Government rules should require simplified, binding, and tranparent pricing for care (“per-procedure”) to stimulate price competition.
If Republicans don’t get it right, the socialist solutions to healthcare (from Bernie Sanders and others) will only rise in prominence. Congress must recognize that price competition is absent in healthcare. Free-market reforms to reduce prices of care must first be given a chance to prove socialist wrong.
The primary problem of healthcare does not involve the design of health plan benefits (insurance). The primary problem is the high price of care; no price competition exists between hospitals, specialists, and other care providers. That needs to change; free-market price competition must return. As prices fall and affordability of care increases, other problems with healthcare begin to diminish.
Let’s say you just had knee replacement surgery. In today’s world, you may see an EOB (explanation of benefits) several pages long. It would include every charge imaginable down to the rubber gloves worn by the surgeon and every role of gauze used to bandage the incision.
Wouldn’t it be nice to get an explanation or invoice that you could understand – one line item: knee replacement – $$$. Even better, wouldn’t it be nice to know what all surgical facilities in your area charged for a knee replacement! All care providers would know what competitors charge and would be forced to compete with them for your patient dollars. Isn’t that what free markets are all about?
Finally health plans would know the average of all fees charged for each procedure available in your area. With this knowledge, your health plan could set the coverage amount and tell you what that amount is. You could then choose a lower-priced provider that would minimize your out-of-pocket obligation. Alternatively, if you believe a higher-priced facility provides better care, you could choose a higher-priced provider with full knowledge that you would be responsible to pay the excess.
What does it take to reach this lofty goal? Providers use complex medical codes (called ICD codes) to track a patient’s diagnosis and course of treatment. Providers would have to abandon these complex medical codes only for billing purposes. Instead, they would aggregate all these complex charges into a single simplified price for a procedure based on their past experience in performing that procedure. Finally, providers must be required, by the government, to publish and be bound by these simplified prices. The government rules would not be imposing price controls by setting the prices. Rather, the government rules would merely stimulate price competition through price transparency in a simplified way that patients can understand.