One of the main criticisms of consumer-driven health care is that, today, consumers have no way of figuring out how much a particular health care service costs. Indeed, one of the reasons that health care is so expensive in America is because people have no idea what theyâ€™re paying for it. Hence, itâ€™s important for reformers to encourage hospitals and doctors to become more transparent about the prices they charge for these services. But an Arizona bill to do just that was killedâ€”by the stateâ€™s Republican legislature.
The failure of reform in Arizona Los Alamitos Medical Center, Terhune found,charges $4,423 for an abdominal CT scan. Blue Shieldâ€™s negotiated rate is about $2,400. But Los Alamitos told Terhune that its cash price for the scan would be $250.
In Arizona, a state senator named Nancy Barto (R.), who chairs the senateâ€™sÂ Health Care and Medical Liability Reform Committee, sponsored a bill,Â SB 1384, targeted directly at this problem. The bill would require health care facilities to â€œmake available to the public on request in a single document the direct pay price for at least the fifty most used diagnosis-related group codesâ€¦and at least the fifty most used outpatient service codesâ€¦for the facility.â€ Doctors would be similarly required to publish the direct-pay prices for their 25 most common services.
The idea is that patients who have health savings accounts need to know what various doctors and hospitals charge for their services, so that they can shop for value when they need care.
Sen. Bartoâ€™s bill passed the Arizona Senate, but it died in March in the stateâ€™s House of Representatives, where Republicans in the House Judiciary Committee refused to send the bill to the full House for a vote. (Republicans control both houses of the Arizona state legislature, along with the governorship.)
â€œDo we want free market health care?â€ Sen. Barto asked in a recentÂ blog post. â€œThen why have common sense reforms that will produce one been opposed, defeated and/or vetoed at the legislature for the last 2 yearsâ€”even though we have a Republican Governor and Republican supermajority?â€
Itâ€™s a good question. â€œThe short answer,â€ she writes, â€œis swarms of lobbyists. The longer answer is legislators succumbing to lobbyists on issues that should be rather plain.â€
Price transparency seems like the kind of thing that everyone should be able to rally around. But youâ€™d be wrong. Pretty much everyone in the health-care worldâ€”other than the patientâ€”has an interest in keeping prices opaque.
Mayo Clinic doctor: transparent prices would â€˜confuseâ€™ patients
Eric Novack, an orthopedic surgeon in Glendale, Arizona, fought a lonely crusade for Bartoâ€™s bill. According to Novack, it was a miracle that the Arizona bill passed the state Senate. Senate President Steve Pierce, alleges Novack, â€œslowed the bill down at the strong suggestion of representatives from the Governorâ€™s office.â€ (Gov. Jan Brewerâ€™sÂ chief of staff has ties to the health care industry.)
In fairness, the stateâ€™s Democrats were nearly uniformly opposed to the measure, as well. Lobbyists, says Sen. Barto, â€œnearly killed [the bill] in the Senate, where, after passing the Senate Committee, opponents descended upon Senate leadership personally and the bill nearly didnâ€™t come to the floor. Obviously there is something more at stake.â€
Most doctors and hospitals would rather not post their prices, because then patients would shop around, placing pressure on their incomes. Insurers donâ€™t like price transparency, because they view the rates they negotiate with hospitals and doctors as proprietary trade secrets that give them an advantage over their competitors. Suppliers of medical products, of course, also benefit from high prices.
â€œAt the final stakeholder meeting,â€ says Novack, â€œit was 50 representatives of the health-care industry against one person: me.â€ You can guess who won. â€œOne physician that was there, representing the Mayo Clinic, claimed that disclosing prices would confuse patients since they might choose cost over quality,â€ says Novack. â€œThis got a near-collective head nod from all.â€
Wait. So if patients got to see how much health care actually cost, theyâ€™d be â€œconfused.â€ As compared to the clear-as-mud system we have today?
Itâ€™s not a credible argument. When it comes to health care, patients will be even more demanding of quality than they are in other aspects of their lives. Itâ€™s the providers whoÂ arenâ€™t providing high-quality care who should be afraid.
Transparency dramatically reduces health-care costs
Not all providers everywhere are against price transparency. The pioneering Surgery Center of Oklahoma, led by G. Keith Smith,Â posts prices online for the full range of surgical procedures that they perform. â€œOur prices are so low in comparison to what others are charging,â€ says Smith, â€œthat our competitors are feeling the pressure, and are beginning to lower their prices as well.â€
ObservesÂ Daniel Anderson, â€œThe clinic simply posts their prices on their website, and those prices are often [50 to 75 percent] lower than [those of] most major hospitals. The clinic is drawing in both the insured and uninsured, not to mention out-of-state and even foreign patients.â€
Some libertarians argue that itâ€™s not kosher for free-marketeers to force health care providers to post prices. People should be free, they say, to hide their prices if they want to. After all, we donâ€™t seem to need to forceÂ Best Buy or Amazon to post their prices. And itâ€™s true that, in a dream world where everyone buys insurance for themselves, and everyone has a health savings account, such measures might be less necessary.
But thatâ€™s not the world we live in today. Today, if you try to buy health care on your own, government policies and industry stakeholders do everything possible to make your life miserable. Transparency is the sort of thing that Republicans and Democrats should be able to agree on. But instead, theyâ€™ve agreed to let industry lobbyists preserve the status quo.
Follow Avik on Twitter atÂ @aviksaroy.
UPDATE: An earlier version of this article incorrectly described State Sen. Steve Pierce as Majority Whip. While Pierce served in that position from 2009-2011, he now serves as Senate President.
I received an e-mail from Sen. Pierce, who writes:
Your article suggests that I delayed the passage of Arizona Senator Nancy Bartoâ€™s bill which would require hospitals to disclose hospital charges for selective procedures. In fact, it is just the opposite. Under my leadership, the bill passed the Arizona Senate, with my support and the backing of nearly every Republican in the Senate. It then died in the House of Representativesâ€¦
I support transparency in health care along with other structural reforms to the system that will improve patient care in Arizona. Thatâ€™s why this legislative session I created a health care working group which included Senators such as Nancy Barto and provider experts to look into several important health care reforms. This group will continue to work on health care reforms this year to develop a patient care agenda for next yearâ€™s session.
With regard to transparency in Arizona, your article did not report that the Arizona Department of Health Services already requires hospitals to file and publicly disclose their charges. The Arizona Senate will continue to work on this important issue without duplicating regulatory efforts.
For those who are interested in reviewing them, the hospital disclosures to which Sen. Pierce refers can beÂ found here.