Price Transparency Is Nice, But All-Payer Is Better

November 17, 2011
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For all the talk about consumer driven medicine (it’s the basis for Republican plans  to turn Medicare into a voucher program), why doesn’t anyone talk about pricing transparency in health care? Did you ever walk into a doctor’s office where the prices of various services were posted? A hospital? At the drug store’s pharmacy counter?

For all the talk about consumer driven medicine (it’s the basis for Republican plans  to turn Medicare into a voucher program), why doesn’t anyone talk about pricing transparency in health care? Did you ever walk into a doctor’s office where the prices of various services were posted? A hospital? At the drug store’s pharmacy counter?

Legislation requiring public posting of health care prices has never seen the light of day on Capitol Hill. Yet even if it passed, the likely result would be confusion, not clarity. A sympathetic post by Jason Shafrin on his Healthcare Economist blog recommends uninsured consumers use the Healthcare Blue Book, which compiles a composite price for various hospital services based on its review of the prices insurance companies get. Armed with that knowledge, they could demand comparable charges rather than the highest rack rate usually charged the uninsured.

Imagine yourself in the Emergency Room of Suburban General Hospital. You’ve suffered a mild heart attack and your wife/husband has rushed you into the bustling antechamber. You look up on the wall to learn that Insurance Company A pays $30,000 for angioplasty. Insurance Company B pays $28,000. Medicare pays $26,000. Medicaid pays $24,000. And you, the customer right in off the street without coverage, the charge is $32,000. Don’t want to pay our rack rate? You might want to try down the street at Mother Mercy of the Poor. We understand their rack rate is $26,000, the same as Medicare.

Pricing transparency will certainly make medical consumers more aware of the high cost of medicine, and might even educate them about the inefficiencies and inequities of America’s multi-payer system of financing health care. But as a starting place for reforming the payment system, it pales besides simply moving to an all-payer pricing system where everybody, whether a private insurnace company, the government or an individual walking in off the street, gets the same price. Only then will all payers, including individual consumers, be able to focus on why Americans pay the highest prices in the world for medical services.