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Manhattan Institute

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Get Government Out and Let Markets Work in Health Care

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Get Government Out and Let Markets Work in Health Care

The Hill November 23, 2017
Health PolicyAffordable Care ActOther

Ask the average American what he thinks about health care costs, and he’ll tell you a few things. He’ll tell you it is too expensive and too complicated, that he pays too much for too little, and how outrageous it is that Americans pay more for health care than any country in the world. In all cases, he’ll be spot on. He knows there’s a problem, and he doubts it can be solved — but it can. 

Here’s what we know: America is predicted to spend $3.5 trillion on health care in 2017, but about a third of that spending will have no health impact whatsoever; we know that health care inflation accelerated when the government became the primary purchaser of health care for more than half the country; and we know that around $100 billion of government health spending is the result of fraudulent billing and improper payments.

We need policies that encourage competition and transparency, allowing markets to function freely and lower costs across the board.

Put simply: the American health care system is broken. Decades of government mismanagement and over-regulation have encouraged waste, fraud, and inefficiency, which may benefit the healthcare industrial complex, but harms patients and tax payers in the long run. To fix this, we need policies that encourage competition and transparency, allowing markets to function freely and lower costs across the board.

Fortunately, this idea has begun to gather widespread support. A recent study from the Brookings Institution argues that the way to really lower health care costs is to address anticompetitive regulations and practices, like Certificate of Need requirements, health systems acquiring physician-owned practices, and hospital mergers.

The study also argues for federal and state authorities to more actively enforce antitrust laws in the health care industry, which is one of the most important steps that can be taken towards real health care reform. Without real competition, hospital systems, like all monopolies, are free to charge high prices for a subpar product — which is, in this case, your medical care.

These reforms are all necessary, and would have a real impact, but there is still one thing that has not been offered to remedy the barriers to accessing fairly priced, high quality care: price discovery.

Most proposals for health care reform are based around the assumption that people either can’t or won’t take initiative in finding the best health care to meet their needs, and so someone – either an employer or the federal government – has to make those choices for them. This couldn’t be more untrue. The Amish community is a perfect example of how to shop for health care and save a few dollars in the process. I dealt with plenty of Amish patients in my 25 years as a practicing physician, and I was always impressed by their determination — and success — in shopping for value. I get the sense that they buy health care in the open market cheaper than the most sophisticated employer-based plans would provide. 

The Amish are, of course, a special case, driven to this kind of frugality by their religious convictions. But they don’t have to be. A wave of new websites and apps – like HealthEngineMedefy, and MedEncentive – are saving patients and employers hundreds of thousands of dollars a month by making it easy to search for the best values among providers and other medical services. As employers continue to make use of these tools, providers will be forced to compete for patients’ business, not just by lowering prices, but by increasing the time they spend with patients or offering additional services, like telemedicine. 

The way I see it, in other markets, the sellers chase us — telling us their prices, their quality, and how much better they are than their competitors. Other businesses, like Trip Advisor, Car Fax, and Schwab help us to sort through our options.   It shouldn’t be any different in health care.

Today, inefficient hospital chains, big insurance companies, and a bloated federal bureaucracy like the status quo, not because it’s the best option for American patients, but because it’s the best way for them to maintain their profit margins and power. By rolling back anticompetitive regulations and broadening the use of price transparency tools, we can level an unfair playing field, and make it possible for individuals to regain control of their health care.  

The benefits of competition have already been demonstrated by the direct primary care model, where medical practices don’t take insurance. Instead pay a monthly fee – usually around $100 – in exchange for unlimited primary care services. Without insurance to reimburse them, doctors have to compete for patient business, offering a variety of perks, most especially longer visits. Longer physician visits have a broader benefit, since doctors who spend more time with patients order fewer expensive (and unnecessary) tests, and have lower treatment costs in general. 

When it comes to lowering health care costs, we’ve tried everything but price transparency. 

How can we introduce this level of competition into the rest of the health care space? The simplest change would be for the federal government to unleash all of Medicare and Medicaid’s information on hospital and physician charges by zip code, and let private entrepreneurs mine the data to find the most efficient providers. Congress could take this a step further by passing a law that mandates all hospital and physician prices must be published and made available to the public in a clear and concise format. As soon as people can readily access this information, they will begin voting with their feet.

When it comes to lowering health care costs, we’ve tried everything but price transparency. Our best option is to empower individuals to choose what’s best for them in a free and open market.

It works for 80 percent of our economy — who says it can’t work here?

This piece originally appeared at The Hill

______________________

Dr. Tom Coburn is the Nick Ohnell Fellow at the Manhattan Institute and a former two-term U.S. Senator from Oklahoma.

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