Health Care: Lets Fix the Real Scandal
August 6, 2009
Editor’s Note: In response to last week’s note on health-care reform, Steven Bavaria, managing director of leveraged finance at DBRS, sent me a piece he had written expressing his thoughts on the subject. If you have an idea you’d like to express regarding health-care reform, please send it our way. We welcome debate on this incredibly important issue that affects us all. —CJC
Uninsured people suffer incredible price-gouging by the medical industry, and they are routinely charged anywhere from twice as much to 10 or 12 times as much for the same services as people covered by insurance. That is the real scandal in health care, and the one we should fix first. Most of us lucky enough to have insurance never bother to ask the cost of our medical services, as long as the doctor accepts our insurance plan. But if you read your statements, you see the gap between the “sticker price” and the price the insurer pays is huge. In our family’s experience, it is typically two or three times for doctors’ services, and as much as 10 or 12 times for hospital and lab charges.
It is this huge mark-up on medical bills that is killing the uninsured, much more than the lack of coverage per se. A quick fix that Democrats and Republicans alike should be able to agree on would be to pass a “Most-Favored-Patient” Act (similar to the most-favored-nation concept in international trade law that guarantees each nation the benefits of tariff concessions granted to other nations) to require health-care providers to charge all their patients no more than the lowest price they charge other patients. You could even allow medical providers to gross up prices by some reasonable percentage—120% perhaps—if you wanted to give large insurers a reasonable “volume discount” that they may feel entitled to.
The impact of this would be huge. First of all, it would remove the primary disadvantage of being uninsured and be a big win for the lower-income working class, who make up most of the uninsured. It would also introduce transparency and cost-competitiveness to the health-care industry, since health-care providers would have to post prices. This would allow all health-care consumers—insured as well as uninsured—to become smarter and more cost-conscious about how our health-care dollars are being spent, whether the money is coming directly from our own pockets or from our insurer.
Once we correct the huge inequity that now exists for the uninsured, and introduce price transparency and cost-consciousness across the board, then even if we do move on to a more comprehensive national system, it will probably have a smaller price tag because many of the grosser inefficiencies will have already been squeezed out of our current system.