Out of curiosity, how much will this reduce the cost of health care? The idea, as it's been explained to me, is that visibility into the cost of medical care will result in downward price pressure. How much?
Personal opinion (as a health economist) is that this is a nice policy, but probably not going to do that much.
You as a consumer now have the ability to search, but do you have an incentive to do so? Do the savings come to you?
Some of it, perhaps. But it's likely not that much and only under some circumstances.
E.g., if you are just faced w/ a copay on a visit, your copay is going to be the same at two facilities.
Coinsurance is different - there you may realize some savings. IF you are below your deductible for the year that is also different. You may realize savings and care.
But there are a decent number of patients who for most of their visits will not see much incentive to search.
Also... it is possible for these releases to help hospitals coordinate on prices in a way which they currently do not. (Tacit collusion, not explicit, back-room, definitely-illegal collusion.)
Hospital A now knows exactly what Hospital B gets from Aetna, so Hospital A may realize it can hold out for more w/ Aetna b/c Aetna is willing to pay their competitor more for the same procedure.
Both of these questions are above all empirical questions and one to which we do not yet know the answer. I would be wary of confident predictions.
I respectfully disagree to one piece of your logic.
The effect. The effect will be strong.
The logic that you posit to contradict this is that for most patients "there will be no incentive to search for better prices". That seems to ignore entirely the dynamics of other established businesses like supermarkets.
Most people go to supermarkets and the vast majority are not looking for the absolute best price or even the median price. However supermarkets battle out in pricing to catch the few customers that they know are price sensitive. Its the minority rule. This is a positive externality by which everyone benefits.
This same dynamic will be observed in healthcare.
I agree in that much of it is unknown and also the time horizon is very uncertain. But the effect will be felt and it will be profound.
For example, an appendectomy (MSDRG 343) in my area will cost $56,000. With my insurance plan, that will max out my $8,000 deductible, + another $8,000 co-insurance to hit my out of pocket maximum of $16,000. That's what I'd pay, $16,000.
Or, I can go to Tennessee and get the appendectomy (MSDRG 343) for $4,700 and pay that directly.
Many people will make that choice Kaiser gets less business putting downward pressure on their pricing. And the folks in Tennessee might see they can raise their prices so that it starts to equalize to some point.
How many appendectomies are elective? I was immobilized by pain and possibly close to death when I had mine. The economic impact depends on actually realizing the cost savings, which could be compounded by a variety of factors.
This is meant to put market pressure on medical svcs. This new transparency rule only applies to hospitals, it does not cover independent Practices.
There will be several 2nd order effects, where the overall impact is unknown:
1. The transparency rule not only reveals prices to consumers, but also to other insurance companies and other hospitals. Since these price arrangements were until now secret, that will impact negotiations between payors and hospitals in competitive markets like major cities. This is likely to force outliers on both the cheap end and expensive end to bring their rates closer to market. If either hospital or the insurer cannot bring their rates closer to market, this may accelerate consolidation of hospitals to improve negotiating power, and/or cause smaller insurers to drop hospitals from their network.
This may give some room to relief to small practices that were formerly in danger of losing payor "network" access; at least while the big coverage fights happen upstream between hospitals and payors.
2. the transparency list is not comprehensive. So, not all medical services are shoppable (i.e. scheduled in advance, typically non life-threatening), this may cause hospitals to shift costs to services that consumers have no control over, meaning (1) emergency and (2) unlisted procedures. It will take a few years for hospitals to understand the impact the rule has on their bottom line. The implication is that there will be a waterfall of margin pressure on scheduled procedures at independent doctors , but it will take time to happen.
It's complicated so nobody really knows. I've seen a few studies that have showed real but modest effects (2-5% decrease). The benefits tend to be concentrated because most healthcare spending is on patients who don't have an incentive to be price sensitive.
Transparent pricing enabling the comparison of pricing between different sellers is only one piece of a functioning marketplace. You also need multiple informed sellers and multiple informed buyers.
So it's a step towards a complete policy. What is the complete policy? Granted we might not see it enacted now, but it would at least clarify where the administration was headed.
Increasing supply of doctors by increasing residency funding, decreasing education costs, and decreasing the sacrifice that needs to be made to become a registered doctor.
I have no idea why doctors need to sacrifice their entire 22 to 30 year old lives constantly slaving away, working on call, sometimes 24 hours at a time.
Relax some of the draconian, outdated hazing rules. Attract more smart people, make it so young people can have lives and become doctors.
That might address the cost of labor. The cost of medicine on the other hand is simple, the government should be funding research into medicines and then offering it for sale at basically the cost of production. Only other way is to reform patents and whatnot, but it seems easier to just do the research with the top tier research facilities the US already has via the higher education system.
There’s probably some other issues such as tort reform and medical equipment costs that need to be address too. But I think all prices can be brought down by increasing supply.
100% with you on the idea of increasing the supply of doctors and shortening medical education.
My dad is an ophthalmologist and he does basically 3 surgeries that take up most of his work time: LASIK, cataract surgery, and cornea transplants.
Was it really necessary for him to do 13 years of schooling to learn how to do those 3 surgeries? I really don’t think so. I feel like we could train doctors in about 6 years (2 years of focused medical training + 4 years of residency / apprenticeship with a practicing doctor). If we’re honest about what doctors are learning, they would have about the same amount of time learning about their actual specialty compared to now, without so many hoops to jump through.
The current system is a cartel that must be reformed.
We also should consider international competition. There are competent doctors in India who could do expensive surgeries like hip replacements for 1/10 the cost AND get better results than the average hospital in the US.
At least we could sell health insurance across state lines...
Indeed, bringing down the cost of med school might also have the effect of attracting people with a working class background, who see it as a form of labor, not as a return on an investment.
I'm not sure what the impact of tort reform would be. It's possible to look up how much is paid in premiums, but we don't know who owns the malpractice insurance industry, and I've read that it's doctors.
There’s two costs to the US legal environment: Insurance premiums and defensive medicine. It’s in the doctor’s interest to run every test because it’s free to him, but failure to do so raises his risks. So you wind up spending money non-productively and you have a non-zero rate of false positives, unnecessary treatment, etc.
Interestingly, I think they may be bringing that cost under control. I had an injury recently, and it took 2 trips to the doctor (each one with a fee) before they agreed to do a cat scan (with another fee) and find out what was actually wrong with me.
The AMA effectively controls the number of Doctors. They do this by limiting the number of accredited Medical schools and the number of students those Schools can accept. This is primarily to artificially drive up salaries.
The current tax code incentivizes insurance as compensation, which drastically distorts the market. The ACA made things even worse by introducing the individual mandate.
The ACA made things better than they were by eliminating maximum benefit amounts, implementing out of pocket maximums, implement maximum age rating factors, and removing all pre existing condition clauses guaranteeing access to healthcare. The individual mandate ensured that all of these increases in access to healthcare could be paid for by forcing young and healthy people to pay premiums. Without the individual mandate, premiums would have had to be even higher, causing even more people to not buy insurance, etc.
That the tax code was not updated to remove the tax benefit for employers, or give it to individuals is a shortcoming (and has long been a handout to big businesses prior to ACA). What really needed to happen was forcing everyone into healthcare.gov onto a single marketplace so healthy lives wouldn’t be locked up in employer sponsored risk pools. Then the costs would truly be shared across the whole population, and sufficient healthy lives would exist to enable multiple insurance companies to compete.
Or we could have gone with taxpayer funded healthcare and made it all simpler. But that obviously wasn’t in the cards.
Indeed when ACA was passed, it was acknowledged that it was intended to reform access to health care, not the cost of health care. It was a compromise that appeased the insurance industry.
