Free health care is going to be very expensive

During a snowstorm last year, I rear-ended an SUV in the Connecticut suburbs. I chose an authorized repair shop, one that was deputized by my car insurance company so no adjuster was needed to survey the damage. The estimate was $5,000 to repair the bumper, hood and grille. When I picked up the car though, my final repair bill was more than double — $11,000. I should have complained or at least inquired, but I didn’t — because my deductible was unaffected — I only had to pay $500 regardless of the total.

Medicare For All has gained in popularity this year and strives to give Americans universal and free health care. But without the self-corrective forces of consumer pricing, the result will be rationing or bankruptcy (or both).

ADVERTISEMENT

Though advertised as improving access, free health care can actual constrain it. When my daughter needed a second-opinion at an elite children’s hospital, we had to engage in a lottery process. My wife and I called their scheduling line (we both dialed to double our chances) on a precise time and date to be considered, but we failed and had to try again the following week.

Dr. William Kissick, one of the original architects of Medicare, first described this iron triangle of health care in 1994 — each angle represents cost, access and quality, respectively. Whenever we try to widen one angle, say access, then cost or quality (or both) are forced to narrow. To date, no country on earth has been able to disprove this formula.

Consider one simple free market principle that could bring a pervasive positive change — transparent pricing. When I started my direct-pay psychiatric practice in 2007, I intentionally priced my services below the market rate to attract patients. Compare this to most in-network practices that attract patients just by being part of a network. There is no incentive to entice patients on pricing.

And just one stroke of the Medicare pen can alter the practice of medicine nationally, lowering quality. This summer the Center for Medicare Services proposed to simplify documentation requirements for follow-up visits by reducing four medical complexity codes down to just one. The effect? Under the proposed plan a doctor would be reimbursed the same amount for a follow-up visit regardless if it was for a hangnail or a brain tumor. A physician on a private chat group commented that if this proposal comes to pass, he will only handle one or two clinical problems per patient appointment, forcing patients to schedule more appointments.

Opponents say that health care is too complicated for consumers to be price sensitive, but this flawed thinking is bred by our current culture of cost ignorance. Economist Elena Prager found in her research that when presented with simple pricing information, consumers bargain-shopped for serious health care needs like inpatient treatment and surgeries when they were on the hook for a percentage of the costs. Unlike my car repairs, they had direct price sensitivity.

Imagine if the same public fury that targeted the price-gouging of Mylan’s EpiPen or Martin Shkreli’s Daraprim was aimed at all parts of our system — hospitals, doctors and drug companies — who could be brought to their knees for unfair practices. Instead, our third-party payers often profit right alongside the price gougers.

Being considered a cosmetic procedure by insurance companies, the corrective vision surgery LASIK is mostly paid for out-of-pocket. In twenty years, after inflation, the cost of LASIK surgery has fallen by over 50 percent at the same time that its surgical technology has improved. And though most other surgical procedures are not cash-based, those that are show dramatic cost containment. Dr. G. Keith Smith, a pediatric anesthesiologist and the cofounder of the Surgery Center of Oklahoma, has offered transparent pricing for various surgeries for the last twenty years, publishing them online for the last decade. By undercutting local hospitals by as much as 90 percent, his group sees patients from all over the world.

ADVERTISEMENT

“Our first patients were single-payer patients from Canada,” he told me on a recent phone call, who in his words were tired of waiting for government approval for their surgeries. The Canadian system, which has inspired the Medicare For All movement, hit a record last year for wait times. For example, Canadians in rural provinces waited more than nine months to see an orthopedic surgeon. Dr. Smith says that his online pricing has inadvertently helped people thousands of miles away. Patients have used his website to negotiate lower surgery costs with their own local hospitals.

Direct primary care (DPC) tells a similar story of containing costs while improving quality. DPC offers easy access to a primary care physician and low-cost labs and medications for a reasonable monthly fee (usually $50-90/month). The benefits of DPC seem to help everyone (except corporatized medicine) by yielding greater patient satisfaction and lower physician burnout. And though DPC doctors tend to carry a fraction of the patient load of a typical primary care practitioner — several hundred instead of several thousand — there’s early evidence that this can significantly lower health care costs by minimizing ancillary tests and referrals.

Health systems like those in Canada and the U.K. do offer free universal health care, yet these systems are besieged with cost and access problems. This year, the N.H.S. waiting list for surgery exceeded four million people, while some surgeries like tonsillectomies for sleep apnea were removed from the list of available treatment options (arguably cited as being ineffective). There are regular reports about understaffed N.H.S. hospitals, delays in life saving medications and patients having to endure severe pain to qualify for an operation. But out of necessity, they have figured out a way to bypass these problems, using the free market, no less. The NHS allows those with cash to jump the line. Two-thirds of NHS’ trusts offer cash-based treatment options with little or no waiting list.

Vatsal G. Thakkar, M.D. is a clinical assistant professor of psychiatry at the N.Y.U School of Medicine and is the founder & CEO of Reimbursify. Follow him on Twitter: @VatsalThakkarMD