In Healthcare, a Little Bit of Market Freedom Goes a Long Way


Andrew Moran – January 2, 2020

In the U.S., a hysterectomy or a gall bladder surgery can set you back tens of thousands of dollars. For families who do not possess medical insurance or have inadequate coverage, it can be financially stressful to visit a hospital or schedule an appointment with a doctor. Most people residing outside the U.S. would suffer sticker shock since they receive medical treatment for free at the point-of-service, though their taxes are through the roof. Indeed, the U.S. does have an affordability issue. Is this the result of free-market economics or is there something else [to it]?

A Retail Surgery Shop

When you walk into your physician’s office or into a hospital and receive medical care, you are unlikely to know the cost of the visit. If you are insured, then the administration will just bill your provider or, if you are subscribed to a government program, then a subsidy will pay for your appointment. This produces a myriad of problems – primarily pricing opacity. One hospital in Oklahoma City is changing that.

In 2004, Dr. Keith Smith and Dr. Steven Lantier founded the Surgery Center of Oklahoma, a medical facility established on the idea of price honesty. Four years ago, the organization began posting a detailed list of all-inclusive and guaranteed pricing. If there is one thing these medical professionals have learned over time it is that “health care really doesn’t cost that much,” but “what people are being charged for is another matter altogether.”

If you were to undergo a breast biopsy at SCO, you can expect to pay $3,500. Anywhere else, you would pay more than $16,000 for the same procedure. Do you need an ankle arthroscopy? It will cost you just under $4,000 at SCO, compared to about $23,000 in other parts of the country. If you tore your patella tendon you could expect to be faced with a $30,000 medical bill but walk into the Oklahoma establishment and you’ll pay a fifth of the price.

Using economic principles, these two doctors aimed to transform the local health care sector through price transparency and bidding wars. It has worked out quite well as a whole host of institutions have gradually mirrored SCO, including the Oklahoma Heart Hospital, Breast Imaging of Oklahoma, and McBride Orthopedic Hospital. To avoid burdensome regulations, some facilities have announced they do not accept Medicare and Medicaid – something that has recently become more common. Dr. Smith told Conservative Modern:

Hospitals are having to match our prices because patients are printing their prices and holding that in one hand and holding a ticket to Oklahoma City in the other hand and asking that hospital to step up. So we’re actually causing a deflationary effect on pricing all over the United States.

In recent years, there have been many smaller clinics across the country adopting these kinds of models. Even Walmart, which has entered the health care business, is offering low-cost care. When you walk into some of these offices, you see a board on the wall that lists prices for everything from a physical examination to a flu shot or an X-ray. These establishments are usually cash-only. So, if these outlets are installing such mechanisms, why can’t the entire industry do it?

An Anatomy of Health Care Economics

Health care price inflation has skyrocketed since the 1970s. What, then, has been the main driver of this tremendous surge in medical care costs? The two most despised aspects of society: insurance and the government.

Back in the day, insurance was only purchased for catastrophes such as cancer, heart attacks, and life-threatening surgery. Today, patients buy health insurance for benign medical matters, from the common cold to the flu shot. Rather than pay out of pocket for these services, either the insurer or the state foots the bill, which means patients are more willing to go through tests and exams that might not even be critical. When price transparency is eliminated from the equation, people will take advantage of the system. When directly impacted by prices, though, the public is far more willing to shop around, price match, and do what is best for the pocketbook, much as consumers do for other goods and services.

Put simply, if you are paying for health care directly, you will ask: How much will this cost? Unfortunately, trying to determine the cost of both routine and more intricate services can be nearly impossible. Even if you were to ask, medical clinics would unlikely be able to answer your inquiries; they are already spending about one-fifth of their earnings on administrative staff just to file insurance paperwork.

It is true that bills may vary per patient. One individual might be overweight and older with a pre-existing condition. Another person could be young and in shape with zero medical complications. The former has vastly different needs than the latter. That said, home renovators can provide quotes for all sorts of homes with different sizes and shapes. A restaurant can put together a menu with prices next to each dish. A dentist or optometrist can be specific in what he or she charges. But in general medical care, it is impossible. When this is the norm, it is extremely difficult to influence providers to lower their premiums.

A Free Market Failure?

Leftists will shriek to the heavens that the U.S. health care system is a free market failure. There are two things wrong with this statement. The first is that American health care is among the best in the world for delivering top-notch treatment for serious chronic illnesses, which is why people flock from all over the world to seek medical care in the U.S. The second is that it is not an authentic free-market system. The main problem with U.S. health care is that there are far too many regulations, rules, and restrictions imposed by the government. When you add in state subsidies, an insurance industry built on cronyism, and doctors buried in paperwork, you have a mess of a system.

The Surgery Center of Oklahoma is a prime example of what free-market health care looks like – and that is far superior to hallway health care in Canada and long wait times across the pond.

Originally published at Liberty Nation.  

Image source: Getty

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