I’ve got a column in this week’s magazine on one of my favorite topics: injecting consumer price information into the health-care industry.
I quote a couple of different studies from the Center for Studying Health System Change, including this one:
Consider LASIK. Over a decade, the cost of the conventional version of the sight-correction surgery has dropped 30% after inflation is taken into account, according to the Center for Studying Health System Change. As doctors rushed to add the lucrative procedure, the market was flooded with price signals about how cheap the surgery could be. Unlike with other procedures, such as in vitro fertilization and getting dental crowns, obtaining an estimate for LASIK usually didn’t require an office visit. A phone call would do. The result: even though people tended not to cross certain price bands (at some point, “cheap” signals low quality), transparency still drove down prices through competition. When consumers have clear alternatives, posting prices works.
I’m grateful to Ha Tu, a senior health researcher at the Center, for leading me through her research.
One important point that she makes, which I repeat in the column, is that price transparency as a way to keep down health-care costs only works if consumers have alternatives. A hospital with a monopoly in a particular market has fairly solid pricing power. If you live in an area where it’s tough to find a primary care physician accepting new patients, then you’re probably not going to shop around to find the best value for your money.
Still, in reporting the magazine piece, I started to realize that even in instances where price tags are unlikely to effect prices, there still could be benefits. I write:
Perhaps even when the supply of doctors (or hospitals, or pharmacies) is limited, consumers can benefit. After all, what a person really cares about isn’t just price, but price matched against quality and outcome. If your doctor recommends a digital mammogram, maybe the high quote on the sheet she hands you will prompt you to ask why the scan needs to be digital instead of on film. Does a digital scan lead to better results? In some cases it doesn’t. Next thing you know, you’re having a conversation with your doctor about what’s going on and why, the sort of conversation people should have with their doctors but rarely do. Nothing gets shopaholic Americans talking like a price tag. And that may have benefits well beyond cost control.