Is Washington finally about to remedy one of the key maladies plaguing American healthcare? Perhaps. But regulatory policies in the District, Georgia, New York, New Jersey, and other states won’t make it easy.
First, the good news. The Trump administration is moving this month to make providers disclose their prices, including the prices they charge insurers.
The new initiative complements several related steps the administration has taken. The Centers for Medicare and Medicaid Services, for example, recently launched a website, “Procedure Price Lookup,” enabling Medicare patients to compare total and out of pocket costs for procedures commonly performed at hospital outpatient facilities and ambulatory surgical centers.
The agency’s hope is that by providing information about the costs of various medical procedures, patients will be empowered to shop more prudently, discouraging some facilities from overcharging.
The White House also is hoping to use price transparency to reduce medical costs in other areas. The administration’s American Patients First proposal would require drug providers selling products that cost patients more than $35 a month to reveal their prices in television advertisements. If it survives a possible challenge on First Amendment grounds, prohibiting forced speech, the rule is likely to be adopted, and many pharmaceutical companies already are preparing for this. Another pending rule calls for hospitals to display their prices online.
These efforts are well-intentioned and address a critically important issue. Healthcare costs account for nearly 18 percent of U.S. Gross Domestic Product, or about $10,000 per person annually. Something needs to change. But mere transparency in pricing will probably not be enough.
Patients are already aware that healthcare is expensive. A Consumer Reports survey found that one out of seven prescriptions goes unfilled because patients can’t afford the cost. A similar survey found nearly 44 percent of respondents avoid medical attention when sick or injured, fearing high medical bills. Policies demanding or mandating transparency are preaching to a rapidly growing and frustrated choir.
What the U.S. healthcare system needs more than mere transparency is increased competition. Unfortunately, the healthcare sector’s overly burdensome regulatory system often limits competition through “Certificate of Need” laws and other restrictions on innovation and patient choice.
These curbs are not universal; alternatives exist.
Consider GenScripts Pharmacy in Oklahoma. It does not accept health insurance when filling prescriptions, to avoid the complications, overhead, and financial disincentives of the third-party reimbursement system. As a result, the company can offer hundreds of drugs, often at lower prices than the out of pocket costs patients pay through their insurance.
Surgical procedures offered outside the highly regulated and bureaucratic third-party reimbursement system have shown similar results.
Nearly 18 years ago, physicians Keith Smith and Steven Lantier opened the Oklahoma Surgical Center. The center competes with other surgical facilities by displaying, and guaranteeing, the prices of available procedures and bypassing insurance companies. This practice triggered a price war that was good for consumers. Today, the Oklahoma Surgical Center offers numerous procedures, from a C-section to a rotator cuff repair, for a fraction of what the same procedure might cost elsewhere.
It’s no coincidence both GenScripts and the surgical center are in Oklahoma. According to the Healthcare Openness and Access Database compiled by the Mercatus Center at George Mason University, Oklahoma allows physicians greater freedom to practice medicine and consumers more access to pharmaceuticals than many other states.
The District of Columbia, on the other hand, is among the worst in this regard.
The result of Oklahoma’s less restrictive regulatory climate is lower prices and more options for quality care, exactly what consumers should expect, although rarely receive, from a functioning healthcare system.
Efforts to make healthcare costs more transparent are a good start. But transparency is no substitute for competition. Both are needed.