More Accessible Healthcare Can Only Come with Transparency
When it comes to healthcare, a lot of things happen behind-the-scenes. In the current U.S. system, for instance, it's hard for patients to find out the real cost of procedures they’re paying for. And healthcare providers and insurance companies routinely reach secret agreements to push patients toward hospitals that’ll charge higher prices. But the Trump administration's proposal to require providers to publish these agreements would lift some of this fog— helping drive down healthcare costs for Americans.
In healthcare, higher prices don’t necessarily mean higher quality. That’s the conclusion The Wall Street Journal came to when it investigated the prices for knee surgery at different hospitals. They found that the operation’s price is seldom related to its real cost, including technology and even the physicians' salaries. In a follow-up piece, the Journal found that hospitals pull other shady moves. They’ve often pushed major companies like Home Depot and Walmart away from choosing employer health insurance plans that offered employees more health provider options. This handily explains why healthcare costs for employer-sponsored health insurance have grown so rapidly.
Hospitals charge wildly different prices for the same procedure with the same quality, allowing them to inflate prices without their patients knowing. For example, a recent study from Pioneer Institute in Boston found that the total price of a knee MRI could fall anywhere from $476 to $1,423 in Massachusetts hospitals. Similarly, the patient’s contribution to a knee MRI could vary from $55 to $208. Massachusetts isn’t alone—numerous studies have shown dramatic price variation for medical procedures within the same metropolitan areas nationwide. Just within the Dallas metropolitan area, the price of a mammogram ranges from $50 to $1,045.
Giving patients access to transparent price information and allowing them to find the most affordable option will force those hospitals charging several times the cost of procedures to lower their prices. We know it’ll work, too. Free markets with transparent prices have already worked incredibly well in the one area of healthcare they've been allowed to flourish: cosmetic procedures.
Consumers pay for cosmetic procedures directly out of pocket without intervening insurance. As a result, prices for the vast majority of cosmetic services have fallen over the past two decades—even as healthcare costs overall have skyrocketed. A recent paper in the American Economic Journal found that easy access to clear price information would significantly reduce healthcare prices.
There are some concerns about the effectiveness of price transparency. One research paper found that only a small percentage of people used a price comparison tool when their insurance company provided one. The labyrinthine nature of insurance and hospital billing, too, could make it hard for consumers to find the true price of a service. And in emergency services: when someone has to be rushed to a hospital, they don’t have time to check the price menu of different hospitals in the area.
The answer is to think about a spectrum with cosmetic services (free market, no insurance involved, entirely voluntary) on one end, and, on the other, emergency services (entirely necessary, no ability for the patient to consider prices). There are plenty of procedures in the middle of that spectrum in which patients could benefit from being able to compare prices, like mammograms or routine exams. Patients should be able to compare those prices, but can’t—thanks to the obfuscated system we have now. That being said, the issue of surprise hospital bills, like when one hospital billed an emergency room patient $629 for a Band-Aid, might require regulation as well as transparency.
Healthcare is a very complicated issue, and there are many problems that drive up healthcare costs for Americans — from hospital monopoly power to prescription drug prices to inefficiently comprehensive insurance. But while price transparency isn't a health policy cure-all, it should be a central piece of any overarching plan to overhaul the healthcare system. Instead of going down the exorbitantly expensive, radical, and risky path of Medicare-for-All, policymakers should focus on making it easier for patients to know the true price of medical care, lowering healthcare costs and allowing it to become more accessible for everyone.
Alex Muresianu is a writer at Young Voices and an Akin Fellow at the Pioneer Institute, a Boston-area think tank. Follow him on Twitter @ahardtospell.