The one aspect of health insurance that the Affordable Care Act did not address is the cost of health care services. Without a governor on the prices that doctors and hospitals can charge, the health insurance companies must constantly increase their rates to cover the cost of health care expenses that seem to rise faster than the national average for inflation. One way to reign in the ever increasing costs of health care is by providing consumer information on the cost of health care services through price transparency. The Health Care Transparency Project has started an online petition to request the Trump administration implement price transparency for consumers.
Free Markets Must Have Price Transparency
The two ways a society can slow the increase in health care costs are either by government maximum rates a provider can charge or using the market place to allow consumers to choose lower cost providers for their health care services. Medicare on the national level sets reimbursements for thousands of different health care procedures. With Medicaid, Medi-Cal in California, the state can set reimbursement levels. Because of the low reimbursement rates in Medi-Cal, there tends to be a shortage of doctors who are willing to accept Medi-Cal patients. This comports with the economic theory that when you cap prices you will create a shortage of goods or services in the market place.
Health Insurance Companies Negotiate Their Prices
In the commercial or private health insurance market, members of health plans rely on the health insurance companies to negotiate health care cost prices. The health insurance companies enter into contracts with providers for a variety of their health insurance markets such as large group, small group, and individual and family plans. In an effort to control costs and keep the premiums low, health insurance companies have tried to reduce the reimbursement rates they pay in-network providers for their individual and family plans. Many providers, recognizing that they can receive higher negotiated reimbursement rates for small and large group members, have opted out of accepting the individual and family plan insurance coverage offered through Covered California and off-exchange.
Health Care Consumers Shop For Services
One idea floated by Republicans after the repeal of Obamacare is to replace it with High Deductible Health Plans. The theory is that if consumers are forced to shop for the lowest price for their health care services they will choose the lower cost services available to them. If providers such as doctors and hospitals want to maintain their market share, they will have to lower their prices. The flaw with this theory is that it assumes that consumers can get accurate health care prices. It is virtually impossible to get a reasonable cost estimate for most procedures especially if they are done in a hospital.
No Competition In The Health Care Market
Providers are not being forced to compete in the market place for the dollars of health care consumers because they don’t have to reveal how much they charge. There are actually confidentiality agreements between the insurance companies and the providers not to reveal the reimbursement rates paid by the insurance company to the doctors and hospitals.
Until there is price transparency in the health care market place, consumers can not actively participate in making decisions for their health care services based on their out-of-pocket costs. This is a basic principle of free market economics. Consumers must have access to prices just as a shopper does when walking down the fruit and vegetable row at a farmer’s market. Most states require an auto repair shop to provide a written estimate of the repairs.
The Health Care Transparency Project has started an online petition to request mandatory price quotes for health care.
- Why are our health care premiums the size of a car or mortgage payment?
- Why are we spending more out of our own pocket but getting less?
- Why do we worry even routine medical bills will wreck our finances?
U.S. health care is expensive is because there is no price competition for underlying medical services. This is because hospitals and insurance companies hide the prices until after the service has been performed (preventing consumers from comparison shopping in advance). They have rigged the system to maximize their profits.
We believe consumers (rather than government or the so called health care experts) are the best qualified people to make decisions on the products and services they want, and the price they are willing to pay. They just need a fair opportunity to make the free market work for them.
To address the above, we are lobbying to get initiatives on state ballots (for the 2018 election) mandating binding price quotes for non-emergency medical services. These quotes would involve the following:
- A clear explanation of the services (or potential services).
- A written estimate for those services:
- What the hospital charges
- What the insurance company will reimburse or credit against a deductible or coinsurance
- The patient’s financial responsibility (if any) for the difference.
- An acknowledgement that any medical services delivered without a price quote will be provided to consumers free of charge.
- An acknowledgement that any requests for insurance reimbursement rates which are not met will be reimbursed at 100% of the consumer quoted rate, with consumers owing nothing.
We expect to get an estimate before we take our cars in for repair—why shouldn’t we expect the same when we go to see the doctor?
If you agree with the above, please sign our petition and visit the below links to learn more on how you can help support this cause:
Online Fundraising: https://rally.org/showmetheprice
Consumers Can Drive Down Health Care Costs
As a group, consumers are not dumb. Given good pricing information, there will be consumers who choose a lower cost provider. But consumers are not given that information. If consumers were supplied with the accurate costs that they would need to pay for health care services from a variety of providers, there would a certain percentage who would select a provider with a lower cost. As it is now, patients automatically go to which ever facility their doctor recommends for the procedure or treatment.
I’m under no illusion that all health care consumers will automatically shift to the lowest cost provider. But if a sizeable percentage makes a decision to use a provider who charges them half the cost of the name brand hospital, imaging facility, lab, or surgery center, we will see providers respond with lower prices. Currently, hospitals are usually the most expensive place to receive a health care treatment or procedure. The high-profile hospitals command the highest prices. The consumer has no clue that another hospital or out-patient facility may offer the same procedure for half the cost. Health care price transparency is one step toward slowing down the cost of health care services which is a significant factor in escalating health insurance premiums.