Rising health care costs represent the largest threat to the nation's fiscal solvency, and unfortunately, Obamacare does little to change that. But empowering consumers can cut costs. It is time to try a different approach.
"The rising costs of health care will put tremendous pressure on the federal budget during the next few decades and beyond," the director of the Congressional Budget Office, Douglas Elmendorf, said recently. "In CBO's judgment, the health legislation enacted earlier this year does not substantially diminish that pressure." Medicare's chief actuary, Richard Foster, holds a similar view.
Under Obamacare, as in the past, health care delivery is based on having someone else -- an employer, the government -- pay for your health care services. That way the consumer doesn't really have to concern himself with what the services cost. And even if you wanted to know, it's not always easy to find out. As The New York Times points out in a recent article, there is no easy way to get good information on health care costs. Providers charge different prices depending on the terms of their contracts with insurers, and often consider the prices confidential information.
Under this system, health care consumers have neither the information nor the responsibility to shop for better prices. Studies have shown that this "third-party payer" system fails to control prices effectively. Although large federal and insurance company bureaucracies try to moderate price increases, they have failed. Health care costs, measured in constant dollars, have risen tenfold in the past 40 years.
"Since Americans started having employer-sponsored health care, people are paying with someone else's credit card, so we created a very inefficient market," Giovanni Colella told the Times. Mr. Colella is chief executive and a founder of Castlight Health, a new company that is building a search engine to help health care consumers do comparison shopping on the web.
Castlight Health, financed by the Cleveland Clinic and other investors, is one of a number of companies that have started publishing health care prices charged by doctors and hospitals. Others include Aetna life insurance company and the state of New Hampshire.
Employers who have shifted workers toward high-deductible insurance policies that require them to pay larger out-of-pocket costs are one spur for better health care cost information. Patients with more information about prices often spend less. The state of Indiana found that in 2009, patients with high-deducible plans spent 25 percent less than patients with a more traditional plan, the Times reported.
In another example of the variability of health care prices, Castlight found that colonoscopy prices in the San Francisco area ranged from $500 to $3,000.
While there are many medical emergencies for which patients have no time for comparison shopping, health care consumers should be encouraged to shop around for many routine medical procedures, examinations and tests, and to be aware of the costs of overusing emergency medical services.
Millions of consumers with dependable price information have a much better shot at controlling health care costs than a relative handful of officials in the federal government and the insurance industry. Consumer power should be the next revolution in health care.