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Taking some mystery out of health care costs

Last summer, as part of a college research project on health care costs, Jaime Rosenthal of Washington University in St. Louis called hospitals across the country with a simple request: Her 62-year-old grandmother needed hip replacement surgery. Could she get a price on the procedure?

Rosenthal’s grandmother was fictitious – but as it turns out, so was the expectation that hospitals would be able to provide an estimate on a relatively basic medical procedure. Of the 122 hospitals called for the project, only 16 percent could provide a complete price, and about half could provide any sort of estimate. Of those, the range was significant: from $11,100 to $125,798.

All of which is unsurprising to any of us who’s had the misfortune of trying to sift through a stack of bills and insurance documents after a medical procedure. But a bill introduced last week in the N.C. Senate offers some promise in taking the mystery out of medical pricing – and perhaps putting us on the path toward having more control over our health care costs.

The bill, sponsored by Republican Sens. Bob Rucho of Matthews and Harry Brown of Jacksonville, would require hospitals to publicly disclose prices on the 50 most common “episodes of care.” Hospitals would have to report how much each procedure would cost uninsured patients, Medicare, Medicaid and patients covered by the five largest insurers. At least 14 other states have similar laws, according to an Observer report.

N.C.’s bill also mandates that hospitals conspicuously post information about charity care policies, and it would set up financial rewards for hospitals that are able to provide low-cost care. But those costs should be easy to find, Rucho told Observer reporter Ames Alexander: “You do that with every other purchase. Why shouldn’t you be able to do that with health care?”

He’s right. So why haven’t we? Unlike other purchases, consumers don’t pay a significant percentage of their health care costs directly, with third-parties such as insurance companies and the government footing most of the bill. According to the Centers for Medicare and Medicaid Services, consumers paid 47 percent of overall health care costs out of pocket in 1960. By 2004, that figure dropped to 13 percent.

As a result, patients haven’t been attentive to health care costs. If anything, most of us want to be as far removed as possible from the post-surgery price haggle between hospitals and insurers. In turn, hospitals and providers don’t compete on price, which is fine with them.

But as insurance deductibles have spiked and more Americans have taken advantage of Health Savings Accounts, consumers have become more attuned to that last line of the medical bill. And while hospitals say rightly that the price of a procedure is subject to the varying costs of everyone in the operating room, some medical markets have shown that putting it all together is possible. Cosmetic surgeons, for example, offer upfront estimates.

Such transparency, on a wider scale, can benefit both patients and providers. If hospitals must show you what procedures cost, they’ll be motivated to justify those costs with better outcomes and efficiencies. It’s called competition, but first we have to ask. We applaud Sens. Rucho and Brown for doing so.

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