatives have plenty of ideas about how to reform health care, such as Representative Paul Broun’s (R-GA) Patient OPTION Act.  

    Last time, I discussed full tax deductibility for health care expenses. This time, I would like to explain why we need price transparency in health care. Price transparency simply means that hospitals and physicians would display for all potential customers the prices they charge for appointments, treatments, and procedures. Price transparency is a common sense reform that will increase competition, provide more information to patients, and discourage price discrimination in health care.

    Think of a typical trip to the grocery store. The price of every item is clearly displayed, so you know how much you’ll pay at the register before you get there. Better yet, if you believe that something is overpriced, you can do some comparison shopping to find the best price in the area.

    What about a hospital? Chances are that you have no idea how much the closest hospital would charge you to see a doctor about a staph infection, or to mend a broken leg. Comparison shopping is impossible if you don’t know what you’ll owe until after you see a physician or undergo an operation. Implementing price transparency will provide patients with the same information that they would receive in a grocery store, thereby empowering patients with the knowledge necessary to act like consumers.

    Competition is at the heart of any market, but competition requires comparison shopping by consumers. How else will businesses be rewarded for efficiency, lowering costs, and improving the quality of their products?

    Furthermore, price transparency discourages price discrimination between the insured and uninsured. One example would be if a hospital charges the uninsured $2000 and the insured $750 for a procedure. Chances are that the public reaction would be negative, which would result on pressure to reduce or eliminate that price discrimination.

    Similar to medical malpractice reform, price transparency is a health care reform best left to the states. The conservative American Legislative Exchange Council has created a “Patient’s Right to Know Act” price transparency bill modeled on Wisconsin law. Furthermore, the Arizona state legislature voted on price transparency proposal SB 1384 just this year. Good proposals are on the table, they just need a stronger push behind them. However, if we move toward a patient-centered, consumer-driven health care system, price transparency legislation may not even be necessary. After all, are there any laws on the books that require grocery stores to publish their prices? If patients control the dollars, hospitals will respond to their demand for price transparency.

    Perhaps the success of entrepreneurial health care providers who already have transparent pricing will place some urgency behind hospitals and these state proposals? Solantic, a chain of urgent care clinics founded by entrepreneur (and now Florida Governor) Rick Scott, publicly posts its prices. While other health care providers force patients into a passive, dependent position with regard to their own care, Solantic respects its patients as customers and acts accordingly. The clinics even maintain a guarantee that if you don’t feel better after three days, your follow-up visit is free. The success and growth of Solantic has demonstrated the popularity of price transparency and consumer-driven health care.

    The Surgery Center of Oklahoma is another example of a successful entrepreneurial effort to implement price transparency in health care. The clinic simply posts their prices on their website, and those prices are often between 100% to an astonishing 300% lower than most major hospitals. The clinic is drawing in both the insured and uninsured, not to mention out-of-state and even foreign patients. Needless to say, the Surgery Center of Oklahoma’s price transparency system has been a major success. 

    A report by the Congressional Research Service states that empirical evidence shows “price transparency leads to lower and more uniform prices, a view consistent with predictions of standard economic theory.” Furthermore, the report explains that greater price transparency could “lead to more efficient outcomes” and “allow patients, either directly or through their physicians, to obtain better value for health care services.”

    Ultimately, patients are consumers in the health care market. We know that markets work, if the government doesn’t interfere too much. Markets are efficient, productive, and improve quality while reducing costs over time. 

    Unfortunately, the health care market is one of the most heavily regulated markets in the United States, and ObamaCare has only exacerbated this problem. In repealing ObamaCare, we must also make health care function like other markets. Price transparency is an important step toward patient-centered, consumer-driven health care.

    2 comments
    Jim Dumas
    04/16/2012

    Though I agree in part with what was written, one very important point was not touched on. Pre-existing conditions. A favorite with the insurance companies. This is one area that should be dealt with...before anything else. Because, IMO, this is what is killing a lot of us, and causing people to have to do without insurance. Things that we had ten, twenty years ago, crop up again and guess what, insurance won't cover it.

    As far as "shopping around for the best price", there are cases when you just don't have that option. You're having a heart attack, you want the closet...which may not be the cheapest, hospital. And then again you also get what you pay for. There is a lot that can , and should have, been done decades ago. This is something that Obama is at least trying to fix, problem is nobody likes it.

    BarryCooperLouKY
    04/16/2012

    This situation is really quite simple, and only made complicated when you attempt to insert a mind capable of the reason into the closed, dark and stinky confines of conventional dialogue on this subject.

    I wrote a ten paragraph summary of this topic several years ago, and nothing has changed: http://www.goodnessmovement.com/files/Download/Notes--31--healthcare%20i...

    What you miss in this piece here is that if something is covered by insurance, people DON"T CARE what it costs. The connection between their insurance premiums and the delivery of healthcare is unclear to them. Most people do not pay the bulk of their insurance premiums--they are paid by their employers--so even though they in fact are paying whatever the doctors are charging, they don't know it.

    Two simple reforms would fix all our problems: prohibit States from preventing insurance competition, which includes their preventing insurance carriers from selling directly to end users, which is the sort of thing the Commerce Clause was actually intended to enable; make insurance premiums tax deductible, provided coverage is never dropped. This will incent people to keep their coverage.

    Quite obviously, a core reason people drop coverage in the first place is that it either cannot be bought at all (i.e. self employed people in Blue states that require you to get coverage from your employer), or it is prohibitively expensive (COBRA, again, in places whose lack of competition means catastrophic insurance is not available for individuals).

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