The Emerging New Face of Affordable Health Care

December 2, 2019

The cost of health care continues to grow, creating serious hardships for patients and families.

In 2017, health care spending accounted for almost 18% of U.S. gross domestic product, or $10,739 per person. It increased an additional 4.4% last year, nearly twice the inflation rate, according to government estimates.

What can be done to bring these costs under control? And who’s best equipped to do it?

If you think Washington holds the key, you might want to think again. While federal government policies can help expand access to care, there is relatively little Washington can do to reduce costs without triggering other ill effects.

Health care is expensive, in part because we expect it to do difficult things. Treatments that didn’t exist a decade or two ago are today extending patients’ lives beyond what was previously imaginable. But such advancements require substantial investments; saving lives costs money.

Washington’s most recent attempt to expand health care coverage while controlling costs the Affordable Care Act did little to shield patients from large “copays” and deductibles or to stop premiums from increasing. Some of the ACA’s failure is due to its design: Increasing health care usage and reducing costs are opposing goals. However, an equal if not greater problem is the lack of transparency and competition in health care.

To lower costs, there really are two options: provide less care or provide care more efficiently. The first option rationing is undesirable. The second making health care more efficient can be accomplished by putting patients at the heart of the system.

Currently, the costs of treatments are hidden from patients. You don’t see any prices until you get the bill or a statement from your insurer showing what it was charged. By making prices transparent, as they are in a furniture or auto showroom, we can stimulate competition, which gradually will help lower prices.

Can this work in real life? Look no further than Lasik eye surgery, used to correct nearsightedness, farsightedness and astigmatism. Because Lasik surgery isn’t covered by many insurers, Lasik surgeons advertise and compete on price. In the first decade after its inception in the 1990s, the price of such surgery fell by 25 percent, while the quality improved substantially.

Competition based on convenience and affordable pricing is taking hold elsewhere in the health care market as well.

Living up to its slogan of “always low prices,” Walmart recently opened its first of what eventually could be hundreds Walmart Health clinic next to one of its retail stores in Georgia, offering an array of services from basic primary care, to X-rays, dental and mental health counseling, at low, well-advertised prices. Retail pharmacy chains CVS and Walgreens also are expanding the outpatient health services they offer. Given their success, others are sure to follow.

What this means is that patients in the not-too-distant future will have several choices for their health-care needs their family doctor, an urgent care facility, a chain store or independent clinic, a hospital or emergency room in certain cases and will be able to make those choices based on need, cost and convenience. This competition, if it isn’t stifled by regulators, is what will drive down costs, not the heavy hand of government.

The emerging new model of competitive, affordable health care is drastically different from the current system, where costs are hidden and patients passively follow providers determined by their insurance networks.

While patients must be confident their providers are knowledgeable and their treatments safe and effective, overly stringent regulations can stifle innovation and new, creative ways to deliver care. As Google co-founder Sergey Brin told an interviewer recently, explaining why Alphabet (Google’s parent company) isn’t heavily involved in health care, “Health is just so heavily regulated … it’s a painful business to be in.”

That may be so but change is coming. As Walmart and other innovators are starting to realize, the best way to lower health care costs is by encouraging transparent pricing and competition and placing the patient at the center of the health care system. The surest way to accomplish this is by getting government out of the way.

Republished from Originally published in The Chicago Tribune.

Conor Norris is a Catalyst Policy Fellow and a Research Analyst with the Knee Center for the Study of Occupational Regulation (CSOR) at Saint Francis University. His areas of interest include occupational licensing and health care scope of practice laws, monetary policy, and long-run growth. Conor is an alumnus of the Mercatus Center MA Fellowship at George Mason University, where he received his MA in economics in 2018. He interned at the Cato Institute in 2017 in the Center for Monetary and Financial Alternatives. He loves reading good history books and bad puns and is still bitter that the Star Wars expanded universe is no longer cannon. Conor grew up in Williamsport, Pennsylvania and after spending two years in Arlington, Virginia, he now lives in Altoona, PA.
Catalyst articles by Conor Norris