If state Sen. Scott Jensen, R-Chaska, gets his way, a startling medical innovation will soon be on its way to a primary care clinic near you. Like many aggressive therapies, it may not make you feel better right away. But in time it might, just might, prove to be part of a cure for what ails American health care.
The breakthrough medical device prescribed by Jensen — a family physician as well as a political practitioner — is, essentially, a price list. His proposal’s most visible result would be a document posted in every Minnesota medical clinic’s reception area — required by state law under legislation co-authored by Jensen (SF 3480) and moving encouragingly toward enactment at the State Capitol.
The notice would disclose such heretofore closely guarded secrets as what your clinic charges different kinds of patients for its most commonly provided services.
If Jensen’s bill becomes law, you may experience side effects on your way home following your first dose of what’s called health care “price transparency.” You may for the first time marvel appreciatively over the gasoline prices that are posted in numbers as big as screen doors outside every service station. You may suddenly feel dizzy studying the thousands of prices plainly marked on every last item for sale at the superstore where you stop to pick up a few things.
In short, you may awaken to a realization of just how abnormal America’s health care system really is, as described by the late, noted health care economist Uwe Reinhardt: “In virtually all other areas of commerce, consumers know the price … of what they intend to buy,” Reinhardt wrote. But in health care they are “led blindfolded into [a] bewildering … marketplace.”
In fact, it isn’t in health care alone where prices are widely disguised or concealed, as commentator Gary M. Johnson makes clear in a May 13 commentary decrying a lack of transparency and candor in higher-education pricing. It’s no coincidence that the health care and higher-ed marketplaces both feature a dominant role for indirect, third-party funding, both public and private.
Helping health care consumers learn more about the subsidies, mandates and secret agreements that produce large disparities in prices paid for the same services is one of Jensen’s main aims with a bill he calls “a step, not a destination” toward lifting the “veil of secrecy” on health care pricing and tapping consumers’ “greatest resource of common sense.”
Jensen’s bill passed the Minnesota Senate May 1 with a thumping bipartisan vote of 65-2 (it awaits action in the House). That’s approval broad enough to suggest the legislation may not be particularly bold. It’s almost reassuring to hear Jensen admit to being “irritated” that insurers and other health care industry interests “tried to gut” the measure. They succeeded in diluting it in one respect.
Four separate prices for each procedure would be disclosed under this law. Consumers would see: (1) the cash or “sticker” price charged to an uninsured patient paying out-of-pocket, (2) the reimbursement provided by federal Medicare for elderly Americans, (3) the reimbursement paid on behalf of state-federal “Medicaid” beneficiaries, and (4) the average price negotiated by commercial insurers, usually through job-based health plans.
It’s on this last point that the health care lobby watered things down. Jensen and other transparency advocates would prefer to see the highest commercial rates disclosed, rather than a broad average, to show just how big price disparities are. Insurers persuaded lawmakers that too much information would give away “trade secrets” — which is the general rationale for the “veil of secrecy” over health care pricing.
But “patients should learn about subsidies,” Jensen says — subsidies that largely flow from the private marketplace to public programs, which pay lower rates by decree.
Another provision of the bill would yield a more immediate benefit of price transparency, Jensen says, helping the many folks now dealing with higher-deductible insurance plans and paying for many services with real money out of their own pockets before insurance kicks in. It might be useful to know what price one’s health plan has negotiated on your behalf with various providers (for, say, wart removal, Jensen says). This would allow you to indulge the exotic custom of shopping around for a better deal.
Today, that kind of information is often kept secret — or at least hard to access — through “gag clauses” in insurer-provider contracts. Under this legislation, such clauses would be removed like so many warts.
At bottom, the hope with price transparency — which is being worked on in many ways and places — is to make real the long-standing aim of free-market health care reformers, and maybe the only alternative to a completely government-run system. It’s the aim of making the health care marketplace a bit more normal, by incentivizing and empowering consumers to do in health care what they do in almost every other marketplace — force sellers to compete on price and quality by spending their money where they find the best combination of both.
Reinhardt pointed out that for many years progress has been made by champions of “consumer-directed health care” mainly on the incentivizing part of this formula. They’ve forced patients to pay for more care with their own money, through sharply higher deductibles, copays and so on. But without making prices visible, as Jensen puts it, “how can we ask patients to be good stewards of health care dollars?”
Reinhardt called increasing “cost-sharing” without increasing price transparency “putting the cart before the horse.”
And flogging the horse harder to make up for that mistake, one might add.
Could more visible prices put a measure of consumer muscle to work in health care? The complexities of the ancient battle against disease and of health care economics are immense.
But the price mechanism — which, as economist Friedrich Hayek said, would be considered one of humanity’s greatest inventions if only humanity had invented it — translates the bewildering complications of many a global marketplace and impenetrable technology into simple numbers that people can understand and respond to.
And not least for that reason, many necessities of life, unlike health care, consume far less of American wealth than they used to.
D.J. Tice is at Doug.Tice@startribune.com.