Rebecca Frech writes about the shopping-around method for saving on health care costs here. We tend to imagine that because healthcare is a need costs must be immutable — the company wouldn’t bill more than necessary, and what they bill must be what it costs, right?
Not so. Without devolving into “they’re just out to fleece us” ranting and raving, one can certainly observe that any endeavor can be run more or less efficiently. Competitive pricing isn’t a cure-all, but it does add a measure of light and fire that can help keep things honest. And thus it’s top on my list of realistic, achievable steps towards health care reform that we could reasonably hope to pass in the next several years. Here are my top three:
1. Published Price Lists
We make a lot of noise about price caps, fairness, cost-cutting, sliding scales . . . there are bunches of ways to manipulate health care costs. But the most fundamental method, and the one that works very effectively across many different types of markets, is making your prices public.
We have the capacity to do this. The uniform billing codes, and the prices to go with, are already on your doctor’s computer system. The server-space that once would have been exorbitantly expensive is now very affordable, and to make it even simpler, healthcare providers who use the going rate (say, the medicare reimbursement rate, or whatever suits) could shorten their list by publishing only the prices that vary from the standard they usually peg.
To effect real reform, it would be best to publish all prices — if the physician charges different rates to different insurance companies or to cash or payment-plan customers, all the different prices should be published.
What would the result be? When you researched your physician or hospital, you’d know in advance how prices compare. When your physician proposed a test, you could find out in advance how much it would cost you, and you could check around for alternate suppliers for outsourced services. You could ask intelligent questions like, “How does the information in a cardiac stress test compare to a pulmonary stress test, and would the less expensive one give us the info we need?”
Other results: Providers who were charging significantly more or less than the going rate would have an incentive to adjust their prices. Insurers would have an incentive to negotiate well, since business owners and individual subscribers could easily see how their bill would vary based on which insurance company they used.
Yet more results: Your local physician might choose to outsource tests currently done in-house, if doing so lowered prices for the patient without a significant drop in service. Alternately, your physician might start doing more tests in-house because it turned out that it was really more cost-effective that way.
One thing I don’t think would happen is patients making cost the only factor in health care decisions. That’s simply not the way American consumers behave. Look at our purchases of cars, clothes, houses, food . . . all things we need. Daily we choose quality or convenience over lowest-cost. Publishing prices allows the market to regulate itself without inducing any artificial restrictions on supply or product quality.
2. Quit the Mickey Mouse on Health Care Savings Accounts
We have an extremely complicated system of “health care” spending accounts. Assorted forms of tax-protected medical savings accounts are a powerful public policy tool, because people really are induced to save by the prospect of lowering their tax bill. It works. Under our current system, though, there are massive restrictions on who is allowed to have such account, how much money can be added, and how quickly it must be used.
If the goal is in fact to ensure Americans have the health care they need, the public policy emphasis needs to change from, “We’re desperately afraid people will use this as a tax shelter” to “Really it would be nice if you’d save money and pay your own bills, thank you. Or someone else’s bills, that would be fine, too.”I’d propose that the US move to a simple tax-sheltered medical savings account system that worked the way your imagination thinks such things work: You put money in, and then it’s there when you need it. No more rushing around on December 31 to quick buy a pair of glasses before you lose your contribution. Over-contributing wouldn’t be penalized, and under-contributing could be rectified by increasing the portion of your paycheck that went into the account when it became apparent your medical expenses were rising.
To avoid this turning into a massive tax shelter, I’d propose we simply say that the funds can’t be pulled out except to pay somebody’s — anybody’s — medical bills. No putting money in when you’re a 50-year-old senior executive, and then pulling it out to pay taxes on it when you’re 80 and have a nice slim tax bracket. When you’re 80, you can use it to pay your medical bills or someone else’s. You can leave your leftovers to your heirs, and they can use it to pay their medical bills.
We already have the regulations in place to manage spending abuses, per the limits on the uses of existing medical savings programs and the restrictions on deducting medical expenses on your taxes. The only change would be in lifting the complicated rules and limitations on how much we are allowed to save, so that Americans are encouraged to save generously towards their medical bills.
3. Partial Insurance Credits for Part-Time Employees
Tying health insurance to employment poses problems, but it also can be a solution. A hybrid system in which affordable insurance is available either through one’s employer or through an independent health care cooperative seems like a solution well suited to the US. One of the advantages of employer-provided health insurance is that employees who would otherwise not spend the money themselves will elect to receive it as part of their compensation. One of the disadvantages of the American system is that part-time employees and freelancers end up in a worst-of-both-worlds scenario.
Rather than the patchwork of subsidies and regulations that attempt to rectify this and do so poorly, consider simply making a partial health-care benefit part of the employee’s compensation. With a forty-hour week as a benchmark for full health care benefits, an employee working 30 hours a week would receive 3/4’s of the benefit — perhaps put into one of those enduring, genuinely helpful health care savings accounts. And so on down the line, fewer hours means a lower total benefit, but at least there’s a foothold being gained.
This would be a particular boon for businesses wishing to pay their employees fairly, but also wishing to employ part-time workers due to limited need for particular skills, or because the employee needs a lighter work week. Likewise, certain professions and times of life tend to be ones when multiple part time jobs are easier to gather than a single full-time position; those working a full workweek would not be penalized simply because the week’s work was divided among multiple employers.
None of these are complete solutions. They do, however, address existing problems in the US health care system in a way that is practical, achievable, and doesn’t require radically changing what we currently have in place.
What are your thoughts? If you were to shape the health care policy discussion for the next presidential election, what would you propose?
Meanwhile, if #2 cheers you because you’d like to be able to use your savings to help out someone with big medical costs, Ella Frech would be way better off if she had a wheelchair that met her physical needs, instead of the insurance-company special.
Photo: By H005, denoised by Pro2 (Own work) [Public domain], via Wikimedia Commons