Earlier this week, President Trump announced an Executive Order requiring health care companies, particularly hospitals and insurers, to make their negotiated prices for services publicly available. Trump said, with his trademark understatement:
“This is a truly historic day. I don’t know if it will be covered that way by the fake news, but this is truly a historic day this is a very big thing that is happening right now and it’s pretty much going to blow everything away.”President Donald Trump, signing the Executive Order on Improving Price and Quality Transparency in American Healthcare to Put Patients First, June 24 2019
Since then, there’s been a slew of coverage about whether this order will have quite that impact. The hardcore health economists have been talking about Danish cement (seriously) in saying that forcing hospitals to publish what they’ve negotiated with health insurers to pay for services will simply encourage the ones charging the least to raise their prices. I personally asked an economist if the airline industry might be a better comparison, with its major players, barriers to entry and regional differences in supply and demand. Here’s what he sent me:
Here’s what this Executive Order on transparency could mean for the FI community: ultimately, smart and active consumers do better when they have more information, so this’ll be good for FI. Duh.
But health care has nuances—many, many nuances.
First, a lot of health care isn’t “shoppable,” i.e. you can’t really shop around for a better price, either because it’s an emergency service and you’re taken to the closest provider, you are in a rural area without multiple choices, you are prescribed a drug or treatment with no known alternatives, etc. It’s not like your car breaking down and you think to yourself that you need to get it fixed as soon as possible—yes but you’re not going to die if you make a few phone calls to area mechanics first, whereas you could if you’re having a heart attack and decide you want to find the cheapest and/or best emergency room.
Some estimates say that nearly half of all health care in the U.S. isn’t shoppable.
Second, for the shoppable kinds of health treatment, it can be really hard to find your way to the tools that will help you find the best prices for you. This great piece by the Upshot blog’s Austin Frakt lays it out nicely in showing that even where price transparency tools are available or even mandated, they still don’t get used that often. Because, as he quoted another economist named Michael Chernow, “Everybody wants to pay for value until they have to actually pay. Then they just want to pay less.”
But here’s the thing: FI people aren’t like everyone else. You have taken the extra steps to really understand your personal finances and what you need to do to achieve financial independence. You’ve used the tools available to you—and in some cases created your own tools—to help you optimize your savings, investments, side hustles and more. You got this.
So while the pros argue about whether health care price transparency will really bring costs down on a macro level, you should take full advantage of the coming data to bring down costs on your own micro level. Ask your employer if they have any healthcare-transparency tools available to you. If they don’t, tell them to get one.
And in the coming years (spoiler alert: it’s gonna take years for this thing to make its way to consumers), be on the lookout for companies making apps and other tools that compare and contrast prices so that you can see what works best for you.
But in the meantime, one thing you can do, as we’ve said before, to potentially save yourself money now is to look that the types of coverage you might need, whether preventive or reactive, and see if there’s a price difference between your options. For example, if you have an annual checkup (which you should!), don’t just go where your doctor tells you to go for blood work. Call around and see which facility provides what you need at a lower cost, whether on or off your insurance.
Another, more extreme example would be looking at your insurance, and even calling them, to see what would be cheaper if you or one of your children gets hurt but not badly enough to have to go to the emergency room. Do you go to an instant clinic or your pediatrician. Do you have a choice? If so, make a good choice!
Finally, there’s also supposed to be “list prices” added to pharmaceutical product commercials. While the same basic logic works for those as it does for all health care price transparency (read: it may or may not make your costs go lower), give it some time and some smart people, maybe you, will come up with a way to dissect it to save some money.
When you do, tell us about it!Like