Thursday, September 17, 2009

First Know the Problem, Then Fix It

This is the recommendation from the dean of Harvard Medical School, Dr. Jeffrey S. Flier. See his article here.

He suggests three problems that are at the root of the healthcare system.
1- A tax system that hides the true cost of employer provided coverage and significantly penalizes individuals.
2- Over regulation that limits innovation in health insurance and health care.
3- Large government programs (Medicare and Medicaid) that have fundamental inefficiencies and inequities in the way they pay for care.

All of these issues also directly impact pricing transparency in healthcare. Employer provided coverage has shielded individuals from the true cost of care and limited their need to understand healthcare pricing. Over regulation has limited competition and provided cover for insurers to hide provider pricing. Government programs underpay providers in many instances causing price shifting and distortion in the consumer market.

Dr. Flier doesn't offer a lot of hope for the current health reform initiatives suggesting that even after six decades, they haven't even fixed some obvious problems with tax deductibles for individuals.

It is hard to argue with the premise that you need know what the problem is before you try to fix it.

I would also suggest that pricing transparency is one of the core problems that needs to be understood and addressed.

1 comment:

  1. The problem is not lack of price transparency, or even taxes and regulations. The problem is lack of cost transparency.

    Simpply put, cost plus profit markup is price. But more important, cost transparency tells you what it takes to make one whole, that how much has to be paid so that the service provider is in the same financial situation as they were before providing the service. The same principle applies simultaneously to the provider's suppliers, vendors, subcontractors, etc. and their suppliers, vendors, and so on.

    Say a provider has to pay for a vaccine that is priced at $150 a dose, and the provider's price for administering is $100 per dose. (Please note, I'm making up the fees to explain a point.) But if it costs only $50 to make the provider whole, and it costs $10 to make the vaccine manufacturer whole (I include furnishing and delivering the vaccine to the provider in the $10), the "make whole" cost is $60. It is not $200, i.e. $150 plus the $50 make whole fee for the provider only. But good luck trying to get them medical community to let their books be audited, they will resist that to the death. By the way, in that situation, a 10% profit markup means a fair price should be $66, something the medical cimmunity would find any way they can to ignore.

    I've yet to see anyone in the medical community show a cost breakdown of their services. It seems they only want to talk price.