Why Aren’t Health Care Prices Transparent?

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President Donald Trump and Department of Health and Human Services Secretary Alex Azar are taking steps to increase price transparency in the U.S. health care system. We couldn’t agree more on the need for more transparency, yet one needs to ask why health care prices aren’t as transparent as they are in virtually every other sector of the economy.
That lack of price transparency doesn’t even include the whole health care system. Consumers have easy access to prices for over-the-counter drugs, many of which are made by the same manufacturers that make drugs needing a doctor’s prescription.
Cosmetic surgeons are able to give patients a fixed, all-inclusive price for various procedures without the threat of “surprise billing.” Ophthalmologists are very open about the price of Lasik eye surgery—they even advertise sales for their services.
And there is a small number of “direct pay” surgery centers that list their prices for all to see and compare.
So why aren’t prices readily available for other health care products and services?
The answer is our third-party health insurance system, whether we’re talking about Medicare, Medicaid, employer-provided or individually-owned coverage.
Note, insurance itself isn’t the problem. If health insurance indemnified individuals when an insurable event occurred—as auto insurance and homeowners’ policies typically do—there likely would not be a dearth of pricing information.
Consumers spending their own money, whether they had worked for and saved it or an insurance company handed them a check, would want accurate prices. And many would likely do some comparison shopping. Indeed, many already comparison shop when they are paying out of pocket for care.
We might even see hospitals claiming they would meet or undercut any other hospital’s published prices.
If consumers, rather than health insurers, controlled the money, they would have a reason to choose providers and facilities they thought would provide the best value for their dollars—a calculation that requires weighing price, quality, convenience and other factors based on the consumer’s preferences.
By contrast, what we have is a system where patients must meet a deductible and, if the care is extensive, an out-of-pocket maximum.
If a patient has, say, a $3,000 deductible and a $5,000 out-of-pocket maximum, what does the patient care if a proposed surgery is $10,000 or $20,000—or even $50,000? He or she would face the same out-of-pocket maximum regardless.
Like President Trump, we think health care prices should be widely available. He is trying to move us in the right direction.
But we think that goal would be reached quicker and more efficiently if consumers, rather than the government, were demanding the change.

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