Release the Health-Care Market

By Kyle Wingfield

The contract dispute between Piedmont Healthcare and Blue Cross and Blue Shield appears to be over: The two parties this past week confirmed a “handshake deal” at the urging of Gov. Nathan Deal.

Georgians who seek care via both companies – not just in Atlanta, but from Columbus to Athens, Blairsville to Elberton – were caught in the middle when the contract expired April 1. They can breathe a bit easier now, but this is no way to run a health-care market.

Deal, who was in Congress when Democrats passed Obamacare, surely reminded both companies the only beneficiaries of these fights are those pushing the next government-centric step of single-payer health care. And this wasn’t even the worst recent fight of this kind: Piedmont and Aetna came within hours of their contract expiring in January 2014, but Blue Cross and the Grady Health System went more than four months without an in-network agreement in 2014-15.

The only real preventive medicine for consumers is to make the market freer.

Start with price transparency, the lack of which is a big reason health care doesn’t perform like a real market. Price is the vital signal between the array of producers on one side and consumers on the other. Without it, neither side behaves as it normally would.

Yet, as the Piedmont-Blue Cross dispute shows, the price signal in health care has been reduced to negotiations between each provider and insurer. That’s why price, from the consumer’s perspective, emerges as if from a black box – with no context or means of comparison between providers or insurers.

If we’re going to have mandates in health care, lawmakers could require providers to offer clear, upfront prices for their services. It may be complicated to do so in emergency situations, but not for the vast majority of routine services or care for chronic illnesses.

Between the existing opacity and the way third-party payer arrangements insulate consumers from the true price of health services, it’s no wonder costs keep soaring. Patients have neither the means nor the motivation to subject providers to any kind of market discipline.

That’s instead left to insurers. Rather than providing true insurance, protecting against an unbearable cost in an unlikely circumstance, it’s become a method of pre-paying for health care one may or may not consume. That won’t change until consumers have attractive alternatives – such as contracting on their own with physicians though direct primary care – that restore health insurance to its proper role.

Easing the state’s certificate-of-need laws, which restrict providers’ ability to open new facilities, may be one of the measures Deal would have taken had Piedmont and Blue Cross not worked out their differences before his deadline. That must also be part of any market-driven solution.

Congress will have to step up, too. Tools such as Health Savings Accounts are too restrictive to help to most people. If HSAs are expanded, more Americans could personally take charge of their health-related finances. And we need not dive into the havoc Obamacare has wrought on the individual market, except to say the next round of insurers’ rate requests this summer will renew the pressure on Congress and President Trump to repeal and replace that law.

If freeing up the health-care market seems daunting or unlike other, simpler markets, that’s because we have let too many distortions pile up. It’s time we start removing those and seeing what kind of health-care market we could be enjoying.

Kyle Wingfield is president and CEO of the Georgia Public Policy Foundation, an independent, nonprofit think tank that proposes market-oriented approaches to public policy to improve the lives of Georgians. Nothing written here is to be construed as necessarily reflecting the views of the Georgia Public Policy Foundation or as an attempt to aid or hinder the passage of any bill before the U.S. Congress or the Georgia Legislature.

© Georgia Public Policy Foundation (April 22, 2018). Permission to reprint in whole or in part is hereby granted, provided the author and his affiliations are cited.