End Price Discrimination in Healthcare. And Reform Obamacare.
The repeal of Obamacare has failed again in the Senate. There is no doubt that healthcare costs are rising and something needs to be done to fix the broken system. But the approach legislators are taking, with complex regulation, is not helping. There is an alternative approach they could take, going back to the fundamentals of our market economy, with simple regulation making healthcare prices be transparent and banning price discrimination — the practice of charging different prices to different people for the same medical product or procedure.
The current state of healthcare is a result of myriad complexities driven primarily due to a system of 3rd party payments — insurance companies, medicare, medicaid, etc. —and it is hard for the patient to get all pricing information ahead of time or make an informed choice while choosing a doctor or treatment, making healthcare not a true free market. For instance, the cost of taking an x-ray varies depending on whether the patient has insurance or not. Why should that be the case?
If a patient visits the emergency room and has no insurance the hospitals cannot deny treatment according to the Emergency Medical Treatment and Labor Act (EMTALA). The cost of the treatment is borne by the Hospital if the patient cannot pay, which is effectively indirectly paid by other patients. Absent EMTALA we will have people dying on the streets because they cannot afford medical treatment, which as a society we have decided as unacceptable, hence EMTALA was created. This makes healthcare industry unique compared to other optional free-market services, and healthcare is not optional, so the society needs to take care of its own people.
Healthcare providers, including physicians, have an ethical duty to treat their patients the same way irrespective of whether they are wealthy or poor. In light of the quality of service provided by the doctor being the same for every patient, on what basis can the doctor choose to charge more for some patients? How will they know whether their patients are wealthy or poor and how much they can afford? Why even have this price discrimination? If the doctor wants to do charity work they could very well choose to treat whom they deem poor for free. Letting the doctor, in this example, decide how much a patient can pay leads to perverse incentives propagating throughout the industry. Instead, the physician should set a price for the procedure and charge the same price to all patients, or, optionally, offer the service entirely free.
When every medical service provider publishes their set price for everyone to access patients have the transparency needed to make an informed choice. This does not constrain different doctors from charging different prices for the same procedure, only that the same doctor charges the same price for the same procedure to all their patients, or offer it, optionally, for free. Transparent fixed prices would also apply to drugs, X-rays, MRI, and all other medical procedures where the service provider or the pharmaceutical company will charge the same price for their goods to everyone they sell to. If a device, drug or service is of, say, higher quality then the provider can charge a higher price compared to alternatives available in the market, and let the patient choose whether they want their higher priced product or some other generic option, but the patient will fully know what they are paying for.
Knowing the price of a drug, device or service, and also knowing it is a fair deal because everyone else is paying the same price, enables the patient to make an informed decision ahead of time. It also enables the insurance companies to set caps for prices for procedures and the patient may choose to visit a doctor that charges less than the cap or someone more expensive and pay the difference out of pocket. In addition, the higher priced provider has an incentive to reduce their price if they need more patients, driving down costs.
Transparent and fixed prices will reduce the bloated organization structure of medical service providers, reducing the cost of providing service. Healthcare service providers will then compete on cost and quality, which will finally provide the incentive to drive down costs, rather than the perpetual increase in cost of healthcare that we are experiencing now.
If the cost of medical care is contained and known, then people do not have to be forced to carry insurance as it becomes a simple choice for them, similar to other forms of insurance, like auto, home, etc., where they choose to bear the risk of treatment cost themselves or hedge that risk by purchasing insurance.
A simple legislation, that bans price discrimination in healthcare and requiring cost of products and services be made public, will achieve the goal of all parties involved - to contain rising health care costs, reduce regulation, eliminate the mandate to carry insurance and bring long needed reform to the healthcare industry. Will legislators listen?
