A Story of Healthcare Pricing Failures and Overtreatment

I don’t know anyone who would not agree if I said that there was a pricing failure with the way that healthcare operates in the United States. My personal favorite example of this was a story about a person who wanted some type of medical care, but couldn’t get it due to complications with payment between what he would pay and what his insurance provider would pay the provider. The individual one way or another found out what the charge was for someone who was uninsured, and asked if he could just pay that amount instead, but the provider couldn’t offer him the same rate because of the complications involving the private insurance, contracts, and all the confusing legal structures involved. The price of healthcare in the United States is not just high, it is completely opaque to even the people on the inside, it is apparently arbitrary in some instances. It is a pricing failure that is detached from the costs that anyone involved actually seems to face.


One of the worst parts of the pricing failure of healthcare, however, is that it isn’t even connected with the services we receive. Because no one knows what anything costs at a pure base level, consumers can’t easily shop around, and providers have no incentive to make sure they are actually providing value for the service they provide. I’ll use an example from my own life:


I had been getting vision checks and contact prescriptions done at Costco for several years, but thought I ought to actually get in for a full eye exam at an office a couple years back. Costco was cheap, it was easy, the service was quick, and the optometrist was a good communicator. In other words, the service and the value of the care I received were excellent. At the other office I paid substantially more for an eye exam, did a bunch of tests that seemed unnecessary and needed to be repeated, never got a great answer about why I was doing the tests, why I failed them, and if it was a problem with my eyes or the machine in use. The optometrist was less friendly, didn’t communicate as well, offered me fewer contacts to try on and conducted what felt like an unnecessary contact fit exam rather than letting me try out the contacts for a couple weeks before making a purchase. Where Costco gave me my prescription and sent me out the door, the office I went to had no intention of letting me have my actual prescription, in an effort to force me to purchase contacts through their office rather than someplace cheaper.


Dave Chase in his book The Opioid Crisis Wake-Up Call writes, “Broadly speaking, the two biggest problems in the U.S. healthcare system are pricing failure (no correlation between price and health outcomes) and overtreatment.”


I experienced both of these in the example above. I (and my insurer) were billed for unnecessary services at the more expensive office. The services provided were worse, less convenient, and didn’t seem to be related to my actual eye health outcomes.


There are a ton of challenges to addressing these problems. Policies to reward good health outcomes often end up rewarding providers who serve more affluent populations, who tend to just be more healthy in general. Equating patient satisfaction and quality of services also are not always related to actual health outcomes, so measuring the quality of services from a patient standpoint is not always helpful and often full of bias. Nevertheless, it is clear we need more transparency, and more market mechanisms in the U.S. healthcare system so that quality, outcomes, and price can be taken into consideration and more directly linked to the services and products that medical providers offer.

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