The President’s proposals to expand Health Savings Accounts are a step in the right direction. Critics point out that they don’t help out the chronically ill, or those with no money. But just because an HSA is not a wonder tool gizmo does not mean it should not be in our toolbox to address healthcare policy. Among other things, HSAs help bring some people into the health care financing system by providing a consumer-friendly way to address routine health care costs. They also bring some degree of responsiveness to the marketplace for health care, which has generally been in the hands of third-party payors instead of consumers.
But in order to make them really effective, prices need to be more transparent. Let me illustrate with an experience I had a few months ago. I had an MRI at an Omaha hospital. I arrived early for my appointment, and was immediately greeted by name and ushered into the MRI room. A kind nurse/technician helped me and made me comfortable, I got “imaged” quickly and painlessly (and most importantly, with no real humiliation), and I was on my way to work in 15 minutes. “What a great country!”, I thought.
Ten days later, I got the statement from my insurance company, indicating the billing for that 15 minutes of fame was $4000, of which they paid $1500. (These are round figures – I don’t have the bill in front of me.) This significant discount was based on their negotiated rate on behalf of others in my insurance group. Since I had met my deductible, the bill was satisfied for less than 1/2 of the cost, thanks to the discount for my insurance group.
When I saw the bill, I understood why I was treated so well. (Of course, I don’t dispute that the fine people running the equipment also had excellent patient care skills because they are great human beings. The machine was also very expensive, I’m sure. But it doesn’t hurt to also generate significant revenues while you are being a great human being.)
I also wondered: If I had an HSA, would I be paying $4,000 (i.e., full retail)? Price transparency is a good thing, as it allows true competition. If we are to become savvy consumers of medical services, we need to know what they cost. Commodities like MRIs, which are fairly standard, are amenable to this competition. More unusual services, like brain surgery, may not be.
The present marketplace is not accustomed to this kind of information exchange. Price discrimination that occurs in favor of the insured is understandable from the perspective of profit motivation. (The airlines used to do this all the time, as they charged last-minute business travelers who are less price-sensitive big dollars, while penny-pinching tourists were offered discounts for advance purchases. However, they are becoming less successful as competition has increased. Airfares at all levels have decreased over time.)
However, that same price discrimination in the health care environment seems troubling from the perspective of fairness. It may mean that the uninsured with means may be paying more than the insured for routine care, unless of course they are negotiating for better rates. The information disparity here favors the health care providers, and disfavors the consumer.
Thus, if we are going to be more market-oriented in making health care responsive to consumers, we will need to enhance transparency for pricing those services.