Nudge of the day
Rortybomb has a good idea:
Here’s my simple idea. Let’s say your salary is $60,000/year, and you take one exemption. According to this paycheck calculator, this is what your pay stub looks like every two weeks, leaving the States out of it:
You see your hard earned money pulled off into Social Security, Medicare and Federal Withholding. If you are a person capable of harnessing great rage, your blood is probably boiling at the thought of the looters stealing from you.
Now let’s do one of those informational nudge things. Taking numbers from the Federal Budget from here, what if your paycheck looked like this instead, which is the same paycheck:
Here you get a special line that identifies the amount of the Federal Withholding was actually going to the defense budget all along, and it tells you what it is. You get a number that lets you identify exactly how much of your time you are working to keep the defense budget as large as it is.
The same sort of nudge could be applied to healthcare spending. If we could go to the doctor or the hospital and see an actual menu of services and make choices based on actual upfront costs, we might choose to better ration the care receive, or at least take more responsibility and have more accountability in how we spend our healthcare dollars. You don’t have to limit choices directly – just make the cost of those choices obvious ahead of time. (Imagine if we ordered food without knowing the cost ahead of time! We’d spend a lot more going out to eat than we already do….)
This reminds me of another topic where healthcare consumers are taking more control: diagnosis. People didn’t used to come to the doctor with an informed self-diagnosis and documentation in the past, but thanks to more widely and readily available information (read: the internet) people can come to the doctor with a lot of their issues already worked out. This might annoy doctors, but it’s good for patients. And if we were smart about it, we’d start to dismantle the high position doctors hold to begin with and get more low-cost healthcare providers trained and out in the healthcare marketplace to provide cheaper and more accessible services to a more savvy population of consumers.
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I have long been a proponent of up front medical pricing. It is the -only- way that market forces can act to bring down medical costs.
Unfortunately, it is the hospitals, not the insurance companies, who are the culprits here. Many Hospitals charge the uninsured a -hugely- inflated price for services in order to make up for perceived losses elsewhere. Also, since some (not all) insurance companies reimburse based on a percentage calculation, it is in the best interest of some (not all) hospitals to inflate their prices in order to get a bigger net payment.
If prices were locked down and put upfront, it would make such tactics almost impossible.
Although I lean strongly libertarian, I think laws that force hospitals to disclose prices up front would be a very good idea. It would cause some initial chaos, and the medical industry might very well rail against it, but that is the only way to inject market forces into this system.
Some sectors of medicine (the ones that do not have to play complicated insurance games, or which benefit from simplified insurance agreements) already do this. Think of cosmetic surgery and the eye-glasses industry. Both disclose prices up front, and both have to deal with competition, resulting in a better market for consumers.
Hiding prices is usually a strong sign that charges are, at some level, being manipulated.
Absolutely, Damon. I lean libertarian myself, but when the market is distorted to favor the supply side by actively obscuring information from the demand side, that’s not a healthy market. That’s a scam. I’d do away with the insurance business altogether if I could and move entirely to HSA’s and vouchers, but that’s wishful thinking of course.
In response to another comment. See in context »I couldn’t agree more. And I was just in a hospital not too long ago, and the charges for simple blood tests were outrageous. I’ve paid for blood tests before out of pocket and they weren’t close to what the hospital wanted to charge. Though the negotiated rate was much lower.
I think knowing what a procedure, test, etc would cost and having a clear understanding of why it would be needed, would be very helpful.
Yes – I’ve had similar experiences. We should never be ambushed by cost. Imagine if you didn’t know what the mechanic would charge you to fix your car until afterwards! They charge too much already!
In response to another comment. See in context »Good idea; my property tax bill comes with a listing of all the agencies receiving the funds, on a percentage basis, and when you see the bulk going to the schools not welfare organizations it really helps put them in perspective.
Mr. Kain,
My daughter was recently in a fairly serious accident which required emergency care at a hospital that was not part the HMO I belong to (she needed more than eight stitches). What the hospital did was submit a carefully itemized invoice which was sent to my HMO. The paid the fixed amount for each item, less than the invoiced amount in each case. The hospital then “forgave” the difference except for 50 USD which happened to match exactly my deductible. Hospitals do have locked-in, upfront pricing for any given procedure. That price is intended to be higher than any insurance company’s locked-in, upfront payment amount for the same procedure. This way, no matter how much any insurance company is willing to pay for a given procedure, the hospital will get the maximum amount possible.
People wonder why the cost of health care is high.