One quite obvious problem in health-care in the U.S. is the total absence of price transparency at the point of sale. One must further consider the total absence of price transparency among providers. Stated alternatively, at the point of sale price is absent which further negates price comparisons among alternative points of sale.
Maybe an example better illustrates the absence of price phenomena. Would any consumer enter a retail establishment and purchase goods where no price was marked nor forth coming? If you entered Target, Wal-Mart, Home Depot, or your corner grocer and price was not readily discernable, would you shop or leave the establishment? How could one compare prices among differing retail establishments in the above example if prices are not marked or forth coming?
When purchasing gasoline do you note the marquee sign displaying price and formulate part of your purchase decision regarding price? Imagine gas stations with no price. You can’t imagine gas stations with no price? Welcome to the wonderful world of health-care purchases.
Think for a moment and list all the places that do not display price. Its likely a short list and the list is populated with health-care related services. Why do they not list price? Without prices listed how can you compare price?
Price is a signal. Price is the rationing agent or mechanism regarding the allocation of scarce resources with alternate uses. How can one rationally allocate scarce resources with alternate uses without a rationing agent?
One must then ask himself/herself why price is not readily discernable in health-care? Why isn’t there a price tag, estimate, menu or some sort of price signal? Why are prices available at your local lumber yard but not your local clinic? Why? Its because you are not the payer of the health-care goods and services.
Health-care providers have absolutely no incentive to provide price to those not paying for services. Huh? Think about for a moment: who pays the bill? Where does the health-care provider, in most/many instances tender the invoice? The bill goes to a government sponsored quasi-insurer or a private insurer. The price is provided to the payer which is government or a private insurer.
Wait a darn minute! You pay insurance premiums, and/or you take a lower wage for employer sponsored benefits, and/or you pay into Medicare, and/or you pay taxes for government sponsored Medicaid services hence you are the payer! Sorry, wrong. From the stand point of the health-care provider, the government or a private insurer is the payer.
Rather paradoxical?!? If you are the ultimate payer of health-care services through insurance premiums, reduced wages, and/or taxes how in the world can you not be the payer? You are not the payer because you have been convinced by politicos through the mechanism of government that a third party payment system is to your benefit. That price is no object hence price need not be a component of decision making. Hence price becomes something merely passed onto you, the ultimate payer. Unfortunately, the price passed onto you, you being ultimate payer, is the “price” you pay for being convinced you do not need to know the price.