Competition in health care can help drive costs down
IN 1988, a radiologist opened a free-standing mammography clinic in south Oklahoma City. He not only promoted the service but the price of the procedure. That price, he said then, was “virtually unheard of in this market.”
What was truly unheard of at that time was advertising medical procedures, with or without the price. Only recently had professional association restrictions against advertising been voided by the federal government. This unleashed a flurry of medical-related advertising. The Four P’s of Marketing — product, place, price and promotion — became a routine part of health care.
At an April hearing of the House Committee on Oversight & Government Reform, U.S. Rep. James Lankford praised the Surgery Center of Oklahoma to make the point that open competition in health care can drive down prices. Surgery Center posts prices for dozens of procedures on its website. The Oklahoma Council of Public Affairs (OCPA), a free-market think tank, says health care consumers benefit when competing providers disclose prices.
Disclosure is key. Providers have always answered questions about pricing, when asked, but generally didn’t go out of their way to reveal them. In most areas of life, goods and services are touted on the basis of price. In health care, the price of services has often gone unspoken because “someone else” is paying for it.
This “someone else” has been private insurance carriers and/or the employers who pay the bulk of insurance premiums. Increasingly, “someone else” will be the federal government. Conservatives have pushed for modest co-pays even for lower-income residents: People need to know how much things really cost and determine if a given procedure is needed or desired.
Lankford, R-Oklahoma City, called attention to Surgery Center’s unique transparency. The OCPA’s Bran- don Dutcher cites the case of a man in Dutcher’s hometown of Bartlesville who used the information to leverage a better price for a surgery he needed. He asked a Bartlesville provider to match Surgery Center’s posted price, which was less than half of what he’d been asked to pay in Bartlesville. The request was granted.
We’re not suggesting that patients choose health care providers according to the lowest bidder. The point here is that providers will respond to competitive pressures. The same is true in education: Competition from private schools can improve public schools. Posting the grades of schools and school districts is an incentive for schools with lower grades to improve. Whether in health care, education, legal services, accountancy or other professions, disclosure gives consumers information on which they can make informed choices.
Back in 1988, when the radiologist promoted a $39 mammogram, a nearby hospital began advertising its (slightly higher) price for mammography. A local spokesman for the American Cancer Society told us then that marketing this procedure led to lower prices. “It’s good to see there’s some competition,” he said. “It’s one of the few things in the medical field that has come down in price.”
Dr. G. Keith Smith, a Surgery Center doctor who blogs on transparent pricing in health care and related issues, calls Obamacare the “Unaffordable Care Act,” an apt skewing of its actual name. Obamacare isn’t about price or quality. It’s about power and control. It will be a disaster for patients and taxpayers. It’s already sinking under its own weight.
If the namesake for Obamacare really wanted to make health care more affordable, he’d encourage free-market solutions over top-down control. Instead, his “reform” is taking us back to a time when, among professionals, the words “price” and “promotion” were best left unspoken.