I heard an anecdotal account the other day. A lady I know needed a prenatal ultrasound, and her new insurance coverage would not kick in for 90 days. The doctor’s office wanted $800 to perform the ultrasound.
She learned from a friend that the Blue Cross insurance rate for the ultrasound was $136. She was able to negotiate a fee of “just” $250 per ultrasound.
The economic textbooks say price controls are bad because they cause a mismatch between supply and demand. If the “controlled” price for a service is $100, and the market equilibrium price is $150, there will be a perpetual shortage of the service as a result of the price control.
However, the medical industry isn’t much of a free market. Patients, unlike consumers in the classic model, have very limited choices between providers for numerous reasons. All doctors are in a guild that artificially limits their numbers. It’s frequently not practical to choose what hospital you end up with if you need medical care urgently. All the hospitals in an area are usually owned by a couple of conglomerates anyway.
Prices aren’t listed, either, so consumers cannot really choose based on value. Also, accurate information about the quality of a specific physician is not available either (even if accurate statistics could be obtained with careful data mining of patient outcomes vs patient morbidity levels).
Anyways, it isn’t a free market. So what would happen if the government said that no licensed medical provider could legally charge more than double the medicare price for any given service?
The medical system is largely a free market at the provider point, even if it is imperfectly administered because of the reasons you cite. Insurance companies and the government negotiate a rate for each procedure. That is done outside the context of any emergency. Blue Cross may pay $136 for an ultrasound and Medicare may pay, say, $80. These prices are freely bargained for.
For the 12% or so of people who don’t have insurance, these companies use traditional pricing methods to account for the fact that without pre-pay, they won’t be able to collect on many bills. So if they charge $800, some people will skip out on the bill and a handful will pay full price. It probably works out that the hospital collects an average of between $80 and $136 for the procedure from uninsured patients.
If you set a price control, then they collect less that what they offer it on the open market causing the textbook service shortages.
MY guess is that providers would simply stop providing the services that the government has any authority over. That means not accepting Medicare or Medicaid patients, refusing that big government insurance program (what’s it called, TriCare?), etc.
Here in my state, there are only two giant insurance conglomerates that are offering Obamacare policies. One of them couldn’t come to terms with one of the huge hospital/physician/rehab groups, so its approved list of providers doesn’t even include any phyician, hospital, or rehab center in that group.
Which means there’s a huge medical group turning away potentially thousands of new Obamacare patients with otherwise perfectly good insurance because they couldn’t work a deal with the insurance company. Price controls would be even more inflexible.
In the US, many physicians have opted out of medicaid because reimbursement is too low, some are also avoiding medicare. However they can still get clients with private insurance. In a national system like Japan a doctor can’t avoid medicaid patients and only take those with private insurance (who pay more) since they are all under the same price control.
One advantage of the Japanese system which has a lot of price controls is that it encourages innovation. They are forced to find ways to provide services on the cheap to still stay in business. As an example, an MRI in Japan is much less than a US one because they were forced to find ways to do it affordably. In the US there is no incentive to offer affordable MRIs. The payer doesn’t really have the clout to say ‘find a way to do an MRI for $160’, so we do it inefficiently and it ends up costing $1000 or more. Even if the payer tries (medicare or medicaid), the provider can just overcharge private insurers and the uninsured, or refuse coverage to those with health plans where the buyer demands cheap services (medicaid).
FYI, this happened even prior to the ACA. In at least one case that I can recall, a Major Insurance Company nearly every American has heard of failed to come to an agreement with the hospital I worked at - and they’d been the hospital’s insurance company for its employees. Needless to say, the hospital changed providers for their own employees and instructed its clinics/etc. to warn patients of the upcoming change. (They did eventually come to an agreement to take the insurance again.)
Taiwan has a national fee structure, so every procedure performed in that country has a set price, no matter who the provider is, who the patient is, or who the payer is. They don’t seem to be having a health crisis. In fact, they claim a 99 percent coverage rate.
Thats just a fear. With no price control, you actually have a perpetual shortage of reasonably priced service providers, which is happenning right now ! WHen faces between a risk of bad results from A and a sure thing of bad results from the opposite, do what makes it look like the USA is heaven on earth , so that everyone can aspire the be like them… And let them donate lots of money to the political parties to ensure they keep the status quo this way.
I am a Healthcare strategist - work doing strategy consulting, heading up strat planning for a couple of start-ups, etc.
Over the next few years, three big changes are going to happen:
Most healthcare transactions are going to move online: picking your benefits (e.g., healthcare.gov), choosing doctors, comparing price/quality, etc.
Most folks are going to end up with higher-deductible health benefits - i.e., we will all be expected to pay for a bigger portion of the care we receive. This is happening a lot already and forces consumers to care a lot more about what they are expected to pay.
Payments will become streamlined: the time to “adjudicate” (that’s the tech term) a claim will be shortened - either to real-time adjudication in the doc’s office, or with an Estimator (not officially adjudicated, but a very good guess based on your coverage) accurate enough to be useful. Alongside this will be an online, easy way to make payments - the ease of PayPal or Amazon 1-click, but secure and compliant enough to work within Healthcare.
As these things happen, price pressures will increase aggressively and Consumers will play a much bigger role in influencing prices.
Hope this helps.
In Quebec, nearly all doctors practice within the medicare system (those who are out are completely out, emergencies excepted) and live within the legislated fee schedules. A few leave the province, but not many and a bigger reason may be the limit on how many can set up shop in Montreal. Hospitals get a global budget and must live within that. Neither doctors nor hospitals can charge any copay or deductible. There are problems but somehow it works.
You were doing well until you stated consumers will play a much bigger role in influencing prices. This is not going to happen with the current private payer system. Providers have a contractual obligation to collect the copay and deductible and the consumer has no choice as to the negotiation between provider and payer. In other words, no private person is going to negotiate the deductible because it has already been discounted through the insurance companies negotiation with the provider. As far as payments being “streamlined” this is already done regularly. Insurance companies fee schedules are loaded into the PM system which is connected to either availity or another benefit verifier and the fee is collected at time of service. For the layman, if you have Blue Shield and you haven’t met your deductible, your doctors office knows that, knows what their contract will allow for a particular service and may collect the negotiated fee before you leave.
Consumer needs surgery. Goes to comparison website, sees a few docs with different ratings for their Cost and for their Quality.
Website has asked Consumer which Health Insurance they have - when Consumer is considering which Doctor to pick, a window pops up offering Consumer a better coverage rate if they pick Doc A vs. Doc B. This is likely because the Health Plan has negotiated better rates with one vs. the other, and their Quality is comparable.
When this happens thousands of times, Doctors realize they have to be more competitive price-wise.
Scenario:
Consumer is signing up for Coverage - having to do it at a Healthcare Exchange as an individual (e.g., like Healthcare.gov)
They look at how much they will have to spend and end up picking a plan that is cheaper and requires them to have a “narrow network” of physicians.
The physicians in a NN are usually in there because they were willing to accept lower rates.
When the membership of that particular Coverage Plan with its NN gets bigger and bigger, Doctors outside the NN consider lowering their rates to get in.
Hope this helps. What is your involvement in Healthcare Foxy40? Not trying to compare expertise; I am just curious.
I really think you are doing a great bit of speculating in your scenarios. (I have a masters in healthcare administration, I am an ACMPE Fellow. Have been a both a practice and hospital administrator since 1987 and have a consulting business where I have traveled as far as Switzerland to speak about US Healthcare. I also speak at medical conferences on negotiating contracts with payers utilizing an RVU/outcome study/cost analysis ) I would venture to say I’ve seen many claims such as yours throughout the years resulting in practices and surgery centers failing due to the premise of negotiating low to increase volume. You can’t provide good service with too many patients while covering the enormous overhead involved. ( Ask any patient that has waited in a hot room for 30 minutes only to see a physician for three.) Twenty years ago major practices were buying each other up to corner the market since HMOs were the “wave of the future.” We all know what happened there. Or maybe you don’t but it was a complete and utter failure. Practices folded due to capitation plans low rates and patient over utilization. Not to mention physicians forced to see a dozen patients per hour and the quality of care being compromised. Time will tell which one of us is right but I’d back patient satisfaction over cost any day of the week. People will pay an extra 20 dollars not to be treated as chattel and the good physicians have no need or desire to negotiate when they are having trouble paying overhead as it is.
Another thing that has happened in the past is what is called “unbundling of services”.
So the government passes a law saying no doctor can charge more than (say) $100 for an office visit. So the doctor continues to charge $100 per visit. He also charges $10 for the nurse taking your history, and $20 for diagnosing your sore throat, $30 for treating it, and an extra $25 for maintaining your records. Another thing to do is make you pass thru a nurse practitioner or physician’s assistant for routine office calls, still charging $100 per visit, and charge more for problems that require an MD. Because those are “routine”.
Doctors aren’t stupid, and they often have a lot of medical school debt to pay off. And, they want to make money as much as anyone else.
To be clear: yes, I am doing a LOT of speculating. You are totally right: with healthcare, what goes around comes around. The differences this time:
An expected BIG shift of costs to Consumers. With high-deductible plans, consumers will be on the hook for upwards of 40% of their annual costs. If the move to high-deductible plans moves as aggressively many experts are stating, this will have a big influence on Consumer behaviors - e.g., perhaps (perhaps!) a greater inclination to switch doc’s.
A big shift to online transactions - already mentioned upthread. But if more and more healthcare transactions happen online, we can only guess what will happen. Remember when Twitter was a silly social media app, and now it is used to foment revolution in the Middle East and is a must-have in some circles. As new healthcare apps and innovators put stuff out there, who knows how behaviors will change?
Big Data - I know, cliche term. But with that online evolution comes Big Data innovation. If the cost/quality Transparency sites like Castlight, Healthsparq, etc. can sift through millions of claims and come up with truly helpful comp data, that will give Consumers a lot more info to use when making decisions…
So, yes, the more it changes, the more healthcare stays the same in some ways. But some of these innovations may finally enable approaches to better manage costs and quality - but I am certain that we have NO idea exactly how, and that Physicians are going to have a LOT to say about it.