Healthcare: What's the Price?
Updated: Feb 26, 2021
Prices are what signal labor and capital to be employed in the most valuable way possible.
Markets will drive down cost and drive up quality if prices are present to carry information.
Cost differentials between healthcare suppliers encourage specialization, innovation, and trade between parties.
Medical and dental care providers are not required to list prices or other payment terms. The result is irrational market behavior, high costs, and opaque quality levels. Consuming products and services with a diminishing marginal utility drives up insurance cost with little benefit to the patient. Without cost weighted alternatives to care, beneficial innovation is dramatically slowed.
Prices and payment terms for all medical and dental products and services must be published and presented to the patient prior to any transaction taking place. Exception may be made if the urgency of the situation renders this impossible. The prices and payment terms of the geographically closest five providers for the same care will be presented alongside each quote in a simple to understand format.
Studies show if only 10% of participants in a market operate in a rational and value-maximizing capacity, the market will arch towards the real equilibrium price.
Hospitals, dental offices, and other care providers will be forced to match costs of providing a given type of care to the revenue that can be gained by supplying it.
Competition will emerge on cost and quality.
Those with lower costs to supply particular types of care will increase market share. Less efficient providers of given types of care will leave these market activities in favor of areas with a comparative advantage.
The Bottom Line:
To be honest, there is no reason that the use of prices and competitive markets need to be justified. They are an obvious and agreed upon aspect of a functioning free market. Markets work, let's use them. 9% healthcare cost inflation per year is outrageous and has stagnated real wage growth for 20 years. It's time for this to end.
FAQ’s and Objections:
Patients would only choose the lowest price and not understand the quality differences. Experts like “Us” guard against them making poor choices like this.
Answer: Few people would go to only the nearest deli and tell the clerk to make them the cheapest sandwich possible paying no attention to quality. Instead, people read the menu, ask questions, talk to friends, family and coworkers. They check sites like Tripadvisor, Urbanspoon, and Grub Hub for amateur and professional reviews. Through this process people find the exact sandwich to suit a host of requirements for taste, size, speed, and price. If people do this must to find lunch wouldn’t they do at least as must for a heart operation or an CAT scan?
Answer: People know their own priorities better than doctors do.
Answer: What would a mechanic say if asked whether it was worth the money to deal with some issues on my car? What would a contractor say if asked if anything needed to be done to my house? What would a doctor, dentist, or hospital say if asked if anything needed to be done to my body? A Mechanic has priorities skewed towards perfect maintenance of a car, a contractor’s priorities are skewed towards shifting more money into home repair and maintenance. Someone in the Healthcare profession is in no way free of bias.
There are to many possible circumstances to apply a list of prices.
Answer: There’s already a list in the charge-master. Medicare already has plenty of billing codes. This could be implemented next week.
Could this mean that price competition would drive down the wages of doctors, dentists and other professionals?
Answer: Yes, that is totally possible. That said, many professionals will adapt and find new and better ways to provide care, expand high end services to make up for lost profit, and discover more ways to become efficient with their resources. Those are all good things.
Answer: Imagine that tomorrow grocery stores all decided to hide their prices and use higher margins to pay cashiers and store managers more money. Would you support this? What about mechanics, lawyers, or cable companies doing this? The fact is, consumers need to know what they are being charged and agree to pay it. Anything else is theft.