August 26th, 2014
Summer vacation’s finally here. You’re strolling along the beach, not a care in the world when – ouch – you step on a piece of broken glass and need a few stitches at the local hospital. Such routine procedures are painless enough, but depending on where you’re treated and by whom, the real pain could occur when you’re handed the ER bill.
In some of the latest evidence on the crazy-quilt patterns of U.S. health care prices, Castlight Health found prices in Dallas TX ranging from $15 to $343 for the same cholesterol test. What makes these price variations particularly egregious is that the highest prices are typically reserved for those least able to pay, such as the uninsured.
What’s the solution? In the long run, we need to establish a more transparent system where consumers can choose easily based on reliable quality and price measures. But our current measures of quality are, to put it politely, inadequate, and people with insurance are often insulated or can generally afford those higher prices. Reference pricing, in which insurance pays only enough to reimburse providers with adequate quality and relatively lower costs, would help to restrain high prices, but distracted patients or those with strong attachments to specific doctors or hospitals could still get stung with a big bill.
Capping payments at 125 percent of Medicare rates. We suggest a short-term solution: The federal Medicare program has in place a complete system of prices for every procedure and treatment. It’s not perfect, but it is uniform across regions, with a cost-of-living adjustment that pays more in expensive cities and less in rural areas. If every patient and every insurance company always had the option of paying 125 percent of the Medicare price for any service, we would effectively cap the worst of the price spikes. No longer would the tourist checked out at the ER for heat stroke be clobbered with a sky-high bill. Nor would the uninsured single mother be charged 10 times the best price for her child’s asthma care. This is not just another government regulation, but instead a protection plan that shields consumers from excessive market power.Read the rest of this entry »