Now that the biggest shopping season of the year is winding down, let’s talk about the power of shopping in a new context. What if the next time you or a family member needs something medical — a CT scan, X-rays, colonoscopy or a minor procedure — you could shop online for the best service at the best price, just like you used Google or Amazon to find the best deal on Black Friday or Cyber Monday? And what if every time you found a great “deal” you could pocket some money for making that choice?
Is it too good to be true? Perhaps not; I am putting forward a proposal that will kick-start just such a health care shopping program, called “Right to Shop,” in which savings for one equates to savings for all.
On a regular basis, people tell me that market economics can’t be used to address rising health care costs because health care is one area where the “free market doesn’t work very well.” As an experienced health economist, it makes me chuckle. How can we know when we’ve never really tried? Over my lifetime, there has been a conscious move toward getting “someone else” to be the responsible party, resulting in less empowered patients and soaring costs.
Key elements that make markets efficient — free entry, low regulation, transparency, consumer choice and competition — are often missing in our current health care system, and the result is painfully obvious; however, there are exceptions.
For two types of elective medical care — cosmetic surgery and Lasik eye surgery — the conditions are more market-like than for most other medical services. Most people interested in these services are “self-pay,” on the hook for the full bill, so you can bet they shop.
And what is the result? Over the years, prices have declined and quality has increased. That is what free market competition does.
Another bright spot for lowering costs is the resurgence of cash-on-the-barrel-head medicine at surgical centers around the country. Patients can be treated for just a fraction of conventional hospital charges. Some self-insured companies give employees a choice — utilize normal insurance with co-payments and deductibles, or, have zero out of pocket costs by using a cash-only surgical center. Why shouldn’t patients who are willing to seek out better deals like that get to keep some of the savings that they generate by shopping?
When patients have a real incentive to shop, providers respond by innovating and providing better care at a lower price. That’s the power of markets, and it can work in health care.
Right to Shop will provide a significant step toward a competitive health marketplace by rewarding shoppers. Under this program, if you save money for your health plan, you have a right to pocket your fair share of the savings.
Right to Shop will launch first with Utah’s Public Employee Health Plan (PEHP). Once the program starts generating savings, as it has in other states, I expect other insurers to join in. Most Utah health plans have excellent “transparency tools” for comparing prices among network providers. Right to Shop will make those tools much more attractive and effective as consumers receive financial rewards for smart shopping.
Given the existing level of government intrusion in health care, I don’t expect the full market to be truly “free” anytime soon, but until we start figuring out how to deploy the same market forces that drive competition in other areas of commerce, we are unlikely to ever get a handle on rising health care costs.
Rep. Norm Thurston, a Republican, lives in Provo and represents House District 64. A professional health economist for the state of Utah, he holds a Ph.D. from Princeton University.