By: Ron Peck, Esq.
I’ve been reading articles about the Amazon / JPMorgan / Berkshire Hathaway foray into healthcare, and how this alliance will likely disrupt the market. The analysts seem to think these powerful entities will “fix” what’s “broken” by collecting data, analyzing the data, and customizing benefits to match user need. Forgive me, but isn’t that already something self-funded employers can do today? Indeed, for decades, the ability to collect usage information, and customize your self-funded plan to meet the specific needs of your population has been a benefit of self-funding. If you’ve not already leveraged this to your advantage, shame on you. You already have the same tools at your disposal that the likes of Amazon tout as what makes them special, and you’ve done nothing with it? Ouch.
Another “advantage” these new players in the market supposedly have is the “power of transparency.” They will publish the prices of medical care, for all to see. Setting aside the legal and contractual hurdles one must overcome to “publish prices,” and ignoring the fact that there IS NO FIXED PRICE to publish, as the amount charged varies from payer to payer, day to day, depending upon the weather and logo on the card… forgetting all of that and pretending that there actually is a readily available fixed fee for services to “reveal,” why (or how) will this change anything? If the consumer of healthcare (the patient) is different than the purchaser of healthcare (the plan or insurance carrier), how will knowing the price change the consumer’s behavior?
If I go to a baseball game, and am paying for beer and hot dogs out of my own pocket – if the prices are “transparent” – I may hesitate to drop $20 on solo cup of watered down “beer?” But… if someone else is paying? Give me the keg! Until the consumer actually benefits or suffers based on their purchasing decisions, transparency – means – nothing.
Wait … strike that. Transparency means something… something BAD. In psychology, we’ve identified a certain human behavior and titled it, “the irrational consumer.” In a nutshell, this behavior is seen when a person purchases a more expensive option for no other reason than it’s more expensive. They believe that the higher price must be associated with higher quality. Additionally, it’s an opportunity to use the purchase as an indicator of status. Thus, even when an “as good” or “better” option is offered for less, people will purchase the less-good/more-expensive option, either to impress people with their ability to spend, and/or because it must be better – it’s more expensive.
Introduce transparency into healthcare (intending to get patients to be better about spending) and you run the risk of seeing irrational consumerism in healthcare. People will ignore indicators of quality, and – (horror) – simply seek care from the most expensive provider.
“Clearly” this isn’t what we intended when we all started singing transparency’s praises. Let’s figure out how to achieve rational pricing in healthcare, and teach consumers what is truly “good” healthcare, before creating plans that force patients to have skin in the game. Then and only then would transparency make sense to me.