The two critical components to transparent pricing in health care

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Credit President-elect Donald Trump for bringing the issue of price transparency in health care to the national stage. As two health-care professionals with decades of experience in the field, we believe that few issues are as important when it comes to fixing America’s health-care system.

Just like in every other facet of the economy, when consumers can see the true prices of the products they’re buying, it spurs competition, increases quality, and makes the product more accessible for all.

{mosads}But that’s not what we have in health care today. With Medicare, Medicaid and insurance panels, prices are both hidden and fixed – and patients may not know what the price is until months after the services have been rendered. Consequently, competition on price and quality isn’t part of the health care landscape.

When it comes to replacing ObamaCare, which only furthered the lack of transparency in health care, President-elect Trump and Congress must enact real reforms that give patients an honest and complete look at the cost of the services and products they’re buying.

There are two critical elements to increasing transparent pricing. First, how much is the provider (hospital, physician, etc.) charging for their services? And second, how much is the insurance company (or government) reimbursing for that same service?

This is common sense. If patients are able to get a sense of how much a routine doctor’s check-up – or even major surgery – will cost, they’re naturally going to search for the best quality, for the best price. As for insurance, does anyone buy a homeowner’s insurance policy without knowing whether the policy will pay off for a new home if it burns down to the ground? Of course not, which is why insurance companies need to be transparent on what they will pay for specific treatments and services prior to patients purchasing the policy.

The benefits of transparent pricing are easily discerned. Patients will be able to comparison shop for both price and quality. Physicians and hospitals will compete to provide the best price and the best quality. Similarly, Insurance companies will compete, not just on the price of their premiums, but also on the reimbursement side.  An insurance policy that reimburses $5,000 for a gall bladder removal is more valuable than one that reimburses only $1,000.  Transparent pricing will eliminate the need for the government-run pay-for-performance schemes that lead to perverse incentives for providers – incentivizing the care of the healthy while dis-incentivizing care of the sickest among us.

It turns out the free market has its own built-in pay for performance feedback loop. If providers charge too much or provide substandard care, patients will vote with their feet – just like they do in every other industry that has been made great by free-market capitalism.

Some will argue that you can’t comparison shop for price and quality when there is an emergency. While there is certainly an element of truth in this, we must remember that over 98 percent of health care is not emergent or life-saving care in nature. Most of health care is not life-or-death issues, but quality-of-life issues.

Great examples are Lasik eye surgery and cosmetic surgery. Insurance does not cover Lasik surgery or cosmetic surgery. They are both straightforward cash transactions with price transparency. Consequently, over the past 10-15 years, prices have come down while quality has improved dramatically. You cannot say that for any health care service that is covered by insurance. The difference: Price transparency that benefits all.

If President-elect Trump and Congress are truly going to fix health care, especially after the mess made by ObamaCare, then they simply can’t ignore the importance of price transparency. If both health-care providers and health-insurance companies start to disclose the cost of their respective services before those services are rendered, it will go a long way to restoring sanity, quality, affordably, and access to our broken health-care system. In fact, it will go a long way to making health care in America great again.

Dr. Strom is a fellow at the Jesse M. Unruh Institute of Politics at the University of Southern California. Dr. Gianoli is the co-founder of the Ear and Balance Institute and a Clinical Associate Professor at Tulane University.

The views expressed by authors are their own and not the views of The Hill.

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