Price Transparency and Clipping Toenails

Price Transparency and Clipping Toenails
April 5, 2013

Benjamin Domenech

Benjamin Domenech (bdomenech@heartland.org) is a senior fellow at The Heartland Institute. Domenech... (read full bio)

Here's a story that illustrates how the lack of price transparency can drive health care costs higher for us all.

Let me briefly share with you a rather amazing personal experience of overcharging by a Harvard-affiliated hospital here in the Boston area. It’s not a huge matter, but it is so outrageous and almost funny in a way that I thought you might have an interest in using it, maybe in something you are otherwise working on.

The hospital did a single toenail clipping. The bill is $1,206.

To avoid misunderstandings, this was not a surgical intervention. It was the same kind of clipping that you do yourself every week, except that only a small piece of only one nail was clipped.

The whole encounter, including the prior doctor consultation, took about 15 minutes.

Much like the $1800 MRI, this is a case where posted prices would likely have led to different consumer behavior. So why is there such opposition to solving this problem and letting consumers decide for themselves which services they need? It's still a major problem:

The point is that insurance is one way to pay for health care services, but it is not the only way, and very often not the best way. It adds massive administrative costs to every transaction. These are costs not solely born by the insurance company (or the employer), but includes costs on providers imposed by insurance companies. It is far more efficient to pay directly for a service received whenever it is possible to do so (and as consumer driven coverage evolves and expands, the optimal cut-off line will become more apparent). The presence of third-party payment always leads to overutilization, mistrust, and lack of accountability. Who is your doctor working for, you or the payer? Who cares what something costs if someone else is paying for it? ...

Having access to affordable health care is not the same as having comprehensive health insurance, and in fact the latter has undermined the former. Price transparency is key here (why do most Democrats want to bully health plans on their rate increases but don't seem to think hospitals should have to publish prices for services?). CMS’ national health expenditure data over the last 30 years illustrates this: premiums go up as out of pocket costs plummet. Quality is important too, and we ultimately need both. But we have to start with something and everyone understands price.

Until we have true price transparency and consumers have skin in the game, it's silly to expect anyone will ever turn down a $1200 toenail examination.

Benjamin Domenech

Benjamin Domenech (bdomenech@heartland.org) is a senior fellow at The Heartland Institute. Domenech... (read full bio)