If the government would apply the same standards to health care and insurance as it does to firewood and gasoline, the costs of these services would plummet.
Some years ago, a friend of mine, Richie Green, related a story regarding his roadside firewood business. To make extra money, he split firewood and sold it from a roadside lot to passersby on the Covington Highway. To make the transaction easy for the customer, Richie collected banana boxes from local grocery stores to package the firewood. A small hand-painted sign by his firewood stand read: “Firewood $5 a Box”.
One day, a nondescript sedan pulled onto the lot and a man approached Richie’s firewood stand. The man identified himself as an employee of the GA Department of Agriculture. (1) He told Richie that he had to change the hand-painted sign along the road to identify the unit of firewood measurement from “box” to “cord”. He told Richie that the official unit of measurement for firewood in Georgia was a cord or some percentage of a cord, and no other unit of measurement was permissible.
As Richie related the story, it was obvious that he was incensed at the seeming overreach of this government bureaucrat. “Who was he to tell Richie how he could sell firewood on his property?” I listened with interest, but I really didn’t think much about it until another event caused me to revisit the issue.
Sometime later, I was filling my gas tank and noticed a yellow seal on the gas pump. There it was again, the Georgia Department of Agriculture seal certificating the accuracy of the gas pump. As it turns out, government employees occasionally stop by to measure the output of the pump to make sure customers are getting a gallon of gasoline for the advertised price per gallon.
The reason for these standards is price transparency. Because a cord and a gallon are enforced standards, Richie’s firewood could be easily compared to a competitor’s firewood and Exxon’s gasoline can easily be compared to BP’s gasoline.
These two experiences got me thinking. What if the Government applied the same diligence in enforcing standards to health care procedures and insurance policies? For instance, what if hospitals advertised prices for procedures “units” the same way gas stations advertised prices per gallon? Imagine a sign in front of every hospital advertising “broken leg $1200” and the procedure for treating a broken leg was standardized from hospital to hospital (just like a gallon of gas or a cord of firewood). Patients could easily compare procedure prices. Hospitals could charge any price they wanted, but there would be full price transparency from hospital to hospital. Naturally, it would be impractical to erect a sign in front of every medical center for each procedure, but an internet website listing all common procedures would be very workable. All that’s needed is a set of standards (units of measurement) for each procedure. In a short time, watchdog groups would arise and compile comparison charts between medical centers just as they do with credit card rates and loyalty points. This standardization would put tremendous pressure to lower procedure prices. After all, why would you pay $2.75 a gallon at one gas station, when the one across the street advertises $2.50 per gallon?
Insurance policies could be treated in the same way. The government could create tiered policy standards (like a gallon or a cord). Insurance companies could then charge anything they wanted for the “Bronze Policy,” the “Gold Policy,” or the “Platinum Policy,” but those standard policies would be exactly the same from company to company. Consumers could then easily compare prices.
Know that I’m not advocating any government control over pricing. In a free market, pricing must be free to find itself. I’m only advocating standards of care or standards of coverage to facilitate pricing transparency. Also, hospitals and insurance companies would be free to offer other policies as long as they offered all required “standardized” policies. Consumers could then shop the standardized policies, or investigate a custom policy. The goal is price transparency and efficiency.
Choosing a healthcare provider could be as easy as choosing the lowest price for a “gallon” of healthcare.