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The Price Transparency Movement: A False Start?

Stanley Feld M.D.,FACP,MACE

Texas is not the only state realizing that price transparency is an essential ingredient in the Repair of the Healthcare System.

Price transparency initiatives to make healthcare fees more available to consumers and easier to understand is also being undertaken at the national level.

U.S. Health and Human Services Secretary Michael Leavitt said in a speech last spring, “people need to know–they have a right to know–the cost of their care and the quality of the care.” Competition and transparency will make the system better,” he says.

“Change will begin to occur when those who pay for health care in each market area insist that their insurers, and their providers, commit to transparent measurement of quality and price,” Leavitt concluded.

I agree with most of what Secretary Leavitt says except it will not work unless the patient has control of his healthcare dollar. All the politicians seem to ignore this important point. If the patient owned his healthcare dollar he would have an interest in getting the highest quality care for the best price. Now, the insurance industry and government fight for the best price. The problem is they do not pass the saving on to the patients. It simply increases the healthcare insurance industry’s profit. UnitedHealthcare’s profits increase an additional 15% in the last quarter.

“The price transparency trend seems to be picking up steam. According to the U.S. Department of Health and Human Services, Arizona, California, Indiana, Massachusetts, Minnesota, and Wisconsin have all established price transparency pilot programs, and several others are considering similar legislation.”

This is wishful thinking. Pilot programs usually fail. Many are poorly designed. They are not mandates and usually have little impact. The working definition of price transparency is wrong and any pilot is doomed to fail. After they fail to produce the expected outcome the political conclusion will be that price transparency is not a good idea.

The pilot programs also offer an opportunity for the insurance industry. They immediately jumped in to help with the measurement of cost and quality. In effect they become the judge of physicians’ and hospital systems’ pricing. It is clear that the insurance companies’ power has to be limited, not expanded.

“Insurance companies are also establishing online cost-comparison tools. Aetna, Blue Cross and Blue Shield, and UnitedHealthCare offer customers cost and quality information regarding their health care.”

“According to the Kaiser Family Foundation, most health care dollars in the United States are spent on hospitals and physicians–more than 30 percent is spent on hospital care, and nearly 22 percent on physicians’ and clinical services. That means half of all the health care dollars spent nationally go to entities affected by price transparency legislation.”

The Kaiser Family Foundation is helping me make my point. Fifty two percent of the cost of care is spent on overpriced cost of delivery of healthcare. Therefore the other 48% is retained by the insurance industry.

The healthcare insurance industry controls the healthcare dollar. It controls both the premium charged and the payments made to the physicians and hospital systems. In order to have any reduction in the cost of healthcare, At least two changes have to occur to have any success in Repairing the Healthcare System. The two most important changes are real price transparency along with consumer ownership of the healthcare dollar. Patients have to have incentives to control the cost of healthcare.

Price transparency should be designed to empower the consumer, not the insurance industry.

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