THE BLOG

Why Published Prices Could Improve U.S. Health Care Costs

02/28/2013 06:24 pm ET | Updated Apr 30, 2013

When you buy a vacuum cleaner, airline ticket, or a car, you can compare prices before making a selection, and pick the one that fits your budget.

Not so when life hangs in the balance. You're sick. You go to the hospital, doctor, or clinic, get help, and, if you survive, are faced with bad news. The bill, particularly if you have only catastrophic (or no) health insurance, is steep, and may indeed bankrupt you.

It's as if you were forced to own that specific car, signed the paperwork, drove away, and only then were told what you spent. It makes no sense.

Yet, like everything we buy, it's based on the simplest formula in commerce, one that I see every day in my work with executives across industries: the price you pay equals the cost plus some type of mark up. It's as true for an airline ticket as it is for a $59 "Mucous Removal Device" -- or hospital fee in some areas for a box of tissues.

Beyond how it's set, we don't even know the price itself -- the one we're going to pay for medical services -- until it's too late. That's because hospital prices are unpublished. They are set and changed constantly out of public view. While there are many more complexities to fixing our health care system overall, removing medical service prices from hiding would be a great step toward recovery.

It's easy to over-think our way out of this potential solution. Once you buy into the notion that the economic problems in U.S. health care need to be framed in terms of costs, you enter the hall of mirrors of infinitely intertwined issues. In the confusion, the price lists head for the back room and quietly shut the door. If instead we could look comprehensively at prices across all providers and markets with clarity and transparency, wouldn't we be better able to sort out what's needed to be done?

Even so, many consider prices irrelevant or immaterial -- whether privately insured or on Medicare/Medicaid, no one thinks they're paying full retail save for the under- or uninsured. For them, there's the ER, or even the Affordable Care Act, right?

Wrong. Prices -- and the mark ups -- for medical goods and services in the U.S. are higher than everywhere else, leading us all on a merry chase to reduce "costs." Even the negotiated prices start the bidding at insane (and hidden) levels. We can no longer afford to over-complicate the problem. By any measure, there is a tremendous toll on our economy taken by provider prices -- a shocking sticker indeed, as some estimate we will spend over $2.6 trillion in health care costs this year alone.

Without a good old-fashioned open-for-all-to see marketplace of health provider prices to go with the access offered by the euphemistically-named "Affordable Care Act," we will continue to be lost in the hall of mirrors among hospitals, doctors, labs, drug makers, lawyers, government programs, and insurance companies.

As Steven Brill suggests in his excellent Time magazine article, "Bitter Pill: Why Medical Bills are Killing Us," every provider has a price list, and they're not too excited to share them with us.

Yet they must do exactly that. By mandating publication and open access to hospital, clinic and other provider pricing for medical services and supplies, our government could lead the way toward a free market solution to excesses and abuses in health costs. That's capitalism in action: prices, driven by competition, would go down over time, because consumers, legislators, regulators, and corporate decision-makers alike would be armed with the information needed to make informed choices. Doesn't that seem healthier?