HHS Secretary Tom Price: The Epic Healthcare Swindle Must End

Steven Weissman Former Hospital President
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The same stewards that allow outrageous invoices to the U.S treasury, permitted healthcare pricing to become a direct to consumer scam. It’s a swindle of epic proportion, reminiscent of big government’s continuous spending scandals.

In one infamous defense department “deal” in the 1980’s, the Navy discovered it paid $1800 for two ashtrays. In another, the Senate heard testimony explaining that the approved price for a 10-cup coffee maker was $7,622.

President Obama joked about his trillion dollar infrastructure and stimulus program: “shovel-ready was not as shovel-ready as we expected.” Remember the $535 million loan guarantee to solar power company Solyndra – money down the drain. We also endured the Justice Department’s $16 muffin scandal.

Spending scandals have beaten Americans into indifference. It is expected that government will dutifully promise reform but not deliver.

But when it comes to personal medical expense, indifference is not an option. Healthcare pricing has been rigged by a healthcare industry that spends more on lobbying than the defense, aerospace, and the oil and gas industries combined.

Ask the price of any medical service and you always receive the same answer: “What insurance do you have?” Billing is determined by how much can be extracted from each patient on a case by case basis, often taking advantage of people at their most vulnerable.

Hospitalization for chest pain can result in a bill from the same hospital, for the same services, ranging anywhere from $3,000 to $25,000 or more. A simple blood test for cholesterol can range from $10 to $400 or more at the same lab.

Because prices are phony there is no price competition. Patients can’t shop for good value. Under these conditions, by design, patients will always be price gouged. Healthcare is textbook crony capitalism at its most vicious.

Hospitals, labs and physicians are essentially operating on the honor system. Nobody knows what their bill is supposed to look like; or, what it would be in an actual free market system with legitimate pricing.

Healthcare providers generally complain that Medicare rates are too stingy. But a recent study proves that Medicare rates may actually be excessive. The Department of Health and Human Services compared Medicare allowable prices for lab charges to the negotiated prices paid for 20 high volume and high expense lab tests by health insurers. It found that prices paid by Medicare exceeded market value: “Medicare could have saved $910 million, or 38 percent, on these lab tests if it had paid providers at the lowest established rate in each geographic area.”

The solution is simple: The only thing necessary to slash healthcare costs overnight is to require legitimate healthcare pricing. That means healthcare providers must have real prices just like sellers of all other consumer goods and services. Allowing prices to depend on each individual’s insurance coverage serves no purpose but to exempt medical providers from free market price competition. Nobody would tolerate being charged $10 per pound for bananas when their neighbor’s price at the same store is 10 cents per pound.

Legitimate pricing means networks would be obsolete, along with the tremendous limitations on patient choice they impose. We could patronize any healthcare provider in the nation without being price gouged for the crime of being out of network or uninsured.

Everyone would be empowered to shop any medical procedure online and see real competitive pricing from all providers nationwide.

Politicians avoid discussing medical bills – like the plague. Instead, they focus on insurance premiums which are just a mathematical function of medical treatment costs. Insurers are required by law to pay 80% of all premiums they collect for patient care.

Mind blowing though it may be, insurers have been perversely incentivized. The only legal way for insurers to increase premiums and profits is to increase the amount they pay for medical bills. Nobody is watching the cash register!

More than 100,000 individuals have signed and delivered a Petition to President Trump demanding legitimate healthcare pricing.

Politicians considering reform of the way health insurance is sold and structured are putting the cart before the horse. The absence of legitimate pricing for medical services is the reason Obamacare was doomed from the start. No replacement insurance scheme has a chance of lowering total healthcare costs, which are 18% of GDP – $10,000 per person, without competitive pricing of health services.

Secretary Price, families cannot afford the same mistake again. Think $1,800 ashtrays; $7,622 coffee makers; $16 muffins – or $30 for an aspirin in the hospital.