Right. Karl Denniger on the market ticker writes a lot along these same lines. Direct primary care physicians lists their costs and it’s amazing the difference between them and dealing with insurance companies.
Some parts of the healthcare system are a lot easier to price transparently than others.
When we visit a primary care physician the “range of service” provided is pretty narrow: it comes down to treatment, recommendation for additional diagnostic tests, or referral to a specialist. It might be a 15 minute visit, it might be a half an hour, but it’s not going to require four hours, let alone four weeks.
And while the provider can’t exactly predict the ancillary costs of providing a given service, it’s unusual for there to be high unexpected costs.
So while we still have the problem of selecting a primary care provider (be that an individual or a group) both the consumer and the provider can expect to have a fairly accurate idea of the amount of service directly involved in a typical transaction.
The problem is the *indirect* cost to the consumer - depending on the accuracy of the diagnosis and any additional follow-up recommended, the consumer is faced with additional costs far in excess of initial visit, and often without any practical means of evaluating whether or not the recommendations resulting in additional costs were cost-effective.
This problem only gets worse as the complexity of treatment increases: the mythical “informed consumer” would likely have to make dozens if not hundreds of individual choices about optimum cost/benefit during the course of a hospitalization for the treatment of a complicated condition - in effect the consumer *has* no rational choice other than to delegate almost all that decision-making to someone else.
So while “price transparency” is theoretically helpful in making consumer choices, as a practical matter even an intelligent consumer with time to research and consider options is forced to delegate the majority of such decision-making to someone else, and the nature of the system becomes critical.
For example, given that what consumer is actually buying is a complicated package of goods and services customized on a minute by minute basis to their individual needs, fee-for-service pricing is about the worst possible option, and something like a fixed price for hip replacement is a much better alternative in terms of limiting their financial risk - always assuming that they’re able to compare outcomes as well as pricing when considering where to have the surgery performed.
Joe flower is pretty much an agnostic about which alternatives will work best, and stresses that different alternatives are probably appropriate in different situations, but his major point is that it’s *very* difficult to control costs - no matter how transparent - in a fee-for-service system.
Some parts of the healthcare system are a lot easier to price transparently than others.
When we visit a primary care physician the “range of service” provided is pretty narrow: it comes down to treatment, recommendation for additional diagnostic tests, or referral to a specialist. It might be a 15 minute visit, it might be a half an hour, but it’s not going to require four hours, let alone four weeks.
And while the provider can’t exactly predict the ancillary costs of providing a given service, it’s unusual for there to be high unexpected costs.
So while we still have the problem of selecting a primary care provider (be that an individual or a group) both the consumer and the provider can expect to have a fairly accurate idea of the amount of service directly involved in a typical transaction.
The problem is the *indirect* cost to the consumer - depending on the accuracy of the diagnosis and any additional follow-up recommended, the consumer is faced with additional costs far in excess of initial visit, and often without any practical means of evaluating whether or not the recommendations resulting in additional costs were cost-effective.
This problem only gets worse as the complexity of treatment increases: the mythical “informed consumer” would likely have to make dozens if not hundreds of individual choices about optimum cost/benefit during the course of a hospitalization for the treatment of a complicated condition - in effect the consumer *has* no rational choice other than to delegate almost all that decision-making to someone else.
So while “price transparency” is theoretically helpful in making consumer choices, as a practical matter even an intelligent consumer with time to research and consider options is forced to delegate the majority of such decision-making to someone else, and the nature of the system becomes critical.
For example, given that what consumer is actually buying is a complicated package of goods and services customized on a minute by minute basis to their individual needs, fee-for-service pricing is about the worst possible option, and something like a fixed price for hip replacement is a much better alternative in terms of limiting their financial risk - always assuming that they’re able to compare outcomes as well as pricing when considering where to have the surgery performed.
Joe flower is pretty much an agnostic about which alternatives will work best, and stresses that different alternatives are probably appropriate in different situations, but his major point is that it’s *very* difficult to control costs - no matter how transparent - in a fee-for-service system.