Why not publish Medicare prices?

Could someone explain to me why health costs are not transparent in this country when public payers are picking up nearly half the tab?

I just read a nice little booklet called “Why Health Care Costs So Much” and it jogged me to ask the transparency question again. The authors, Greg Dattilo and Dave Racer, excoriate “gotcha” prices in health care and ask patients/consumers to ask for the Medicare price when they are about to undergo a procedure.

My label for the “gotcha” prices has been “sticker prices.” You could call them retail prices. They come in at about three times the Medicare prices, which, in turn, are supposed to be a little above hospital, clinic or doctor costs. You could call Medicare prices the wholesale prices.

The only people who pay the 300% sticker prices are the uninsured. People with insurance get discounts. Dattilo and Racer put insurance company prices at 125% to 150% of Medicare prices.

The federal government has what amounts to price controls, so it can make its low, cost-plus reimbursements stick. One response to such price controls is withdrawal of services. And that is happening with some doctors and clinics that refuse to take on more government-pay patients. Another response is for providers to shift bigger price increases to non-government payers.

The willingness of most providers to take most Medicare and Medicaid payments suggests, though, that the government prices aren’t way off the mark. The feds appear to know more about real costs and real prices than the health care corporations, who generally aren’t good at cost accounting.

So, why doesn’t the federal government just publish Medicare prices? It could be done region by region. Instantly, we would have a nationwide transparency system. The same can be said for prices paid to cover federal employees. Just make those prices public. President Obama could probably do it by executive order, a method he favors.

The need for a national menu of health prices arises because there still is no marketplace for health care. Markets discipline prices. But such a market is just emerging as payers and consumers get smarter about what they are buying.

Wisconsin Gov. Scott Walker recently called for more transparency in health costs/prices. So, why doesn’t he issue an executive order to publish prices paid to cover state employees across the state? He could do the same for the Medicaid prices the state is paying.

It would be interesting to see if Wisconsin, with about 200,000 lives covered, buys better than Medicare.

The prices listed on web sites by insurance companies and providers get less clunky each year, but most still are not good enough.

Remember this about the price data. It belongs to the guys writing the checks as much as it does to insurers and providers.

Ergo, self-insured private payers are demanding the data on not only discounted prices – real prices, not sticker prices – but also on quality.

Bill Bohn, CEO of Associated Financial Group, a large broker/consultant on benefits, wants CMS, the agency managing Medicare and Medicaid, to do a lot more. He wants them to collect critical data, such as volumes of procedures by provider, success rates and actual costs. He would tie reimbursements to compliance and performance on those metrics.

I would want such data to be made public.

Entrepreneurs are jumping into the market niche for transparency, but often meet resistance from insurance companies who see claims data and their discount schedules as their intellectual property.

Nonetheless, citizens, the taxpayers, the real payers behind government-run health plans, have a right to Medicare, Medicaid and public employee prices and quality outcomes. It’s their data,too.

You’d think such openness would be required under the Freedom of Information Act.

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  • Anonymous

    For starters, I think this is a great idea.  When it comes to cash customers, sometimes they actually pay less than Medicare.  By law, practitioners cannot charge less to other insurers than Medicare.  Cash bypasses this law. 

    What I would also find enlightening is the actual costs posted for practitioners.  How much is liability insurance, building overhead and billing costs per procedure.  Even an example would be nice.

    Overall, very interesting.

  • Artt Hackett

     Because health care and health insurance is a for profit operation, even at hospitals that are officially “non-profit.” If that information were public it would become, in short order, the price for all.  Profit growth depends on keeping some customers in the dark.  The CMS would be portrayed as the bully taking advantage of the medical system since they’re the biggest buyer on the block and no hospital can live without their business.  Do you really want to spend the next election campaign watching ads from the Club for Growth blasting “government price controls bankrupting America’s health care system?”
    You would wind up with a system like Canada’s in which the provincial systems negotiate prices and that’s what doctors and hospitals get.  Not that there’s anything wrong with that.

    • Anonymous

      I take your point. CMS already “bullies” the medical industry by using what amounts to price controls. But why should the uninsured, private businesses and their employees subsidize CMS/taxpayers? These big “non-profits” are essentially utilities, and, as such, their prices should be transparent. They are reality on an approximation of their costs. In the end, the providers need to get a lot more efficient. A few of them are doing so by using the lean disciplines that have led to huge quality improvements, better service and lower prices in manufactured goods. It’s all about management science, not political science. Basic cost accounting would be another good place for the providers to start.

      • “Bullies” is exactly the right word. We saw similar behavior in the “Big 3” Detroit automakers, bullying their suppliers into accepting lower prices (instead of partnering with them as Toyota famously does). That led to a lot of bankruptcies in the auto supplier base.

        Beating suppliers into having to accept a lower price is NOT the same as actually lowering costs (I’m sure I am preaching to the choir, John).

  • Gobkraus

    We are an accountably transparency-phobic species. The other current example is the reluctance to follow the Supreme Court’s urging to attach names to all that money that is flowing into politics.


  • Jhinwb

    I would think this pricing info could be accumulated without the government actually publishing it (I think they should be compelled to).  People are amazed when you tell them the best medical care in the state is also the cheapest, and explain the details. I wonder if price transparency would be as transforming as we wish it would. The general public just doesn’t seem to inform themselves of what’s happening. They will be forced to change…………by??

    • Anonymous

      By incentives and disincentives. When consumers have skin in the game, their behaviors change on a dime. If it’s their money, they will ask for prices.

  • Marc Eisen

    John: This question may or may not be on point, but let me put it out there. You know the newspaper biz. A car dealer who signs a contract to buy 52 half-page ads a year is going to get a cheaper rate for that half-page than a business that buys a single half-page ad. That’s the power of volume. Why shouldn’t a hospital or a doctor’s group operate on the same basis–an insurer (or whatever) that promises to bring 10,000 patients through the door in a year gets a cheaper rate on services than Ralph who’s paying out of pocket for a hernia operation? 

    • Anonymous

      Marc, No question that volume merits a discount. And Medicare has huge volume, justifying a significant discount. Yet the pricing in the health care market overall amounts to pure chaos. A colonoscopy can range from $1800 to $8000 in Wisconsin in the private sector market (non-market?). Medicare probably pays far less than the $1800. In that confused world of pricing, making Medicare prices public would provide a baseline for other prices to compare to. It would be sunshine to the maximum. Some self-respecting journalist should file a Freedom of Information to make the government prices public. Where’s the harm? The transparency reform would shine the bright light on costs and prices.