Three guys walk into a bar…
Their names are Choice, Competition, and Price Transparency. Not exactly sure what their parents were thinking when they were born, but here we are. These three guys are here to share thoughts on how to lower healthcare costs.
Just as they’re about to order a steaming pile of capitalism for the entire bar (which just happens to be the entire healthcare sector) two bigger guys, Government and Big Business, grab them, knock them out, and throw them on a plane.
When Choice, Competition, and Price Transparency wake up they are stranded on an island in the middle of nowhere with no hopes of getting back to the free market.
Government and Big Business return home sharing publicly how the over-indulgence of capitalism at the bar is the reason costs are so high. The End…
…or is it?
This well written story is actually the current state of the US healthcare sector. The Health Sector is on track to claim 1 in 5 American dollars by 2026 and instead of attacking some of the root issues, Government Policy and Big Business have removed the key pieces that would naturally push the end consumer cost down for healthcare and insurance.
To avoid the political landmine, let me just touch on what the capitalism really is. Our current health care systems lacks those three very important pieces to ensure a healthy, competitive, free market.
Goodbye Competition & Choice
Without competition there isn’t much pressure to drive price down. A lot more doctors work for larger health systems now and those same health systems continue to merge or acquire others. This creates something closer to a monopoly and means more power is concentrated in the hands of fewer sellers in the market.
With a trend towards consolidation (thanks ever-increasing bureaucracy), choice is also removed from a consumer. Relatively few Americans even ‘choose’ their plan (most accept the one or limited number offered by their employer), and the same can be said for their providers always opting for the ‘in-network’ providers (again due to cost).
The required Competition & Choice that would push cost down has been limited by Government Policy in favor of standardization and regulation.
TL;DR: Without competition or choice in the healthcare sector there is no need to drop prices. There is no other guy competing with you for the same patient (choice to the consumer). Why change a price if business is still booming?
Pricing that just isn’t transparent
The last piece that will ensure a capitalist market that is truly healthy and competitive is to provide consumers with the right information. As I mentioned in the last post, the answers you get when you ask “how much does this cost?” are rather opaque in the healthcare sector. This does not only involve pricing on procedures, medical supplies, or doctor visits, but also involves something as simple as information supplied by providers to patients.
Specifically, Medicare patients would have seen lower costs for prescriptions if they paid out of pocket instead of using insurance, but that information was not communicated causing a grotesque disservice to the consumer. There are even gag-clauses now that do not allow that type of information to be withheld.
Reduce the cost by reinvigorating capitalism
Without Competition, Choice, and Price Transparency our current health sector is far from free-market capitalism. The direction that could realistically cut costs would be to recharge the competition in the marketplace by removing bureaucratic burdens, restoring legitimate individual choice, and empowering patients with the best information about care and cost.
This would also require the consumer to become more educated on everything related to their care including: What your health plan actually covers, what your costs are, what other options you have, and even how you can ultimately use different accounts like HSAs or FSAs to lower your tax burden at the end of the year.
The change to the healthcare system will be on both the consumer and Big Business, but we need to start really being honest about what is causing the astronomic increases in healthcare cost.