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Health Care Costs

Wouldn’t it be neat to let people know ahead of time what their health care costs may be? Based on the tendencies of many other industries, this kind of business practice seems like a no-brainer. However, when it comes to health care, this sort of price transparency is quite rare. Imagine you were recently in a car accident caused by a drunk driver, the health care costs associated to your injuries may vary based on where the ambulance takes you. Unlike many other industries, health care costs can vary drastically depending on who is paying and where they are. These realities can leave health care consumers in the dark as to what it is exactly that they are paying for and if they are getting a good deal on it or not. To combat these problems, there is a price-transparency movement which aims to shed light on health care costs in order to empower patients to become better-informed health care consumers.

In reality, most doctors and hospitals have only a vague idea of what health care costs. The real health care costs of tests, drugs and specialists they recommend are a mystery to them. The health care costs at a particular medical facility is often based purely on the deals insurers and providers strike. This leads to large variations in the prices charged for the same procedures from facility to facility. For example, the average charge for a join-replacement surgery in Ada, Okla. was $5300 while the average price for the same surgery in Monterey Park, Calif. was $223,000. Even hospitals in the same region differed greatly when it came to pricing. For example, a hospital in Pennington, N.J., charged $3036 for a diagnostic ultrasound, while one in the Bronx, N.Y., billed just $88.

Based upon these startling variations in price, a movement to make the health care industry more transparent is in full swing. Efforts to raise transparency are coming from a number of places, including various state and federal agencies, including the Obama administration and the Centers for Medicare and Medicaid Services. Other entities such as Healthcare Bluebook, United Health Group and Pricing are also contributing to transparency efforts by amassing information related to list prices, cash prices and negotiated rates for common procedures. This initiative is also being spurred on by the insurers themselves, who say they are eager to help plan members save money. Approximately 98% of health plans now offer their members  online tools that help them to calculate their out-of-pocket health care costs. The overall hope is that by allowing consumers to compare the prices for doctor visits, hospital stays and other services, competition will go up, driving prices down.

Proponents of these new transparency measures are not yet clear on how much their efforts have effected costs overall. Some critics fear that the transparency efforts will backfire and cause prices to be higher since providers could then see what insurers were paying competitors, and therefore possibly holding out better rate. Regardless of the small criticisms, better price transparency in the health care industry seems like a great idea; after all, it is your money that becomes needed when you are sick or injured.

R.F. Wittmeyer

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