What Health Care Can Learn from the Plastic Surgery Marketplace

What Health Care Can Learn from the Plastic Surgery Marketplace
May 28, 2013

Benjamin Domenech

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

Consumer Power Report #375

We all know the stories about what price transparency can do within the health care marketplace. It’s amazing how, unlike any other industry, the simple act of posting prices online is worthy of a news story.

One great example of how health care marketplaces can work, if only they’re allowed to, is within the realm of plastic surgery, where prices have been posted for decades. Devon Herrick of the National Center for Policy Analysis has done some interesting new work on this topic:

Cosmetic surgery is one of the few types of medical care for which consumers pay almost exclusively out of pocket. In health markets without third-party payers, doctors and clinics use price competition, package prices, convenience, and other amenities in order to attract patients willing to purchase their services. When patients pay their own medical bills, they become prudent consumers. Thus, the real (inflation-adjusted) price of cosmetic surgery fell over the past two decades – despite a huge increase in demand and considerable innovation. Since 1992:

  • The price of medical care has increased an average of 118 percent.
  • The price of physician services rose by 92 percent.
  • All goods, as measured by the inflation rate, increased by 64 percent.
  • Cosmetic surgery prices only rose only about 30 percent.

One interesting note is that these prices rose even as the arena became far more innovative. Herrick writes:

Consider corrective eye surgery. From 1999 through 2011, the price of conventional Lasik fell about one-fourth due to intense competition. Eye surgeons who wanted to charge more had to provide more advanced Lasik technology, such as Custom Wavefront and IntraLase (a laser-created flap). By 2011, the average price per eye for doctors performing Wavefront Lasik was about what conventional Lasik had been more than a decade ago; but the quality is far better. In inflation-adjusted terms, this represents a huge price decline.

Now, unlike emergency care, cosmetic surgery is the sort of thing you plan ahead for, with the ability to compare doctors and prices. But the truth is that emergency services account for only a small portion of overall medical expenses in the United States. And even those who need to seek immediate care often find it’s much less expensive to shop around and avoid the ambulance. This reminds me of this incredible feature on an uninsured California writer who had an accident, and still took time to shop around:

For our third stop, we visited a branch of Medical Urgent Care Clinics. That it was on the second floor of a building with no elevator was not ideal, but it had good reviews on Yelp. I managed with my girlfriend’s help to hop up the stairs. To our happy surprise, the place was empty, and they treated me right away. The cost: a flat $75 cover fee. Dr. Saravia, a young, pretty doctor who received her training in Guatemala, expressed empathy upon seeing my bloodied leg, much of it dirt-black from the road rash, and then she began to clean me up, with the help of a younger nurse. Sensitive to my finances, she consulted me before every injection she felt she needed to make, telling me the price of each. It was like being in a restaurant and hearing the specials. Most were vaccinations, and I chose to get them all and pay the $25 per-shot fee.

Two-and-a-half hours later, my wounds were all cleaned up. I ended up requiring stitches on both knees because the cuts were too big to heal on their own. For three or four weeks, I’d be unable to bend my legs. The doctor told us that she suspected that my left foot had some breakage and sent me to get X-rays at a separate location, five minutes away. At the X-ray shop, we learned that each X-ray would cost $75. My girlfriend repeated the two magical words, “no insurance,” and began to engage in a combination of pleading and haggling. They agreed to do an X-ray of my foot and one of my knees for $75 total …

A few years ago, when everyone was debating healthcare reform, people talked about changing the system to give patients more incentives to save money. Having insurance makes you spend more, it was said, and having skin in the game makes you save. I admit they have a point. If I’d had insurance I would have said yes to the ambulance. I would have gotten my treatment in the ER. I would’ve said yes to most of the recommendations made by my doctors. I would not have been panicking about money. I would not have driven around to a half dozen different places patching together treatment. The way I did things, I made sure that my doctors did only what they felt was absolutely necessary, and I saved a lot. But it was a hell of a way to cut costs.

The aim of policymakers ought to be making this kind of shopping much easier, particularly for non-emergency care. People will respond to price transparency, just as they do in other marketplaces. And no one will ever care what something costs as long as someone else is paying for it.

-- Benjamin Domenech



Paul Krugman and others are crowing that California shows Obamacare working. Not so fast my friend: you’ll be paying more and getting less.

Today, you can go to EHealthInsurance.com and find the cheapest plan fitting this description for your age – at $111 per month, the California Farm Bureau’s HSA 4500 plan. You’re on the hook for your first $4,500 in medical bills (your deductible), but you’re totally in the clear after that because there’s no coinsurance above that. The terms are as simple as can be, and they are exactly the same for prescription drugs and everything else. With this plan, you’ll never pay as much as 10 percent of your current income toward health care in any given year – and that includes your health insurance premiums. (If you want, you can set up a Health Savings Account and use pre-tax money to pay your medical bills, but that’s entirely up to you.)

I ran the details of this bare-bones near-catastrophic plan through the HHS actuarial value calculator and found that it would qualify for Bronze status, with an actuarial value of 63.3 percent.

Alas, this plan won’t qualify, because this plan will no longer be available when the exchange starts up. This morning, California’s state health exchange – California Covered – unveiled the options that consumers will have in the individual market beginning next year when the exchange becomes operational. So what can you expect? The cheapest bare-bones plan you can get in the entire state is more than $200 per month. But that might not be available to you, depending on which region you live in. If you live in say, Napa County, you can’t get any kind of health insurance through the exchange for less than $257 per month (corrected). The California Farm Bureau isn’t offering plans on the new exchange. So it looks like you’re just going to pay a lot more.

More on what California is doing here and here.

SOURCE: Conservative Intelligence Briefing


Idaho and New Mexico: We won’t be ready.

Two states that had planned to run their own health-insurance exchanges this fall are asking the federal government for help in the first year, a sign of the obstacles states face in carrying out a centerpiece of the health-care overhaul.

Idaho and New Mexico had been among a few Republican-led states that had agreed to operate their own health exchanges, which will offer a variety of insurance plans for people who don’t have coverage otherwise.

But both states’ health-insurance board chairmen said this week they can’t get their computer systems ready by Oct. 1 and need the federal government to help. Open enrollment for currently uninsured Americans to shop and sign up for health insurance on the new exchanges begins Oct. 1, with coverage effective on Jan. 1.

That leaves the federal government responsible for running all or part of the exchanges in at least 36 states. President Barack Obama’s health-care law had envisioned all 50 states running their own exchanges but created a federal exchange as a backup.

The state legislation formally authorizing them to proceed wasn’t signed into law until the end of March, which gave the states too little time to prepare the computer systems that will process insurance applicants.

“It’s a real task to be able to put this all in place by Oct. 1,” said James Damron, chairman of New Mexico’s health-insurance exchange board. Dr. Damron said the board, which wasn’t named until the end of April, believes it is feasible to get a small-business exchange running by Oct. 1 but not the one for individuals.

In Idaho, the board overseeing the exchange also wasn’t established until last month. The board’s chairman, Stephen Weeg, said the federal government will run the enrollment and eligibility portions of the state’s exchange because a computer contractor hasn’t been selected. Idaho consumers could still log on to the exchange’s website Oct. 1 to sign up for health insurance, he said. But behind the scenes, federal computers would determine who is eligible for subsidies on insurance.

Federal officials say they are monitoring each state’s progress and can absorb more states into the federal computer system if needed. The Centers for Medicare and Medicaid Services, which run the federal health-insurance exchange, confirmed it will run the technology behind the Idaho and New Mexico exchanges but said it still considers those state-based exchanges.

Remember, what we’re talking about here is a Web site. A billion-dollar Web site.

SOURCE: Wall Street Journal


A marketplace with fewer choices:

California’s health insurance rates for a new state-run marketplace came in lower than expected this week, but one downside for many consumers will be far fewer doctors and hospitals to choose from.

People who want UCLA Medical Center and its doctors in their health plan network next year, for instance, may have only one choice in California’s exchange: Anthem Blue Cross. Another major insurer in the state-run market, Blue Shield of California, said its exchange customers will be restricted to 36% of its regular physician network statewide.

And Cedars-Sinai Medical Center, one of Southern California’s most prestigious and expensive hospitals, said it’s not included in any exchange plans at the moment.

Those types of exclusive arrangements, increasingly tight networks and outright exclusions are becoming more common as insurers and government officials search for ways to hold down rising medical costs.

The vast majority of Californians get their health coverage through their employers and won’t be immediately affected by these limitations in the state-run market. But private companies are pursuing similar changes to shave costs. More employers have been adopting these narrower networks and the government’s overhaul of the individual insurance market is accelerating the trend.

Some consumer advocates express concern that insurers will go too far and deprive patients of meaningful choices. State officials sought to blunt that criticism this week, pointing out that the 13 health insurers selected will offer access to about 80% of California’s practicing physicians and hospitals.

“If we want to keep costs down, something has to give,” said Betsy Imholz, special projects director for Consumers Union. “At first blush, it seems like Covered California has negotiated some good deals, but in any given community we will see how this network issue plays out.”

Covered California, the state agency implementing the federal healthcare law, said these trade-offs are necessary in many cases to keep premiums reasonable for California’s families.

SOURCE: Los Angeles Times


The method of Obamacare’s passage thwarts technical changes.

Almost no law as sprawling and consequential as the Affordable Care Act has passed without changes – significant structural changes or routine tweaks known as “technical corrections” – in subsequent months and years. The Children’s Health Insurance Program, for example, was fixed in the first months after its passage in 1997.

But as they prowl Capitol Hill, business lobbyists like Mr. DeFife, health care providers and others seeking changes are finding, to their dismay, that in a polarized Congress, accomplishing them has become all but impossible.

Republicans simply want to see the entire law go away and will not take part in adjusting it. Democrats are petrified of reopening a politically charged law that threatens to derail careers as the Republicans once again seize on it before an election year.

As a result, a landmark law that almost everyone agrees has flaws is likely to take effect unchanged.

“I don’t think it can be fixed,” Senator Mitch McConnell of Kentucky, the Republican leader, said in an interview. “Everything is interconnected, 2,700 pages of statute, 20,000 pages of regulations so far. The only solution is to repeal it, root and branch.”

Senator Max Baucus, Democrat of Montana and one of the law’s primary authors, said: “I’m not sure we’re going to get to the point where it’s time to open the bill and make some changes. Once you start, it’s Pandora’s box.”

As the clock ticks toward 2014, when the law will be fully in effect, some businesses say that without changes, it may be their undoing.

SOURCE: New York Times


The Washington Post reports:

White House records show that Elizabeth Fowler, then a top health-policy adviser to President Obama, met with executives from half a dozen investment firms in 2011 and 2012. Among them was Kris Jenner, a stock picker with T. Rowe Price Investment Services who managed its $6 billion Health Sciences Fund.

Separately, an official in the agency that oversees Medicare and Medicaid spoke in December with managers of hedge funds, pension plans and mutual funds in a conference call. The official, Andrew Shin, was pressed during the 50-minute call for information about upcoming Medicare decisions but declined to discuss matters still under agency review, according to people familiar with the call.

That call and the White House meetings Fowler attended were arranged by political-intelligence firms, an expanding class of consultants in Washington that specialize in providing government information to Wall Street.

Hedge fund executives and other investors are increasingly interested in the timing and nature of health-policy decisions in Washington because they directly affect the profits and stock prices of pharmaceutical, insurance, hospital and managed-care companies. Similar interest surrounds other industry sectors, such as defense, agriculture and energy, whose fortunes are especially dependent on government decisions.

There is no evidence that the private discussions with the two administration officials about health-care decisions provided investors with confidential agency information or that the investors made trades based on what they learned. But this sort of intelligence gathering has been drawing attention from lawmakers and federal investigators who are looking at whether some traders are gaining access to information that is not available to investors in general or the wider public.

SOURCE: Washington Post


It remains unpopular.

Fifty-four percent of Americans oppose President Barack Obama’s signature domestic policy achievement, according to a CNN poll released Monday, while 43 percent support the law.

Majorities have consistently opposed the law, which subsidizes and expands coverage while making it mandatory for Americans to buy health insurance, since its passage in 2010.

Thirty-five percent of the country opposes the law because it’s too liberal, while 16 percent argues it isn’t liberal enough.

The poll was conducted on May 17 and May 18, days after House Republicans again voted to repeal Obamacare. The poll of 923 adults has a margin of error of plus or minus three percentage points.

SOURCE: Politico


How Obamacare will warp consumer information. http://vlt.tc/vnp

The balance of price transparency and confidentiality. http://vlt.tc/vo8

Obamacare won’t cover weight loss surgery in most states. http://vlt.tc/vo3

Sebelius under scrutiny. http://vlt.tc/vnc And on the political hot seat. http://vlt.tc/vne 

Hobby Lobby appeal tests limits of federal birth-control coverage mandate. http://vlt.tc/vl1

Coming soon to America: A two-tiered, Canadian-style health care system. http://vlt.tc/vlk

Exchanges under attack. http://vlt.tc/voa

Threats fly in Arizona over Medicaid. http://vlt.tc/vo9

In Maine, LePage delivers instant veto after hospital debt, Medicaid bill passes Senate. http://vlt.tc/vlh

Rhode Island health insurers seek double-digit premium hikes. http://vlt.tc/vo4

Maryland already sets hospitals’ prices. Now it wants to cap their spending. http://vlt.tc/vm1

Illinois should not expand its Medicaid Industrial Complex. http://vlt.tc/vo7

The IRS’s role in implementing Obamacare. http://vlt.tc/vl7

Obama still trying to sell law to the public. http://vlt.tc/vo5

Details emerge on Arkansas Medicaid expansion. http://vlt.tc/vkq

Passing off Medicaid expansion as reform. http://vlt.tc/vl6

Linda Gorman on Obamacare’s war on men. http://vlt.tc/vob

Closing racial and ethnic gaps. http://vlt.tc/vns 

How state governments rip hundreds of billions off federal taxpayers using health insurance premium taxes. http://vlt.tc/vmu

Eyelid lifts skyrocket for Medicare patients. http://vlt.tc/vo6

Benjamin Domenech

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