American patients are fortunate — they have access to the greatest health care system in the world. Unfortunately for many, the cost to access that care can be prohibitively high.
It is ironic that in the world’s largest free-market economy, government control and a lack of true market forces have led to diminished sophistication among medical consumers and runaway health care costs. Uwe Reinhardt, a professor of political economy at Princeton University, frames the problem by stating, “To move from the present, chaotic pricing system toward a more streamlined system that could support genuinely consumer-directed health care will be an awesome challenge. Yet without major changes in the present chaos, forcing sick and anxious people to shop around blindfolded for cost-effective care mocks the very idea of consumer directed care.”
A lack of transparency has created a system where customers don’t have the ability to hold providers and payers accountable. We have reached a point where even doctors and nurses and other providers have difficulty in being cost- conscious because nobody really knows what anything costs anymore. In a system like this, double-digit cost increases are a given from year to year, making health care coverage unattainable to millions of Americans.
A more transparent pricing system would help give providers and patients more control over their health care dollar, but there are great incentives for providers to keep consumers blindfolded. For instance, every year hospitals normally raise their list prices for services. Because hospitals can increase their net revenue by raising their list prices (due to a mix of third-party private payers and public payers ultimately pay the bill), the incentive is to increase their list prices. But hospitals also negotiate discounted payments for patients covered by certain health plans, and these discounted amounts are not always available to individuals that may be interested in self-pay.
Additional breakdowns of hospital operating costs and how that impacts billing could be essential information to a consumer as they try to select the lowest cost provider. Since this information is obscured, the consumer can exert no pressure on a hospital to implement a rational pricing structure.
What happens when pricing information is available to consumers? The results can be dramatic. When the Medicare Prescription Discount Drug Card was introduced in 2004, seniors could log on to Medicare.gov and see the cost comparison of what the drugs cost at area pharmacies. Seniors could determine whether it would be cheaper to get the drug at pharmacy A or pharmacy B. And then the market reacted. Pharmacies and other organizations that sponsored different discount cards began to increase the discounts on some drugs when their competitor’s information was available to consumers. This is how the system should work every day.
Even some health plans are getting into the transparency game. Aetna’s health plan has initiated a pilot project in Cincinnati, Ohio, that gives enrollees information on what doctors charge and gives enrollees the ability to take action before services are performed. This type of information is vital to hold providers and plans accountable for what they charge and what the patient pays.
Giving new consumer- based coverage options, like Health Savings Accounts, the opportunity to plug into a fully transparent system would transform the American health care system in a radical manner, improving care for all Americans, rich and poor. Patients with portable health care dollars that can be paid at point of service are extremely attractive to most health care providers who normally have to wait for an insurance company to process the claim and remit payment months after the service has been rendered. To attract the business of these patients, providers could list their charges, competing for business on price and quality. With nearly 3 million enrolled in HSAs to date and the number growing, health care providers and hospitals would be wise to allow transparency to pervade the system to ride the coming consumer wave.
Congress can play a role in leveling the playing field in favor of the health care consumer. HSAs should be supported and made more attractive to consumers by increasing their portability and maximizing the tax benefits of these accounts. Congress has already established several quality reporting programs that are available to the public the same should go for medical costs. Congress should take the lead in developing a collaborative approach with all provider stakeholders to make the costs more transparent to consumers. Yesterday, the House Energy and Commerce Committee took a positive first step in this dialogue by holding a hearing on how we can improve the quality of information available to health care consumers. The Greek dramatist Sophocles said that, “wisdom outweighs any wealth.” The American health care system needs a healthy dose of wisdom that consumers can deliver given the chance.
Rep. Michael C. Burgess, Texas Republican, is a member of the House Energy and Commerce Committee, sitting on the Health, Energy, and Oversight and Investigations subcommittees. He also is an obstetrician/gynecologist.