A Free Market Proposal for Medical Reform
– Part 2
– Part 2
“Perfect competition assumes standardized products and services, free entry and exit, and complete information.”
The above partial definition of perfect competition surely doesn’t fit the medical field very well. But there are some aspects of medicine that do fit the definition, and others that could be made to fit better. And that is the topic for today.
As I was thinking about this topic, I asked myself, “Why don’t I shop for medical goods and services like I do for other kinds of goods and services. There are basically two reasons. The first is that prices are practically invisible to me. The second is that even when they ARE visible, they often don’t effect how much I pay out of pocket. So here are my proposals. They are fairly simple steps that would improve competition. And they wouldn’t cost very much either.
First, providers of medical goods and services should be required to post prices. For services, some standardization of categories would be required. My dentist would post his charge for a cleaning, filling, root canal, etc. Same with clinics, labs, etc. How much for a common blood test, or a physical exam… you get the idea. In each field, the most common services could be determined and prices for these would have to be easily obtainable by the public, via postings on premises, but also web sites, both individually and corporately, through medical associations, insurance companies, HMOs, etc. for all of their participating members. Pharmacies would have to post the prices of their top 50 or 100 sellers.
The above proposal allows for two of the advantages of competition – standardization and complete information, both of which are necessary to make truly informed purchases. Sometimes you might decide to go with the “premium product.” For example, a relatively painless dental hygienist is worth more than “Nurse Ratchet,” and you could make an informed decision about whether the added pain was worth the gain (I’m only partly kidding here. I’ve had a “Nurse Ratchet”-type work on me, and I once had gum surgery from a Dr. Paine – I kid you not). But many medical goods and services are quite mundane and standardized. And the more standardized a product really is, the more price sensitive I become. I certainly would be price sensitive about prescriptions, since you are generally getting an identical product from one pharmacy to the next.
Obviously, the above proposal only makes sense in conjunction with my second proposal – Allow for the consumer to participate in any savings that are achieved. This might require a departure from the common “dollar amount” copayments to the more traditional percent copayment. Or insurance companies could set “allowed amounts” for standard services with the insured paying the difference. Insurance companies would be required to post their allowed amounts in the same manner and for the same goods and services as medical providers.
Insurance companies already set “allowable charges” but for a different reason. I don’t know if the original intent was for people to pay the difference, but my experience has been that excess amounts over allowable charges are normally written off. Which is fine for people who are insured, but can become a huge penalty for the uninsured, as they are expected either to pay the full amount. When the platinum wife and I went to the same dentist, her $90 cleaning was written off down to the allowed amount of $65, while yours truly, then uninsured, was expected to pay the $90. I did not appreciate that, and although I probably could have asked them to accept the $65 for me as well, I shouldn’t have to bargain with my dentist like we’re at some yard sale.
But if he had posted prices and a set policy for such matters, that would be fine. I could pay or not pay. It’s a free country, right? With free markets and competition, right? Right? - Bob
The above partial definition of perfect competition surely doesn’t fit the medical field very well. But there are some aspects of medicine that do fit the definition, and others that could be made to fit better. And that is the topic for today.
As I was thinking about this topic, I asked myself, “Why don’t I shop for medical goods and services like I do for other kinds of goods and services. There are basically two reasons. The first is that prices are practically invisible to me. The second is that even when they ARE visible, they often don’t effect how much I pay out of pocket. So here are my proposals. They are fairly simple steps that would improve competition. And they wouldn’t cost very much either.
First, providers of medical goods and services should be required to post prices. For services, some standardization of categories would be required. My dentist would post his charge for a cleaning, filling, root canal, etc. Same with clinics, labs, etc. How much for a common blood test, or a physical exam… you get the idea. In each field, the most common services could be determined and prices for these would have to be easily obtainable by the public, via postings on premises, but also web sites, both individually and corporately, through medical associations, insurance companies, HMOs, etc. for all of their participating members. Pharmacies would have to post the prices of their top 50 or 100 sellers.
The above proposal allows for two of the advantages of competition – standardization and complete information, both of which are necessary to make truly informed purchases. Sometimes you might decide to go with the “premium product.” For example, a relatively painless dental hygienist is worth more than “Nurse Ratchet,” and you could make an informed decision about whether the added pain was worth the gain (I’m only partly kidding here. I’ve had a “Nurse Ratchet”-type work on me, and I once had gum surgery from a Dr. Paine – I kid you not). But many medical goods and services are quite mundane and standardized. And the more standardized a product really is, the more price sensitive I become. I certainly would be price sensitive about prescriptions, since you are generally getting an identical product from one pharmacy to the next.
Obviously, the above proposal only makes sense in conjunction with my second proposal – Allow for the consumer to participate in any savings that are achieved. This might require a departure from the common “dollar amount” copayments to the more traditional percent copayment. Or insurance companies could set “allowed amounts” for standard services with the insured paying the difference. Insurance companies would be required to post their allowed amounts in the same manner and for the same goods and services as medical providers.
Insurance companies already set “allowable charges” but for a different reason. I don’t know if the original intent was for people to pay the difference, but my experience has been that excess amounts over allowable charges are normally written off. Which is fine for people who are insured, but can become a huge penalty for the uninsured, as they are expected either to pay the full amount. When the platinum wife and I went to the same dentist, her $90 cleaning was written off down to the allowed amount of $65, while yours truly, then uninsured, was expected to pay the $90. I did not appreciate that, and although I probably could have asked them to accept the $65 for me as well, I shouldn’t have to bargain with my dentist like we’re at some yard sale.
But if he had posted prices and a set policy for such matters, that would be fine. I could pay or not pay. It’s a free country, right? With free markets and competition, right? Right? - Bob
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