Andy Grove has an interesting piece in Wired looking at how increased transparency revolutionized the experience of purchasing a car — and what that might mean for health-care markets.
In the 1950s, car prices varied from dealer to dealer, and from customer to customer. That made shopping for a car hugely difficult. Enter, Sen. Mike Monroney:
In 1958 … U.S. Sen. Mike Monroney of Oklahoma shepherded a bill through Congress requiring that official pricing information be glued to the window of every new automobile sold in the country. The “Monroney sticker,” as it came to be known, has been with us ever since. It became an effective means of disclosing the manufacturer’s suggested retail price, or MSRP, and a billboard for other data disclosures to the consumer: the car’s fuel economy, its environmental rating, and so on.
The sticker price was one of the triumphs of consumer-rights legislation and has made buying a car an easier— though never altogether easy — experience. What’s more, window stickers made automobile pricing rational and understandable. A customer who knows the base price going in will expect more value coming out. In economic terms, the sticker turned a failed market flummoxed by information asymmetry into something resembling a functioning, price-driven marketplace.
“If there is ever an industry in need of a Senator Monroney today,” Grove argues, it must be health care. There’s huge price variation in the market, and not much in the way of transparency at all. An appendectomy — one of the simplest and most common medical procedures — can cost anywhere between $1,529 and $186,955 depending on where it’s done.
“In a transparent health care market,” Grove argues, “pricing and other patient data can be consolidated and analyzed to yield new insights.” In other words, patients might start questioning why they’re paying $186,955 for an appendectomy when they know a doctor down the street performs the procedure for a fraction of the price.
That’s the case Grove makes, but it seems to break down a bit when you look at how the experience of shopping for health care is significantly different than shopping for a new car. For one, the decision to buy a new car is usually just that — it’s a choice. Some of the health care we purchase is a choice, too. In a scheduled appendectomy, for example, a patient often has a say in what doctor to see and could weigh the cost of the procedure as a factor.
But the most expensive health care, the ambulances rides and the emergency appendectomies, is not much of a choice at all. Comparing prices on cars is one thing. Comparing prices for a life-saving surgery that needs to happen within hours is quite another.
The other key difference: When we buy health care, we’re often not shopping with our own dollars. Patient A could get the really expensive appendectomy, Patient B could get the really cheap one, and they could end up paying the same price: Whatever co-pay their insurance plan has set for that procedure. It’s hard to get patients interested in seeking the lower-cost plan when the savings go back to the insurer rather than back to their wallet.
That being said, the health insurance market seems to be changing to give patients more exposure to costs — more “skin in the game,” in health-wonk terms. Employers are shifting toward high-deductible health plans, in which their workers get a set of amount of money to purchase health care. All of a sudden, the price tag becomes a lot more important. That might not matter in emergency medicine, but in more routine matters, it could change the way patients think about where to seek care — in the same way standardized stickers changed how we buy cars.