To Cut Healthcare Costs, Let's Start With the Secret Prices

When a colonoscopy ranges from $450 to $10,000, there's room for plenty of savings.

By + More

To turn these surprising revelations into useful information that can guide and reward patients for getting the best value for their healthcare dollar, prices have to be widely accessible and easily compared before care is rendered. One way to do this might be to expand the concept of the proposed health insurance exchange, which currently would be restricted to the uninsured. Allow for public and private exchanges, and make them open to all individuals who want to purchase insurance anywhere in the country at the best price. And make exchanges vehicles for price transparency, where consumers could get access to comparative and customary pricing information and then hold insurers' feet to the fire by selecting the company with the best available prices at the places they want to go.

[Instead of wholesale health reform, why not fix insurance first?]

The power of making medical prices transparent to the public has not been lost on the political establishment. Indeed, Sens. Charles Grassley and Arlen Specter have pushed legislation to require price disclosures in the private sector, where secrecy clauses between hospitals and manufacturers have been shown to double or triple the cost of medical devices for some patients. Meanwhile, it may surprise the public to know that the government has gone to great lengths to keep the rock-bottom prices it demands quiet, including entering into contracts with industry that make the prices Medicare and Medicaid pay for prescription drugs, say, inviolable trade secrets.

Why? Congress, as laid out in a 2007 letter from the Congressional Budget Office, recognizes that such disclosures would enable private insurers and their customers to be more insistent about getting similar pricing deals, making their own small discounts, and the government's large ones, converge toward an average. While this would lower costs for people with private insurance, it would make government prices—and costs—a bit higher. Disclosure has still not happened.

But if health reform is supposed to reduce costs, disclosing prices and enabling and incentivizing individuals to seek out the best value to serve their needs is a way to do that as a first step—and before making efforts to restrict or redirect care. I'd estimate a good 10 percent of total costs could be taken out of the system quickly, to the benefit of those in both private and public plans.

Related: Find out how many uninsured patients are saving on surgery by heading to India or Singapore.