Tag Archives: market economics

Is This As Stupid And Worthless As It Looks?

There is a new federal rule requiring all hospitals to post a master list of prices online–enumerating the services they provide together with their prices, so that people can review them, and presumably “shop” for the best deal.

Think about that for a minute, then review the fine print on your health insurance, assuming you are fortunate enough to have health insurance. You will note that you have very little choice of what your insurer calls “provider networks.”

Think, too, about the last time you or someone in your family had a medical emergency. If you fell off a ladder, were in an auto accident, were having a heart attack or found yourself in any of a number of similar situations, your most urgent task was getting to the nearest hospital as soon as possible; I’m pretty confident you didn’t delay in order to review and compare hospitals’ charges.

There are other reasons to file this new requirement under “worthless.” Hospitals in America’s ridiculous healthcare industry don’t charge every patient the same price for the same service. Patients with insurance are actually charged less than those without, for one thing. For another, most hospitals don’t even have a good idea of what their services cost them to provide.

Some years ago, we had friends over for dinner; one of them was, at that time, vice-president of a local hospital, and I asked him to explain the infamous five-dollar aspirin. We’ve all seen those itemized bills after emergency room visits or hospital stays that include bizarre and frequently outrageous charges, including per pill pricing that vastly exceeds what the same pill would cost at the local drugstore.

Our friend’s response was honest, if not reassuring. Because hospitals must deal with multiple insurers as well as Medicare and Medicaid reimbursement rates and with uninsured patients, they engage in “innovative” and “creative” cost-accounting. In other words (although he didn’t put it quite this way), they play games with individual bills, depending upon the likely source and timing of payment.

The bottom line: unless things have changed rather dramatically since that dinner party, hospitals really don’t know what any given service actually costs them, and there is no “standard charge” for a given medical procedure.

As I have said many times, I am a believer in markets–in economic areas where markets can work. If I set out to buy a widget, I’ll shop around to see who makes the best widget for the best price. The market for widgets works, because it provides what is essential to a market transaction: a willing buyer and a willing seller, both of whom are in possession of all information relevant to the transaction.

I know what sort of widget I want, and pricing information–what widgets are going for–is easily available. The guy selling me that widget knows what his widget cost to manufacture, and how much he needs to get for it.

If I have a stomach ache, or measles, or a broken arm; if I am having a heart attack, all I know is that I need medical care. I don’t know what medical science has to say about appropriate medications and their dangers (I may not even know my diagnosis); I have no idea what my treatment options might be, which ones are least likely to manifest side effects, or what they should cost. I’m not even a “willing” buyer who can walk away if I think the price is too high. I lack the knowledge to evaluate the quality of the care I’m receiving, let alone the ability to walk away if I think that quality is substandard.

Markets simply don’t work in these situations, and knowing that a hospital has posted its “best guess” prices is irrelevant.

Every other advanced country has figured this out. I’m beginning to think that “American Exceptionalism” means “exceptionally dense.”


When Elected Officials Don’t Get It, We All Pay the Price

Indiana Governor Mike Pence is adamantly opposed to the expansion of Medicaid in Indiana, despite the fact that his opposition will cost Hoosiers a lot of money–not to mention lives.

I have previously explained why our stubborn refusal to participate in this particular aspect of the Affordable Care Act is irresponsible, inhumane and costly.

When Pence announced his negotiated one-year “deal” with the federal government to continue “Healthy Indiana” in lieu of expanding Medicare (a “deal” that leaves some 400,000 Hoosiers without healthcare), he insisted that “Consumer driven healthcare is the path to the future.”

Sorry, Mike–but if that’s the case,  the future is pretty damn bleak.

Here’s the problem: markets work incredibly well when buyers and sellers operate on a level playing field. They work especially well when consumers are looking for widely-available goods and services, and can compare prices and quality and shop around for the best deal. Economists define a market transaction as one involving a willing buyer and willing seller, both of whom are in possession of all relevant information.

That description does not remotely apply to medical care.

The “consumer” who needs a hernia operation is highly unlikely to be in a position to shop around. He’s much more likely to need immediate care, and be locked into using a particular provider by his insurance company. And he is highly unlikely to know as much about the procedure as his doctor.

For that matter, this “consumer transaction” isn’t going to be negotiated by the patient and his doctor. The real parties to this transaction are the doctor and the health insurance company–and as recent news reports have reminded us, the needs of the patient are rarely front and center. (The Star recently reported on a lawsuit brought by the widow of a man who needed a pacemaker–despite the urging of his own doctor and another doctor who was consulted for a required “second opinion,” the insurer delayed its approval, and the man died. The doctor insists that, had his patient had a timely procedure, he’d be alive today.)

There is no market in health care. There never will be. Hernias and heart attacks aren’t widgets and mousetraps; there is not and cannot be a level playing field where consumers have as much information and power as their providers–or where their providers have as much power as the insurers. Other countries have figured that out. And in those other countries, amazing as it may seem, big bad evil government has turned out to be more protective of patient needs than for-profit insurance companies beholden to their shareholders.

To suggest that “consumer-driven” healthcare is the future is to display profound ignorance of market economics.

I think it’s interesting how many “free market” ideologues like our governor have no idea how markets really work.