Competition and Choice, Part C: What Might Health Care Competition Look Like?

Exploring the Common Ground Principles: Health Care

Principle #3: A competitive and accountable health care system would help control costs by (i) ensuring that consumers pay a portion of the cost of medical services and products; (ii) allowing consumers to shop competitively for health insurance coverage or contract directly with health care providers for services, as they choose; and (iii) leaving room for health care providers, insurance companies, and the states to experiment with different methods for delivering services and reducing costs.

Much of the cost of health care is distorted, often by the complicated inner mechanisms of insurance companies. But there are some examples on the fringes of health care that offer a glimpse at what a more transparent market for services could bring.

Consider Lasik, an outpatient vision correction procedure generally not covered by insurance. People purchasing Lasik shop for it in roughly the same way they shop for anything else, basing their decisions on price, quality, recommendations, and convenience. At the same time, providers have sprung up to serve different parts of the market, offering everything from storefront clinics that charge a few hundred dollars to spa-like facilities that charge a few thousand. An online search turns up plenty of warnings about low-cost Lasik procedures, suggesting that they are probably performed by less qualified doctors with older equipment. Still, consumers have all the usual tools to make a good decision in the marketplace, and it seems to be working — we have not seen a rash of news reports about botched Lasik procedures.

Or, consider the MRI, a procedure for which health insurance is usually the primary payer. A great Atlantic article summarizes an example by Jonathan Bush, founder of a health IT business: “At Massachusetts General Hospital, an MRI can be billed to an insured patient for $5,315. Bush proposes that an industrious person could rent an MRI machine for around $8,000 per month, a suburban park office for $1,000, two technicians for $6,500 each (including benefits), and around $3,000 for taxes and fees. That’s $25,000 per month in cost. If you can do three scans per hour and run twelve hours per day, you’d break even at $28 per MRI.”

To be sure, many health care decisions are not so simple, and the stakes here are higher than for many other types of purchases. But the health care marketplace would benefit from the standard push and pull that comes from consumers and providers trying to find one another, without the artificial distortions of insurance bureaucracy.

Resources:

Healthcare, Meet Capitalism by James Hamblin (The Atlantic, July 2, 2014)

The Market for Medical Care Should Work Like Cosmetic Surgery by Devon Herrick (Townhall, June 5, 2013)