Medical treatment should have transparent prices and open competition

So that we can make health care more affordable.

This is the second part of my series of articles on reforming the healthcare industry to make its services affordable to all. In the first article in the series, I made the claim that employees should be allowed to:

• Refuse their employer’s traditional health insurance coverage.

• Accept a far more affordable Catastrophic Medical Insurance in its place.

• Keep the cash savings as increased salary/wages.

Using averages from the Kaiser Family Foundation survey, “Annual premiums for employer-sponsored family health coverage reached $23,968” in 2023. Given that the median household income in 2022 was $74,580, the typical family who made this choice would increase their income by something on the order of 25%. Families with lower incomes would see even higher rises. Now they could use a portion of that income for health care and likely a far larger portion on other goods.

This would be a big step towards removing the upward pressure from third-party insurance on medical prices. But this is not enough. We need major changes to the entire system. In addition to the reforms that I mentioned in the first article, a new healthcare system should be based on the following principles:

• Transparent prices

• Transparent reporting of results

• Cash payments by individuals

• Opening up surgical procedures to foreign competition

• Opening up medical diagnoses and treatment to nurses

In total these reforms would make the healthcare system much closer to a market-based system rather than the current service-based system.

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See more of my articles on Upward Mobility:

1. Why achieving Equality is an Impossible Dream

2. Why Progress and Upward Mobility should be the goal, not Equality

3. Why Equality of Opportunity is not enough

4. Why copying is essential to individual success

5. Upward Mobility in the USA (1947-1965)

6. Why Life Choices are key to Upward Mobility

7. The Traditional Pathway to Success

8. Constructing a modernized Pathway to Success

9. The Pathway to Success (first article in three-part series)

10. The case for Upward Bound accounts

11. The case for a Working Family Tax Credit

12. more

The following is an excerpt from my forthcoming book: Upward Mobility: A Radical New Agenda to Uplift the Poor and Working Class. Most of these excerpts will only be available to paid subscribers.

Other books in my “From Poverty to Progress” book series:

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Transparent prices

It is ridiculous how difficult it can sometimes be to price shop in the healthcare industry. Clear price tags are almost non-existent, and it typically requires multiple phone calls to each provider to get a straight answer. And even once you get an answer, there is no guarantee that the final price will match the estimate.

Almost every other industry has found a way to have transparent prices. There is no reason why the medical industry cannot also do so.

Yes, the cost of performing services varies by patient, but that is also true in other industries. Other industries typically make up for this variation by charging a price that makes a reasonable profit for the average customer and treats any variation as an unexpected gain or loss. They then adjust the prices if necessary. There is no reason why the medical industry cannot do the same.

Congress or state legislatures should pass legislation requiring all medical providers to:

• Establish a set price for each procedure

• Accept cash or card payments for all treatments.

• Display the price and results of the treatment in the entryway of their office and on a website that is accessible to all without prior payment. Prices and results should also be accessible via APIs that enable third-party websites to aggregate the data. This would create transparency of prices and results for all medical treatments for the first time.

Congress or state legislatures should also pass legislation to create a website that enables all people to quickly run a search on a specific treatment and see all the prices and results for the entire nation and all certified foreign facilities. This will enable all patients to easily price shop before getting treatment.

This would also have the side benefit of letting providers know when they have excessively high prices. My guess is that many providers have no idea how much their prices compare to the average. Just knowing that they are the most expensive provider in the metro area might give them a substantial incentive to cut their prices. And a sudden drop in patients after the website goes online will let them know that they need to make serious changes to stay competitive.

Transparent results of treatment

Congress or state legislatures should pass legislation requiring all providers to publish the metrics based on the results of treatment, including:

• The number of times a doctor has done the procedure in their lifetime.

• The number of times the doctor has done the procedure in the last six months.

• Results of previous procedures by doctors grouped into the following categories:

  • The patient’s condition improved.

  • The patient’s condition showed little to no improvement.

  • The patient’s condition worsened.

  • The patient’s post-op condition was not reported.

• Side effects of previous procedures by doctors are grouped into the following categories:

  • No side effects

  • Minor side effects

  • Serious short-term side-effects

  • Serious long-term side-effects

  • Patient death

• Known risks to undertaking procedures with easily understandable metrics.

I admit that this is far more complicated than transparent prices as the data currently probably does not exist. Providers will need to acquire the data from their recent patients after treatment. But should they not want to do this anyway? Getting feedback on results is a key step in process improvement.

I also admit that providers will have a strong incentive to lie, and going through the data is tedious. Patients may decide not to report or exaggerate their negative side effects. As a professional UX Designer, I could easily design a website that made it easy for:

• patients to input their results

• providers to verify those results

• third-party auditors to validate or followup on suspicious data.

But just because I can imagine such a system does not mean that it will be implemented well. Perhaps transparent results is not worth the effort, but given that this data can then feed into medical research, it seems worthy of an attempt. To know the real-world results of procedures with massive sample sizes could add more to our knowledge of medical efficacy than tens of billions of dollars in medical research.

Either way, with transparent pricing and results, providers would be forced to compete against each other based on price and efficacy. Doctors and hospitals with poor results or expensive prices would be under particular pressure to innovate. Entrepreneurs would have the incentive to establish new means to deliver affordable, quality medical care.

Foreign Competition

While the American working class has been under relentless pressure from foreign competition, our healthcare system has been isolated from it. This has worked to the benefit of healthcare providers and insurance companies. Because of this, the price of medical procedures within the United States has increased far more rapidly than overseas. Opening up the medical industry to foreign competition has the potential to radically lower treatment costs.

The cost of medical procedures in India, Costa Rica, South Korea, Thailand, Mexico, and Malaysia are dramatically lower than in the United States. For example, the cost of angioplasty in the US is $57,000, while it costs $3300 in India and $27,000 in Mexico (Oops! Sorry for the lack of citation here. I forget where I got this data from, so treat them as ballpark numbers).

Regardless of the actual prices, the enormous cost disparity is more than enough to justify the cost of airfare and hotel. While some Americans may wonder about the quality of overseas care, there is no evidence that there is a substantial difference (at least in facilities that cater to medical tourists). The only barrier keeping a far greater number of Americans from going overseas for their treatment is a lack of incentive to do so.

Today, medical tourism is a niche means of treatment. It is largely reserved for fairly well-off risk-takers who cannot afford critical care. It has not really reached a level of awareness that a typical person would seriously consider that option. As far as I know major private insurance companies and government-funded insurance plans do not allow their patients to seek overseas care.

There is no reason, however, why flying overseas for medical treatment could not become a standard practice. We should make it an option and give incentives for patients to seek the cheaper option.

Congress should pass legislation requiring Medicare, Medicaid, and the Veterans Administration to cover overseas medical procedures. To give Americans an incentive to do so, they should also pay for the airfare and reasonable accommodations for up to two persons and give the patient one-third of the cost savings in cash.

Let’s use an example of an American who travels to India for an angioplasty (based on ”back-of-the-envelope” advertised prices at the time of writing). In India, the procedure costs $3300, while it costs $57,000 in the United States. Two round-trip airfares would cost less than $4000. Let’s say other expenses total another $1000. This brings the total cost for treatment in India to $8300 for a total savings of $48,700. So if the person chose treatment in India, they would net more than $16,000 in cash. Plus they would not have to pay their share of the $57,000 for treatment in the USA. The federal government would save over $32,000 per treatment.

With these types of incentives, overseas treatment will likely transform from an oddity undertaken by only the most courageous to the default option. We could rapidly move to an era where routine preventative and diagnostic visits take place in the patient’s local metro region, but the more expensive treatment takes place overseas. This would save hundreds of billions of dollars every year.

Of course, we need to ensure that overseas treatment is at least as safe and effective as treatment at home. To qualify for reimbursement from Medicare, Medicaid, or the VA, an overseas medical facility must show efficacy and safety results at least as good as the median of similar facilities in the United States. Overseas facilities would also be required to have the same level of transparency on pricing and results as American facilities.

As more and more Americans go overseas for treatment, foreign doctors and providers would have a strong incentive to become certified. Most likely the best doctors and facilities will focus on foreign customers. With full transparency, any facility that got bad results would go out of business very quickly.

Some may argue that the government should not subsidize overseas providers over American providers. They would argue that the U.S. government should “Buy American.” I would argue that we have been trying this for the last 60 years, and the results have clearly been escalating costs.

Government healthcare spending has realistically been an enormous subsidy to American providers. And those providers have reacted in a self-interested way: they have raised prices and failed to compete. Cut off the subsidies and force transparency and competition and those same providers will be forced to offer more affordable care.

Empowering Nurses to Compete with Doctors

State laws are full of requirements that give doctors and dentists effective monopolies over many types of treatments. While some of these laws are designed to ensure quality care, it is hard not to notice that the medical interest groups have a strong incentive to outlaw competition from other sources. In particular, if qualified nurses were allowed to compete with doctors in delivering basic preventative care, urgent care, and diagnostics, society would realize substantial cost savings.

Congress and state legislatures should pass legislation eliminating all laws and regulations that require doctors and dentists to perform procedures that can reasonably be performed by nurses. We should make it legal for highly-trained nurses to form practices in basic preventative care, urgent care, and diagnostics.