Why is Healthcare so Expensive in the United States?

One of the main criticisms of consumer-driven health care is that, today, consumers have no way of
figuring out how much a particular health care service costs. Indeed, one of the reasons that health
care is so expensive in America is because people have no idea what theyEUR(TM)re paying for it.
Hence, itEUR(TM)s important for reformers to encourage hospitals and doctors to become more
transparent about the prices they charge for these services. But an Arizona bill to do just that was
killedEUR"by the stateEUR(TM)s Republican legislature.
The failure of reform in Arizona Los Alamitos Medical Center, Terhune found,charges $4,423 for an
abdominal CT scan. Blue ShieldEUR(TM)s negotiated rate is about $2,400. But Los Alamitos told
Terhune that its cash price for the scan would be $250.
In Arizona, a state senator named Nancy Barto (R.), who chairs the senateEUR(TM)s Health Care
and Medical Liability Reform Committee, sponsored a bill, SB 1384, targeted directly at this
problem. The bill would require health care facilities to EURoemake available to the public on
request in a single document the direct pay price for at least the fifty most used diagnosis-related
group codesEURand at least the fifty most used outpatient service codesEURfor the
facility.EUR Doctors would be similarly required to publish the direct-pay prices for their 25 most
common services.
The idea is that patients who have health savings accounts need to know what various doctors and
hospitals charge for their services, so that they can shop for value when they need care.

Sen. BartoEUR(TM)s bill passed the Arizona Senate, but it died in March in the stateEUR(TM)s
House of Representatives, where Republicans in the House Judiciary Committee refused to send the
bill to the full House for a vote. (Republicans control both houses of the Arizona state legislature,
along with the governorship.)
EURoeDo we want free market health care?EUR Sen. Barto asked in a recent blog post.
EURoeThen why have common sense reforms that will produce one been opposed, defeated and/or
vetoed at the legislature for the last 2 yearsEUR"even though we have a Republican Governor and
Republican supermajority?EUR
ItEUR(TM)s a good question. EURoeThe short answer,EUR she writes, EURoeis swarms of
lobbyists. The longer answer is legislators succumbing to lobbyists on issues that should be rather

plain.EUR
Price transparency seems like the kind of thing that everyone should be able to rally around. But
youEUR(TM)d be wrong. Pretty much everyone in the health-care worldEUR"other than the
patientEUR"has an interest in keeping prices opaque.
Mayo Clinic doctor: transparent prices would EUR~confuseEUR(TM) patients
Eric Novack, an orthopedic surgeon in Glendale, Arizona, fought a lonely crusade for
BartoEUR(TM)s bill. According to Novack, it was a miracle that the Arizona bill passed the state
Senate. Senate President Steve Pierce, alleges Novack, EURoeslowed the bill down at the strong
suggestion of representatives from the GovernorEUR(TM)s office.EUR (Gov. Jan
BrewerEUR(TM)s chief of staff has ties to the health care industry.)
In fairness, the stateEUR(TM)s Democrats were nearly uniformly opposed to the measure, as well.
Lobbyists, says Sen. Barto, EURoenearly killed [the bill] in the Senate, where, after passing the
Senate Committee, opponents descended upon Senate leadership personally and the bill nearly
didnEUR(TM)t come to the floor. Obviously there is something more at stake.EUR
Most doctors and hospitals would rather not post their prices, because then patients would shop
around, placing pressure on their incomes. Insurers donEUR(TM)t like price transparency, because
they view the rates they negotiate with hospitals and doctors as proprietary trade secrets that give
them an advantage over their competitors. Suppliers of medical products, of course, also benefit
from high prices.
EURoeAt the final stakeholder meeting,EUR says Novack, EURoeit was 50 representatives of
the health-care industry against one person: me.EUR You can guess who won. EURoeOne
physician that was there, representing the Mayo Clinic, claimed that disclosing prices would confuse
patients since they might choose cost over quality,EUR says Novack. EURoeThis got a nearcollective head nod from all.EUR
Wait. So if patients got to see how much health care actually cost, theyEUR(TM)d be
EURoeconfused.EUR As compared to the clear-as-mud system we have today?
ItEUR(TM)s not a credible argument. When it comes to health care, patients will be even more
demanding of quality than they are in other aspects of their lives. ItEUR(TM)s the providers
who arenEUR(TM)t providing high-quality care who should be afraid.
Transparency dramatically reduces health-care costs
Not all providers everywhere are against price transparency. The pioneering Surgery Center of
Oklahoma, led by G. Keith Smith, posts prices online for the full range of surgical procedures that
they perform. EURoeOur prices are so low in comparison to what others are charging,EUR says
Smith, EURoethat our competitors are feeling the pressure, and are beginning to lower their prices
as well.EUR
Observes Daniel Anderson, EURoeThe clinic simply posts their prices on their website, and those
prices are often [50 to 75 percent] lower than [those of] most major hospitals. The clinic is drawing
in both the insured and uninsured, not to mention out-of-state and even foreign patients.EUR
Some libertarians argue that itEUR(TM)s not kosher for free-marketeers to force health care

providers to post prices. People should be free, they say, to hide their prices if they want to. After
all, we donEUR(TM)t seem to need to force Best Buy or Amazon to post their prices. And
itEUR(TM)s true that, in a dream world where everyone buys insurance for themselves, and
everyone has a health savings account, such measures might be less necessary.
But thatEUR(TM)s not the world we live in today. Today, if you try to buy health care on your own,
government policies and industry stakeholders do everything possible to make your life miserable.
Transparency is the sort of thing that Republicans and Democrats should be able to agree on. But
instead, theyEUR(TM)ve agreed to let industry lobbyists preserve the status quo.
Follow Avik on Twitter at @aviksaroy.
UPDATE: An earlier version of this article incorrectly described State Sen. Steve Pierce as Majority
Whip. While Pierce served in that position from 2009-2011, he now serves as Senate President.
I received an e-mail from Sen. Pierce, who writes:
Your article suggests that I delayed the passage of Arizona Senator Nancy BartoEUR(TM)s bill
which would require hospitals to disclose hospital charges for selective procedures. In fact, it is just
the opposite. Under my leadership, the bill passed the Arizona Senate, with my support and the
backing of nearly every Republican in the Senate. It then died in the House of RepresentativesEUR
I support transparency in health care along with other structural reforms to the system that will
improve patient care in Arizona. ThatEUR(TM)s why this legislative session I created a health care
working group which included Senators such as Nancy Barto and provider experts to look into
several important health care reforms. This group will continue to work on health care reforms this
year to develop a patient care agenda for next yearEUR(TM)s session.
With regard to transparency in Arizona, your article did not report that the Arizona Department of
Health Services already requires hospitals to file and publicly disclose their charges. The Arizona
Senate will continue to work on this important issue without duplicating regulatory efforts.
For those who are interested in reviewing them, the hospital disclosures to which Sen. Pierce refers
can be found here.
http://gather.com/why-is-healthcare-so-expensive-in-the-united-states/
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