How much did you pay for your last prescription? How much was your copay? How much did your insurer (should you be so lucky) cover? How much did the insurer bargain the pharmaceutical provider down before they paid their share? How much of that net difference did they tell you about? What is the difference between what would have been paid on your behalf if you had been insured and what you paid yourself if you were not? Which of these numbers do you know – are you allowed to know – and how hard would it be to find them out if you wanted to know?
Now ask the same questions about your last visit to a primary care clinic, specialist, emergency room, or hospital. If you have ever tried to scrutinize one of these itemized bills, you will already know that the layers of obscurity between you and a bottom line serve to obfuscate until you just give up and pay what they ask (or just give up altogether).
Now ask the same question about the last time you had your car repaired, or the last time you bought a refrigerator, or the last time you utilized the services of legal counsel. You may not have liked the final bill, but at least you probably know how much you were paying for which goods, parts, and services.
There are many reasons for this complexity in health-care costs. Fracturing of billing systems, multiple points of service, technological complexity, high overhead, and a number of other factors contribute to this chaos. It cannot be missed, however, that the layers of obfuscation in the health care industry both put the consumer at a distinct disadvantage and contribute the ability to incur spiraling costs - and as long as the ball is in the biller’s court, there is no incentive to change this labyrinthine structure.
For all the Rand-ian railing on health care as a free market enterprise, the health care market as it stands today defies every tenet of Adam Smith’s principles of the free market. The sellers of health care goods hold all the cards. The barriers to entry and exit from the market (for insurance products, pharmacies, and providers alike) are extraordinarily high. The ability to negotiate prices and mobilize the market in response to changing prices is impaired by the obscuring of what those prices are. The demand for certain goods is fixed because these are not goods people choose – they are goods whose need is bestowed on people by the winds of fate, and whose utilization is not optional. The only invisible hand is the one that reaches out and smacks you good and proper when you realize that the fine print of your insurance coverage specifically excludes the one condition you need it for.
Nevertheless, health care is a market, and reclaiming some of the concepts of the free market may help both with the everyday frustration of the health care system and with that elusive beast called “cost control” that everyone talks about but no one seems to be able to tame. Interesting models have arisen that give us some clues about how the world might look if health care costs were prone to a little more transparency; pry open the looking glass and take a peek.
The first model out there is the pure fee-for-service clinic. These clinics are usually small, often run with minimal to no back-office staff, and have taken the remarkable step of refusing insurance reimbursement. The charge by a deli-counter list of services and fees, and you know before you walk in how much you are going to owe before you walk out. No copays, no deductibles, no $40,000/year billing specialist to support in the back: you pay the whole bill (or submit it yourself to your own insurance), and that’s that. These have been remarkably popular options – in no small part because they tend to employ other innovative strategies like same day-only appointments, but also because of the transparency of cost: no surprises, no variation, no sifting through confusing bills, no time spent on your part puzzling over whether you’re getting a deal or getting screwed. This predictability has proven popular with both uninsured and insured patients alike.
Another more powerful – and more startling – model of transparency comes from a most unexpected place: your friendly local Walmart store. In 2006 Walmart initiated a plan to sell a couple hundred generic pharmaceutical products for $4 per month. This was not a benign gesture; it was designed to break the dominance of specialty chain providers like Walgreens and had the venomous side effect of putting a good number of mom-and-pop pharmacies on short notice also. Some of the medications cost Walmart less than $4 a month to sell, some cost more (in fact, if you read the fine print at the bottom of these lists, you will note that several of these drugs are not available in certain states at these prices; this is because these states have outlawed selling certain goods below cost as a form of unfair competition). Many people have a legitimate beef with Walmart and I won’t argue with that beef, but I will argue this: by publishing a clear list of cheap generic medications at a single price right there on their website, Walmart revolutionized the market for pharmaceuticals in America. Their list became the standard-bearer for providers caring for uninsured patients – even if there’s no Walmart in a hundred miles, the list still tells you what has gone generic, and what is most likely to be cheap at another pharmacy. The list empowered everyday Americans to be able to ask their providers if their medication was on the cheap list or not – and if they could switch to one that is. You don’t even need internet access; if you walk up to most Walmart pharmacy counters, they will hand you a paper copy of the list right there.
Several other retailers followed rapid suit, and if you don’t like Walmart, you can also find lists for Kmart, Target, the Smiths grocery chain, and some other regional chain pharmacies. Some vary slightly, so medications that you might not find at one may be available on another – but for the most part, the Walmart $4 list remains the definitive guide to low-cost drugs in America.
But, the market for drugs remains free, and just because Walmart will fork over a month’s worth of your blood pressure drugs for $4 does not mean that everyone else will too. Notorious for the highest cost among the chain pharmacies is Walgreens; I once paid $17 for a prescription that (I later found out) was on the Walmart $4 plan, and I once saw a patient pay $40 cash for a medication that was on the Walmart $4 plan. That’s up to a 10-fold difference – a full 1000%. The new twist on the pharmaceutical block is the mail-in pharmacy: some insurers “require” that you use a mail-in pharmacy, pay a set copay, and wait for your prescription to arrive in the mail; what they don’t tell you is that your total for cheap generic drugs at a chain that has a $4 plan may be lessthan your mail-in copay – and remember, you only have to use your insurance if you want them to pay for something. If you wanna swallow the $4 yourself, that’s your business.
At my practice (which is a pretty even split between insured, under-insured, and uninsured patients), I routinely bring up the variable cost of medications. Uninsured patients are of course interested to know that they can get medications at the most reasonable cost, and in turn I do my best to keep to the low-cost formularies whenever possible. Insured patients show some interest, especially when they have high copays or deductibles that place a larger burden on them. Interestingly, the least interested patients tend to be those on Medicaid – because at least in this state, they have no copay at all on medications; it makes no difference if their carrier pays $4 or $40, because the patients pay none at all (and while I philosophically agree with charging nothing to patients poor enough to be on Medicaid, this philosophy bangs straight into reality when I read in yesterday’s headlines that my state’s Medicaid budget take up nearly a fifth of the state’s general fund and has to cover almost a quarter of the population).
And this is why I so fervently believe that transparency of cost should apply down to the consumer level: because people are capable of making good decisions when the information to make good decisions is readily available to them – and good decision-making at the personal level can translate to cost savings at the system level. And in turn, transparency means forcing the purveyors of these goods and services to compete openly - there is no reason why one pharmacy chain can charge rapacious prices, except that consumers are kept in the dark both by a lack of an open price list and the filtering of the true cost through the insurance system.
Transparency means putting drug prices on the internet and in paper form at the point of service, and running side-by-side comparisons of costs at different pharmacies. Transparency means setting prices and sticking to them for all services that can be reasonably quantified: basic clinic visits and procedures, imaging like xrays/CT scans/MRIs, and durable medical goods. Transparency means having to compete – no more hiding behind the refusal to list prices out in the open, no more obfuscation through the filter of complex insurance algorithms, no more indulging the mistaken perception that medical costs are somehow fixed and universal. Everyone should be able to know – like they do about groceries, gas, and plumbers – who are the cheap suppliers in town and who are the pricey ones.
Overall though, transparency requires a major philosophical gear shift within the practice of medicine itself. Theoretically, cost should not impair a provider’s decision to pursue care, choose a drug, look for a cause, identify a diagnosis. I have often been told at various places that I work that I should not consider cost when I make clinical decisions; one clinic where I served was very hesitant to allow me access to a basic price list for our services because it was thought that this would bias my practice, even though patients begged to know ahead of time how much they would be on the hook for. I have called local imaging centers to try to get generate a comparative price list for patients only to be told, “Well, it depends.” (For an xray?, I want to ask, it depends on what?!).
But this world of worry-free decision making is not the world we live in – not in the free-marketeering United States, and not in any variety of the socialized medical systems either (all of which have formularies and protocols for cost control as well). We all operate in a resource-limited world, and it’s time we started acting like it: when all else is equal, choose the cheaper drug from the cheaper store; when two imaging centers are hawking high-quality MRI services, choose the one that costs less; if two primary care clinics have equally good providers at two different costs, establish yourself out of the gate at the one that costs you less.
Patients have to be able to know. Providers have to be able to know; they have also to care. And given the full power of the free market – with a transparent view through what is now a one-way looking glass – we can all start to see where costs come from and where the fat can be cut from the meat before we are instead forced to cut meat from bone.