Public Option To Have Pricing Subsidy

Back in July we got a preview of the difficult situation of creating a Public Option that "competes fairly" in the market versus the hint that the Public Option might pay doctors below market rates.

Today the Washington Post reports that the House is planning a reconciled bill that "would include a government-run insurance plan that pays providers at rates tied to Medicare." Medicare rates are well below commercial market rates for most healthcare services.

This development is unlikely to promote pricing transparency. Medicare's current payment system sets most physician fees at a similar level which could foster transparency. However, it is very difficult for patients to determine what the specific fees will be before they receive care. This difficulty arises from complicated geographic adjustments and the fact that care levels, and therefore pricing, are generally determined after the care is provided.

In addition, Medicare's rules provide different payments to providers based upon place of service and many other factors. If you have a service performed at one hospital you will likely pay a different rate than if you had used the hospital across town. Have the service performed at an out patient facility and it could be much less expensive.

If consumers don't know what healthcare costs before they get treatment, it is very unlikely they will be able to help get more value for all the dollars they spend. Let's hope that whatever shape the final health reform bill takes that it will at least bring more transparency to the consumer.