Attention Health Care Shoppers!

November 10th, 2013 at 10:54 pm

I found this article by Elisabeth Rosenthal in today’s NYT to be extremely resonant and sensible.  It’s written at the intersection of a) the reality of “shopping for health care,” including drugs and treatments, and b) the frequently heard admonition that the best way to reduce our bloated health costs is through consumer-driven price competition.

If you’ve ever found yourself at that dangerous intersection, I suspect you’ll nod rigorously throughout this piece.  Of course it’s true that price competition and price signaling play critical roles in capitalist economies.  But as I constantly point out here at OTE, health care is not a normal market.

I just shopped around for a suit and got a great bargain.  Compare that activity to the time I rushed my injured kid to the MD’s office with what I thought might have been a broken limb.  The MD sent us downstairs to an independent lab for an X-ray.  We were told we could shop for one that was cheaper, but no one will do so with a hurt kid in tow, and anyway, we had no idea how much our insurance would cover.  I challenge you to find me a parent who’s going to stop and shop in that situation.

Or the time I developed a horrible toothache on a Friday afternoon in DC.  I finally found a dental surgeon to pull the tooth and—I’m not making this up—as I was in the chair with the (absolutely wonderful) gas about to knock me out, they were handing me bills to sign.  I suppose I could have said, “Hold on!  I’m going to call around and see if anyone will beat this price,” but all I cared about was stopping the pain.

Of course there are non-emergencies where you theoretically have time to engage in price comparisons, the simplest of which—again, in theory—should be prescription drugs.  Rosenthal, however, points out that even here, it’s difficult and time-consuming to figure out the actual out-of-pocket costs at one pharmacy versus another, especially once you start adding the key factor of how that pharmacy interacts with your insurer.  A bunch of websites have sprouted up to help, and they sound quite useful, but they won’t know the specifics of your coverage and how that plays out with your pharmacy.

One service she documents allows you to bid out a procedure to discover the lowest bid from a doctor or surgeon.  “Who out there wants to replace my knee!?  Do I hear $12K?  How about $10K—anyone…going once…”  Maybe there’s something to it, but it sounds like an accident going out to happen (quality control??).  There’s gotta be a better way.

Clearly, our current system is the worst of both worlds.  Many with coverage don’t face the costs of their decisions which has made the unsustainable American health care the most expensive in the world, without commensurate quality gains.  Those without coverage can’t afford much of anything.

Co-pays and deductibles nibble at the edges, but why not just do what every other advanced economy does: control health care prices (and MD salaries, drug costs, and hospital stays) by fiat?  The question answers itself: because we insist of freedom of choice, consumer sovereignty, etc.

As Rosenthal sees it, Americans “…have cast their lot with so-called consumer driven health care.”

To which I say, “No, we haven’t!”  At least, that’s not obvious to me.  The medical industrial complex—the insurers, MDs, big pharma, hospital associations—certainly depends on the belief that we insist on extensive consumer choice.  And for every truly market good, we do.  But I hear far more people complain about their difficulty affording health care, the confusion and obfuscation built into the delivery system, the arbitrary changes in coverage and cost—than I hear clamoring for a more transparent and competitive market for thoracic surgeons (“dude, have you seen the awesome deal on heart valves down at City Hospital?!”).

Hold your fire—I’m not suggesting we give up our freedom, become “bloody five-year planners,” as PG Woodhouse says it, and switch from our current doctor to Dr. Marx.  I’m just saying that the real costs of the illusion of free choice outweigh the alleged benefits (and really, what “benefits” are we talking about?!).  Much of health care will never be susceptible to price competition, and the sooner we recognize that, the sooner most of us—excepting the beneficiaries of the current regime—will be better off.

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6 comments in reply to "Attention Health Care Shoppers!"

  1. Tom in MN says:

    I agree, what freedom? I have insurance through my employer and in the last ten years have had to switch doctors twice as my current doctor changed jobs or clinics. And I’ve had to completely switch insurer and the network of clinics that I can go to. None of this was my choice.

    And for costs, if you get cancer, as too many people I know have been recently, you are never going to go to the low bidder. The stories I’ve heard about the cancer being found by a fluke or having a coworker die in the ER having never been diagnosed correctly make sure of that.


  2. azlib says:

    To me the problem with the healthcare “market” is for the really high dollar procedures, the consumer is in no position to “shop around” since when you need healthcare, you are either in an emergency situation or dealing with a potentially life threatening once in a lifetime event.

    The only way to bring prices down is to have an intermediary negotiate on behalf of a large pool of consumers. Even that is not enough as we see with the continual rise in healthcare prices. The providers of healthcare have the upper hand due to the nature of their product. Experience seems to indicate the most cost-effective system is a single payer where the market clout of the providers is blunted by a single large payer or an integrated system which is both a payer and provider of healthcare services.


  3. Fred Donaldson says:

    Collapsed in emergency room, paddled back to life, and ended up with stents and a $104,000 bill primarily paid by Medicare. Otherwise, would have lost house, car and computer used to reach this website. Choice was die or shop!


  4. smith says:

    No one, including politicians and those in the health care field, as well as the general public, can make an informed decision about policy without looking at the data.

    http://www.huffingtonpost.com/2013/05/08/hospital-prices-cost-differences_n_3232678.html

    https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/Medicare-Provider-Charge-Data/index.html

    This data is much too limited, hospitals and medical practitioners should report all data. This could be done mostly by insurance companies that feed the data through their current computerized systems already. Granted, we could spend billions on a system that doesn’t work (like the ACA) but probably a few million would suffice if someone knew what they were doing.

    Everyone in the health care business would have to report, since, you know, people’s health are involved.


  5. Jill SH says:

    The whole point of insurance is to protect us from the high cost of whatever we’re insuring the loss of. Car wrecked? Tree fell on your house? That’s a value that can be concretely assessed and insured against.* How many of us worry about the cost of body work when we’re rear-ended by a tailgater? We only worry about whether or not there’s insurance to cover it!

    With health insurance, those high deductibles are supposed to make us better shoppers. But if you have a really serious illness/injury, it’s very easy to blow past even a $10k deductible. So what real effect is there on the health care costs if you are really careful with your everyday drug expenses, then have a serious and costly problem? Are you saving money for yourself or the insurance company? Do you really think the insurance company is going to lower your premium because you got $4 drugs at Target?

    And BTW, what those insurance companies are actually paying care-providers for services is proprietary information. In other words, nix the transparency. (Boy, I do believe that there would be a motherlode of data if those corporate vaults were opened.)

    But, you know, there is a public price list. Medicare has it. You were saying about single payer?

    *Once again we must face the fact that the market for health care insurance is not like other insurances: It’s insurance we should use, in order to not lose health.


  6. purple says:

    There is no such thing as a pure market anyhow. If you are talking about excluding health care, education, national defense and the social safety that’s well over 50% of GDP. There’s not much left. Capitalism is not just about markets,which have existed forever, but about markets as they are integrated within the nation state. What we call capitalism is closely tied to the rise of the modern nation-state.

    And though we are global, the nation-state still calls the shots in the world economy. It’s the reason global warming summits fail time and time again.


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