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The lack of transparency would cripple any other industry, but why is it ok in healthcare?

A light on your car’s dashboard flickers yellow, and you’re convinced you can hear a rattling sound whenever you make a sharp turn.  You know you should take it in to a shop, but you delay it. Maybe the light will go off on its own, and it was just a false alarm. But you know better (and after some googling, you realize that the problem could be a Big Flapping Deal), so you eventually take it in; you needed to get an oil change 2-6 months ago anyway.

You brace yourself for the potential bill, because let’s be honest — you wouldn’t be surprised if you were charged $60 or $600.  Actually, $600 actually sounds kind of cheap for your 2003 sedan.  In fact, if it gets another few years of life out of your car, $600 really isn’t that bad, right?

This scenario seems relatively harmless, until you realize this kind of thinking is a large reason why people, even those with insurance, don’t seek health care.  Only there is no flashing light when your unregulated diabetes is on the cusp of creating very serious problems.

The obvious answer to this problem is because health care is expensive.  We have insurance to help mitigate against large financial losses, but health care still remains costly.  The Affordable Care Act is taking great lengths to ensure that all Americans have affordable health coverage, but as the GOP likes to point out, that does not guarantee that health care will become magically affordable.  Two things will help.

Increased Transparency

Despite being one of the biggest drivers of spending in both household and government budgets, health care is one of the few industries where consumers are unaware of the costs and uncertain about quality and outcomes.

BIG BOX ELECTRONICS STORE: Here’s a nice new laptop, it’s top-of-the-line.  You should buy it, it’ll help you be more productive at work.
YOU: Ok, but how does it stack up against other laptops? How much does it cost? Do I even need a top-of-the-line laptop?  I only need it for spreadsheets, research, and watching cute animal videos online.
BBES: Oh this will do all of that, and even edit HD video without breaking a sweat! We’ll send you a bill for it later.
YOU: But… how much is it?
BBES: Would you like an extended warranty with that? What about a 16-in-1 printer? It’s free after rebate!


It’s a little unfair to compare the healthcare industry to the tech world, but the point still stands that we don’t know how much services cost.  This contributes to the reason why we’re reluctant to go to the doctor, even if in the long run, more frequent visits are cheaper due to the effects of preventive care identifying, preventing and forestalling worse problems.

Fortunately, we’re moving towards increased transparency. With Covered California, the standardized tiers of health plans and quality ratings systems will be able to help consumers comparison shop based on quality and affordability. Eventually, we will be able to make the same comparisons for doctors and hospitals, treatments and procedures.  As consumers make better, more informed choices about their health care, we can trim some of the costly fat from the system.

Shift Away From Fee-For-Service

Traditionally, health care has been reimbursed on a fee-for-service basis. What this means is that health providers are compensated by insurance companies for the number of services provided, not necessarily on the quality or the outcomes.  As patients, we don’t know how much a service actually costs the system; we have an inkling of how much we have to pay when we get the bill, but many of those entries on our bill are purposely wildly inflated numbers, bearing no relationship to the real cost.  So when our doctor encourages us to get a slew of tests, some necessary and some “just in case – because hey, your insurance covers it,” we agree to it, as long as it doesn’t hurt our pocketbooks too much.

While it seems harmless to order that extra test or three, unnecessary (or duplicative) procedures are not only costly to the patient, but to the system as a whole.  Since insurance plans will have to pay providers for each individual service rendered, health insurance premiums steadily climb to recoup those costs.

In moving away from fee-for-service and towards managed care, we’re starting to re-incentivize the system to reward quality instead of quantity.  Instead of merely doing more, we can start to think about why a procedure or test is necessary, and if it’s beneficial to the patient.  With the rise of pay-for-performance incentives in managed care plans, the quality and outcomes of care can begin to replace the number of expensive services rendered.

One day, we will not wince when we open our medical bills, and the thought of going to the doctor will fill us with relief, not dread for the impending costs.

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