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One of the ideas I've heard discussed is that the only way we will ever get the cost of health care down is if consumers are back in the drivers seat with how the dollars are spent. Right now it's disconnected. I go in to have something done, the doctor bills my insurance company, and I really don't know (or care) how much it costs, unless I happen to look at the insurance paperwork. The same goes for pharmaceuticals. Which pharmacy in your town has the lowest price on that antibiotic that was just prescribed for your son's ear infection? Who cares, right? It's a $15 co-pay no matter where you go, so you go wherever is most convenient.

One solution that's been proposed is the increased use of HSAs + high deductible policies. That way people are paying their expenses out of pocket (for the day-to-day things at least), and are therefore more likely to shop around.

I'm not hear to argue the merits of that, but it definitely seems like an approach that might work. I fail to see how anything that takes control out of the hand of the individual will fix this problem (short of regulating the prices, which I wouldn't be a fan of).




Unfortunately healthcare is not a market you often willingly participate in. Some health needs can be anticipated, and doing more to encourage consumer empowerment would definitely lower prices. Think about cosmetic surgery or LASIK. Every participant in that market is voluntary, so all the providers are motivated to do it cheaper and better.

But when you have a major health crisis, your "empowerment" is just fundamentally limited. If you get into an accident with a loved one and they're unconscious, you're not doing to be in a position to decide whether you should go to the hospital 1 mile away, that may be X% more expensive than the one 5 miles away. Your ability to price discriminate is also fundamentally limited by your own knowledge of medicine. If you have a tumor and one doctor suggests taking medicine A which costs $50,000, and medicine B which costs $5,000, is A better than B? Is it 1000% better? If it's only 2% better, unlike any other consumer product, are you trying to optimize for "value" or "not actually dying"?

There's definitely things we can do in terms of government policy to encourage more customer empowerment to bring down costs. But ultimately you have a market with unvoluntary participation and opaque pricing, which means Adam Smith can't really do his thing.


You make some very good points, and I think you're spot on for the most part. I think HSAs have more benefit for the lower end of the cost spectrum, such as routine care, or minor medical issues (sprains, fevers, and the like). But I don't know what percent of the total US healthcare spend is on those types of items, vs cancer treaments and MRIs. So maybe it won't help as much as I'd like to think.


My family is actually on a plan similar to the one you describe (high deductible and a spending account).

Before I used it, it seemed fine. I tend to do alot of research regarding upcoming tests/procedures and such, and so adding in an element of cost/shopping around wasn't too much more hassle.

In practice, it's been awful. I have no problem shopping around, but it's been essentially impossible to get the information I need to make an informed decision.

As an example, our primary care physician determined a procedure was needed and provided a list of specialists in the general area who were equipped to do it. So I filtered those for in-network providers using the insurance's website and then called those practices. Out of the 4: 2 refused to quote me the price at all; 1 gave me such a run-around that I eventually gave up; 1 (whose employee started our conversation with "We don't normally give this out, but Jane said I had to") gave me the price they would bill if I were uninsured. None of the 4 were actually able to tell me what they would bill me.

However, I did manage to get them to list the CPT codes relevant for the procedure, so I then called up the insurance company. Despite being able to list specific providers and the exact codes they would bill, the insurance refused to quote the member rate. The best they would do was give me that average cost for that CPT in my area which is useless if what you're trying to do is shop around within your area.

So, I don't disagree that people having a more direct link to the actual cost of their treatment wouldn't be a good idea, but until the system adjusts to provide up-front visibility into those costs, the only effect from that linkage is going to be post-procedure sticker-shock.




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