The Plot to Keep Health Care Prices from Consumers
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The Fiscal Times
April 16, 2012

The possibility that the Supreme Court will strike down all or part of the Affordable Care Act has given new life to Republican calls to put market mechanisms to work in holding down health care costs. The public is certain to hear lots more about it on the campaign trail later this year.

There’s one big problem, though. Markets cannot work when consumers and patients have almost no information about the prices they pay for health care.

Rep. Paul Ryan, R-Wis., chairman of the House Budget Committee, has resuscitated his proposal to turn Medicare over to insurance carriers. Future retirees would be offered financial help to pay for policies sold through public exchanges similar to the ones set up under Obamacare. The subsidy would be limited to the value of the second-lowest cost plan offered on the market. The idea is that over-65 consumers, who would still have the option of remaining in traditional fee-for-service Medicare, would drive down costs by forcing the plans to compete for their business by offering lower-cost alternatives.

Other Republicans and conservative think tanks are touting laws that would allow insurance carriers to sell individuals policies across state lines, which would be coupled with incentives to shift people away from employer-based coverage. Under such plans, individuals could buy catastrophic coverage for expensive hospital stays while using the savings to pay the entire cost of routine health services, just like they pay out-of-pocket now for lawyers, flat-screen TVs or the week’s groceries.

Again, the idea is that people putting up their own money will be much more likely to scrutinize the price of tests, drugs and procedures, and choose accordingly. If they comparison shop, they might even visit the provider down the street.

Have you ever walked into a doctor’s office and seen a price posted for all the tests, products or procedures that might be offered during your visit?

Employers are already moving in the direction of giving consumers “more skin in the game,” according to a recent survey by the Employee Benefits Research Institute. One in five Americans are already in high-deductible insurance plans, an all-time high, even though this approach is leading many to skimp on preventive services that could avoid higher health care costs down the road.

Unfortunately for the architects of such proposals, there’s a crucial element missing from their proposals, something that is necessary to make any market work: accurate and easily accessible price information for consumers. Have you ever walked into a doctor’s office and seen a price posted for all the tests, products or procedures that might be offered during your visit? At the hospital? Ever seen a price list at the local pharmacy?

spent 25 years as a foreign correspondent, economics writer and investigative business reporter for the Chicago Tribune and other publications. He is the author of the 2004 book, The $800 Million Pill: The Truth Behind the Cost of New Drugs.