If you are tiring of the green energy revolution and can’t quite get on board with the mission to Mars, yet still would like to join a worthy cause with the potential to transform millions of lives, allow me to make a recommendation: transparent hospital pricing. It may sound less ambitious than big spaceships, but in a services-oriented economy, it is at least as important.
It is hard to get a straight answer about prices for medical procedures in the US, unlike in much of the rest of the world. The US also has some of the world’s highest health-care costs, in part due to insufficient competition.
Greater price transparency doesn’t have to cost much money upfront, as most of what is required is attention. A critical majority of Americans — including doctors, patients, politicians, media and hospital board members — needs to insist on this outcome.
And I do mean insist. Just as, at some point, a critical mass of Americans demanded that the US end the Vietnam War. Otherwise, change is very unlikely to happen.
Some parts of the Affordable Care Act provided for transparent hospital pricing of individual services, and further regulations took effect in 2021. These were steps forward, yet the law has not turned the tide. It does not price packages of services, and it does not make it easy to compare one provider to another.
Recent research shows it is hard to even get a single consistent answer from a single provider. For instance, prices posted online and prices quoted over the telephone do not correlate very closely. For 41% of hospitals, the price difference was 50% or more. Clearly, suppliers aren’t really trying.
The incentives of hospitals are not set up to encourage transparency. They often have some degree of market power and profit from price discrimination. Meanwhile, their customers are often paying through third parties, which are often bureaucratic federal and state governments. The upshot is that people do not always make their healthcare decisions in a bargaining frame of mind.
In any case, further efforts are needed. One simple first step would be a law stipulating that price transparency, including in the comparative sense of that term, be part of the fiduciary duty of hospital board members. That alone won’t solve the issue, but some board members would undoubtedly step forward to support such laws, rather than trying to evade their impact. It would be harder for the other board members to oppose them.
There is also a bipartisan health-care price transparency bill that was introduced last summer. President Joe Biden’s administration is proposing additional rule changes to further healthcare price transparency. Both are positive steps.
If all this sounds like too much government intervention, keep in mind the current non-transparent system is very much the product of ill-conceived government intervention, including regulations, entry barriers and trillions of dollars of public money. Most of those policies are not going away, so addressing these problems is going to involve some positive use of government. At the same time, a broader cultural revolution will be necessary.
What if there were regular news coverage of the comparative transparency and standardization of hospital prices? Or more explicit and accessible quality ratings? Or a prominent non-profit, run by medical professionals, devoted solely to making price and quality more transparent? Employers also could evaluate health insurance companies based on their performance by these criteria, much as they currently use ESG analysis. There could be an index of progress, like those national debt clocks one sometimes sees.
Is it absurd to hope that this topic might regularly trend on social media? What if there were public marches in front of hospitals (they can chant, “How much cash for a heart bypass”)? Who will be the Greta Thunberg of price transparency?
Don’t think this struggle is impossible. There are some areas, such as plastic surgery and Lasik surgery, where it is easy to get a price quote upfront. And the presence of insurance carriers need not be a barrier; getting price quotations for car repairs or veterinary services isn’t so hard.
One advantage to price transparency is that some initial transparency begets further transparency. If your friends or internet-based intermediaries can call around and get price quotations, that information will spread rapidly. You are more likely to know what a brain MRI “ought to cost,” even if you’ve never had one. At some point, there will be a positive cascade of competition and transparency.
Hmm. I wonder if that will fit on a T-shirt.
A message from Advisor Perspectives and VettaFi: To learn more about this and other topics, check out our full schedule of upcoming CE-approved virtual events.
Bloomberg News provided this article. For more articles like this please visit
bloomberg.com.
Read more articles by Tyler Cowen
