NCPA - National Center for Policy Analysis


February 17, 2006

If a goal of health-care reform is to empower the patient, why is there such a mystery about medical prices? Instead of allowing government to set prices, it should make transparent the cost of these procedures, says Scott W. Atlas, a senior fellow at the Hoover Institution and a professor at the Stanford University School of Medicine.

When prices are openly stated and widely known, competition will ensue and prices will come down -- regardless of whether or not patients initially use that knowledge to make their "purchasing" decisions. This would allow the price mechanism to function again, says Atlas.

Where would the price data come from, and for what procedures should prices be known at the start? According to Atlas:

  • We should start with the 10 to 20 most common procedures in both outpatient and inpatient medicine, such as MRI scans, a surgeon's bill for rotator cuff repair or an anesthesiologist's bill for a cardiac surgery procedure.
  • Procedure-based prices are more appropriate, because diagnosis-based prices would likely be too complicated to calculate and contain too many variables.
  • To pre-empt the claim that "price depends on individual situations," posted prices could be based on retrospective analysis of the provider's previous three or six months' average of charges.

How would the price data be posted? The patient needs to know upfront, not after the fact, says Atlas:

  • One way would be at the time when patients are handed the "medical information materials," such as brochures describing procedures and consent forms.
  • Another way is to post them in the clinic offices and hospital admitting rooms.
  • A third would be to put them on the Internet.

Source: Scott W. Atlas, "Doctors: Post Your Prices," Wall Street Journal, February 17, 2006.

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