Health care reform 2.0: lowering health care costs with no taxpayer costs

For months, we have been hearing the debate on ways to reduce healthcare costs.  Thus far, nearly everything introduced requires vast amount of government expenditures and seriously upsets people who actually like the health care plan that they currently have.  

It is astounding that the most important way to lower health care cost rarely , if ever, gets discussed. Curious?–read on. How do we lower health care costs? As the Governor of Minnesota would say – prepare to be dazzled…

The answer to lowering health care costs is to require all providers (doctors, hospitals, surgery centers, labs, anesthesia)  to disclose what things cost before the service is rendered. Yes, as a matter of informed consent, the cost of a routine medical service should be disclosed to the consumer.

If this one mandate was made (to disclose pricing), health care pricing would be in the ‘free market competition’ and prices would start dropping like a rock.

Consumers would start to shop for scheduled services and prices would come down, quickly. This is exactly what happens in a free market economy   and this is what has been happening in Plastic Surgery for decades.

Plastic Surgery is one of the few elective areas of medicine where most services are NOT covered by insurance. Thus, Plastic Surgery has always been subject to free market forces. Well guess what?–prices (adjusted for inflation) of most cosmetic procedures have gradually gone DOWN over the years , not up.

Since there is a well trained supply of Plastic Surgeons in the U.S.,  pricing disclosure CREATES COMPETITION of these medical services and prices are forced down.

A facelift performed now is less expensive (inflation adjusted) than a facelift performed 20 years ago.  Since there is a high supply of qualified Plastic Surgeons performing Breast Augmentation procedures, Breast augmentation prices keep going down.

Since many medical specialties are now offering Botox,  there is a high supply, and  prices fall year over year because patients can price shop among the competition. However, highly specialized procedures, such as the Brazilian butt lift or stem cell enhanced Fat grafting, with limited supply of experienced surgeons delivering excellent results can command higher prices.

It’s good ole supply and demand and Larry Kudlow’s free market path to prosperity.

With plastic surgery, there are only a couple of insurance covered procedures, so let me walk you through health care’s current mode of pricing secrecy.

Let’s say you want a Breast reduction procedure. The major components of the breast reduction surgery are:

Total cost= Surgeon’s fee + Operating room fee + anesthesia.

You have a insurance policy that will pay 80% . So, you, the patient are responsible for paying 20% of the allowed procedure amount. So, you, the patient want to find what your 20% will cost. How do you find out?

Here in Maryland, your plastic surgeon performing the breast reduction WILL tell you his surgeon’s fee in advance of the surgery. However,  there is no consumer database of operating room fees so a patient can compare costs between a  hospital and an outpatient surgery center.

Furthermore, if you call a hospital  to ask what the procedure will cost, they basically give you a run around. It takes a while to get a straight answer. I know because I have picked up the phone myself to get prices of a breast reduction procedure–and I know how to ask it.   I

wanted to know the difference in cost between having a breast reduction done in a Maryland  hospital vs. having it done in our own outpatient surgery center.  What is the difference in cost for a patient?

It is important to note that your surgeon can perform a breast reduction the exact same way, under the exact same type of anesthesia whether it is in a Hospital or an accredited Out Patient Surgery Center.

 Your surgeon’s fee is identical regardless of where the procedure is performed. However, the difference in operating room costs at a hospital vs. an out patient surgery center are worlds apart.

Estimated Average Operating Room fee (with recovery for a 4 hour breast reduction procedure):

Hospital OR= $6,200

Accredited surgery center= $1200  (based on BCBS participating allowable)

HUGE difference! The additional cost to have the procedure performed in the hospital is:
insurance company: $5000 additional for the insurance company,
patient: if the patient has a 20% co-pay, her co-pay is either $1240 in the hospital, or $240 in a surgery center.

So, why aren’t patients choosing surgery centers over hospitals for this particular procedure?? It’s so much cheaper and it’s the same procedure! The answer is that patients DO NOT KNOW what the difference is. Hospitals and other health care providers do not have to disclose what they charge to the patient BEFORE the procedure is rendered.

Can you imagine if the rest of the world operated this way?

The simple solution is for Congress to mandate that ALL healthcare providers disclose their pricing BEFORE the service is rendered. This should be mandatory for all routine services and scheduled surgeries.  Services that should  obviously be exempt would be ACUTE care, where there is really no time for disclosure.

Congress should require doctors, hospitals, surgery centers, labs , anesthesia providers to disclose their fees. This mandate would set forces in motion to lower health care prices.

It could be as easy as requiring each company to list the prices at their website. Many plastic surgeons have been doing this for years. Mandatory health care pricing disclosure would be a wonderful FIRST EASY step to reform health care pricing.  Except for the cost of writing the bill, it wouldn’t cost the taxpayers a single penny.

(originally published Jan 24, 2010)