by James Dunavant
There is a growing public awareness that many of the national problems with healthcare result from a lack of price and quality transparency. President Trump has rightly brought more attention to this problem through recent executive orders and proposed rules to require hospitals and insurers to disclose negotiated “deals” which have traditionally been hidden from individuals and employers. This lack of transparency has no doubt created perverse incentives and cover for healthcare providers to increase cost and enrich the crony hospital systems and big insurance companies.
Before we rely too heavily on the federal government to “fix” this mess, let’s not forget that government intervention and regulation in healthcare created this anti-free market phenomenon in the first place. First and foremost, transparency in healthcare is primarily a problem because the majority of consumers of healthcare goods and services rarely CARE about the cost as long as someone else is paying the bill. Our predominantly “fee-for-service” model and third-party payment system are the direct consequence of a long history of government interventions in the market, including employer tax exemptions, Medicare, Medicaid, HMOs, PPOs, ACOs, and all the resulting regulations that have emerged in their wake. The government has intervened to limit the supply of market-based medical services (licensing laws, patent laws, certificate-of-need laws) while artificially stimulating demand (subsidies, tax exemptions, welfare payments).
As the 20th century economist Ludwig von Mises said, “Economic interventionism is a self-defeating policy. The individual measures that it applies do not achieve the results sought. They bring about a state of affairs, which—from the viewpoint of its advocates themselves—is much more undesirable than the previous state they intended to alter.”
Each government intervention has created more perverse incentives and opportunities for non-transparent interlopers, driving up the cost of healthcare while increasing the profits of the politically-connected. As a result, opportunistic politicians and their economically illiterate constituents call for more government intervention to solve the problems that well-intentioned or outright unscrupulous lawmakers and their corporate lobbyists caused in the first place. The current “private insurance” system that Medicare-for-All advocates want to abolish is actually more of an inefficient government-created and regulated payment system that has little resemblance to true insurance that offers real value for consumers interested in risk management in the midst of economic uncertainty.
The issue of transparency has only begun to reach public scrutiny because individuals and employers have seen their healthcare premiums, deductibles, and other out-of-pocket expenses skyrocket thanks to the latest iteration of government intervention in the form of the Affordable Care Act.
So what is the best way out of this abominable mess? One thing is certain. More than 50 years of increasing government control over healthcare markets has been a miserable failure and has created the most expensive healthcare system in the world. Asking the state (i.e. taxpayers) to pay for more of the same is the definition of insanity and will only result in fiscal bankruptcy while effectively transforming physicians into government employees with as much incentive to provide quality service as the clerk at your local DMV.
Fortunately, there is a growing segment of the healthcare economy that is operating according to consumer-centric market principles, disproving the narrative that increasing healthcare costs are a result of “greedy capitalism”. This marketplace is comprised of buyers who do care about cost and quality, including cash-paying individuals and members of health-share associations, individuals with high-deductible plans, and employers with self-funded health plans. Real “transparency” is the natural result of voluntary exchange between willing buyers and sellers of healthcare goods and services. Entrepreneurial “sellers” must evaluate the market and develop a cost structure that results in a price that will attract customers. The “buyers” in a free market always look for value (price and quality) when making purchasing decisions. This market-based system is working efficiently in the Direct Primary Care movement and a growing number of facilities that offer a fully-transparent bundled pricing structure.
Consumers and employers can and should increase pressure on hospitals and insurance carriers to be more transparent. The free market approach to doing this effectively is to make a concerted effort to only do business with transparent providers of healthcare. Experts and patient advocates like Dr. Marty Makary have recently given sound advice that patients should outright refuse to sign their financial life away to any hospital or healthcare provider who is not willing to guarantee an honest and transparent price.
There is one thing the public should demand from government aside from letting this growing free market in healthcare work unhampered by more economic interference. We could start by demanding transparency from government itself in its own purchase of healthcare. There are currently more than 20 million federal, state, and local government employees who are all receiving health benefits. This means that our federal and state tax dollars are subsidizing countless government contracts with hospitals and insurers that are not transparent to the public. Most of these hospital systems are designated as “non-profit” under the guise of providing a public benefit. These very profitable tax-exempt organizations should be held to the same standards of open records law as public universities. It sounds like a criminal heist for government agencies to disregard price and quality in contracting healthcare services and funnel taxpayer money to tax-exempt hospitals while these same hospitals are suing taxpayers who cannot afford the inflated bills the hospital is charging them. Demanding transparency in this area while seeking the services of true free market, price and quality transparent providers will revolutionize healthcare and help us avoid the disaster that will result from more government control of healthcare.
James Dunavant serves as the Executive Director for the FMMA. Mr. Dunavant possesses more than ten years of success in academic fundraising and managing comprehensive capital campaigns for private and public institutions. His extensive experience includes event management, corporate and foundation relations, and prospect management. Prior to his work in institutional development, Mr. Dunavant spent nearly ten years in the book industry managing major business to business client relationships and marketing programs across higher education and international markets.