Friday, May 25, 2018
Editorials

Editorial: U.S. health pricing too opaque

Someone uninsured, needing hip replacement surgery and seeking the least expensive procedure would soon find out that nearly one in every two hospitals can't provide that kind of basic cost information, according to a recent survey. This speaks volumes about the health care system in the United States, where it is nearly impossible for consumers to comparison shop. If bending the cost curve for medical care is the key to making health insurance affordable, forcing prices out into the open would be a good starting point.

The survey conducted by Jaime Rosenthal, a senior at Washington University in St. Louis, was a simple request for the estimated cost of a hip replacement for an uninsured 62-year-old female that she made last summer to more than 100 hospitals from every state. The results she obtained are startling. Each hospital was contacted up to five times for the information, yet despite the persistence, only about half could provide it. Those that did respond had prices so varied that they ranged up to 10 times more for the same procedure. Quotes varied from $11,100 to $125,798 depending upon the hospital, according to the study by Rosenthal and two co-authors published in JAMA International Medicine.

The researchers describe how difficult it was to get an answer to a simple question on price that every other service industry dependably provides: "We were frequently transferred between departments, asked to leave messages that were rarely returned, and told that prices could not be estimated without an office visit." Anyone who has tried to comparison shop for health services has suffered similar frustrations.

In a clear demonstration of how opaque pricing distorts the marketplace, the huge differentials in price estimates were not necessarily correlated to quality. According to the study, some of the best-ranked hospitals had lower prices.

Medical pricing is complex partly because the same medical procedure will be reimbursed differently based on whether the payer is a government program such as Medicaid or Medicare, or a private insurer with a separately negotiated price schedule. But that doesn't excuse the fact that people without any insurance can end up being charged multiples of what someone in a large group insurance plan is charged. If prices were based on the actual cost of providing care, this wouldn't happen.

The cure here is sunlight. A 2011 Florida law requires urgent care centers to prominently display the prices of its 50 most common medical services for self-pay patients. More of this is needed. Only with transparent pricing will higher deductible health care plans have the desired effect of spurring medical consumers to shop around and drive down prices.

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