Commentary Magazine

A Revolutionary Reform in Hospital Prices

Wikipedia Commons.

This is yuuge.

Beginning January 1, 2019, the Trump administration will require hospitals and outpatient clinics to publicly post their prices for surgeries and other medical procedures, according to the Washington Examiner.

Nothing will help rein in ever-rising medical costs more than the kind of price transparency that has been almost wholly absent from American medicine since the coming of medical insurance in the 1930s. Once prices are known and can be compared, competition–capitalism’s secret weapon–will immediately begin to drive prices towards the low end, draining untold billions of dollars in excess charges out of the system. It will also force hospitals to become more efficient and more innovative to stay competitive at the lower price range.

Some hospitals already post prices. The Surgery Center of Oklahoma, for instance, does. Knee replacement? $15,499. Rotor cuff repair? $8,260.

Undoubtedly, insurance companies and large corporations that self-insure will find this information useful. But they already negotiate prices to levels far below the nominal price, just as Medicare does. Those without insurance, who get stuck with the often outrageously high nominal price, will benefit most. With the new transparency, they will be able to compare prices and bargain. “Why are you charging $2X, when the hospital across town will do the same procedure for $1X? Will you match that price?” The Surgery Center of Oklahoma reports that many uninsured patients are already using their prices to get their local hospital to charge less.

(Obviously, this doesn’t apply to emergency care. But that makes up only a small part of total medical costs).

Indeed, Medicare should also be required to post what it actually allows for the various medical procedures it covers (there are over 7,000 in its list), giving non-Medicare patients even more bargaining ammunition. For instance, a recent visit to my back doctor resulted in a charge for $159. Medicare allowed $79.65, slightly over 50 percent, and paid 80 percent of that. My supplemental insurance paid the rest. If the doctor was willing to accept $79.65 as full payment, why was the nominal price $159?

American medicine has a long way to go before its economics are totally out in the open and thus subject, in so far as possible, to market forces. But this is a very big first step.

Chalk up yet another major reform to the Trump administration.

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