Brands in the News

Healthcare: Here’s a Better Idea

28 Jan 2010  

“But if anyone from either party has a better approach that will bring down premiums, bring down the deficit, cover the uninsured, strengthen Medicare for seniors, and stop insurance company abuses, let me know.”

                                                            President Barack Obama

Last night President Barack Obama asked people to let him know if they had a better idea for healthcare legislation, so I thought I would jump in with one.

Now I don’t claim to have a magic bullet.  Anyone who knows the healthcare system knows the situation is complicated.  If it was easy we would have figured it all out by now. 

But I do have one very simple idea:  pass a law that requires healthcare providers to have one, single price for procedures, and to make the price available publically on the internet.

At the moment, it is almost impossible to make an intelligent decision about healthcare because it is impossible to determine what anything costs.  If you want to be entertained, just call up your local hospital and ask them the price for a total knee replacement.  They will not be able to give you a straight answer.

The issue is that the official list prices used by providers are simply absurd.  Each insurance plan negotiates huge discounts.  This is why when you get a bill from the doctor it will often have an amount, say $1,500 and then a column called “not covered” which will be perhaps $800 and then the amount that the insurance company pays.  The “not covered” portion is the insurance company’s negotiated discount.  These discounts vary widely depending on who precisely has negotiated the deal, but can be 50% or more of the total.  The result is that the list price is totally irrelevant, charged only to people who don’t have insurance and often will never pay.

With clear pricing people would begin to understand what things cost.  People could see precisely what the insurance company is paying.  People might start to decide to forego some treatments because the price outweighs the benefit.

Ultimately, the best way to contain health care costs is to give people the information and let them decide when treatments aren’t worth the money and when providers are charging too much.

Before we can make those choices we have to know the actual prices.

Clear and public pricing would be a good first step in improving healthcare.

3 Responses

  1. Two years later we are still working on this issue. Things like narrow networks, high deductible health plans, and mobile technology are at least driving some investment into this area:

    Definitely a push on the cost side by insurance companies, think there is a lot of room for provider brand development in terms of quality etc. though.

    P.S. Thanks for the blog inspiration Professor!

  2. Tim Calkins says:

    Andy—A good analogy. It is hard to make a good decision without information. Comparing costs and benefits is impossible if the costs are not clear!


  3. Andy Kohok says:

    The concept you have brought to table is interesting one. I come from a developing country like India, where we had similiar problem is day to day life. The taxi drivers used to ask for unwarranted fares. If you were good at bargaining (discount negoiation) you could pay the fare otherwise they would reap you. To take hold of this situation, the Govt. standardized the taxi meters and fares. Today if you land at Mumbai airport you can take a prepaid taxi while practively deciding if you can afford the trip. This is an analogy, but gels well with american healthcare.

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