In an effort to curb the rise in health care costs, President Trump has set his eyes on the pricing of health care services. The Low Health Care Cost Act, which is gaining support in both the Senate and the House, imposes new regulations on out-of-network health care pricing that would undermine the market and only serve to create new problems.
The idea behind LHCC seems good enough. Prices for health care services vary across the country, and across health providers, which can create problems when we need health care outside of our insurance network. If you are traveling and have to get medical care outside of your insurance network, you can get hit by a surprise medical bill.
Some states are taking measures to address this problem. One of them is Wyoming where the state’s Department of Health has proposed that Medicaid take over air ambulance services in an effort to protect patients against unexpected costs.
Thankfully, Congress has not gone that far, but that does not mean they have come up with a good solution. On the contrary: with the LHCC, Congress is trying to solve the surprise-bill problem by creating new ones. Plainly, the bill is another lesson in the unintended consequences of government do-goodery.
The LHCC allows patients to carry their own health care prices with them when they travel. Think of it as a tourist walking into a hotel in New York saying, “the same hotel room would only cost $80 in Wyoming, so you should only charge me $80 for this $250 room”.
Anyone who tried that would most certainly be asked to leave the premises. Yet this is exactly what the LHCC Act would do to health care providers. If this bill becomes the law of the land, they are no longer allowed to charge the prices they need in order to cover their local costs.
This is no small problem. Prices vary for all kinds of products across the country. All you need to do is drive across a couple of states and check out the prices for a gallon of regular gasoline. The cost of selling a good or providing a service, depends on everything from local wages and utility costs to taxes, fees and regulations imposed by government.
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Price portability of the kind that the Low Health Care Cost Act suggests, would make the pricing of health care services uncertain. When the price is dependent on a network the doctor is not part of, he simply cannot know how much the next patient is going to pay him.
How does a rational business respond to a situation like this? If that hotel in New York gets a lot of visitors who bring their own prices, would they still accept them as patrons? How well can they actually foresee their revenue from one week to the next?
In big cities and popular travel destinations this could be a major problem for health care providers. But the bill also creates bad incentives that over time will jeopardize our market-based health care system.
Imagine a patient with a meager, small network health care plan. Due to its low cost, this plan is having problems attracting health care providers to its network. With the kind of portable pricing that the LHCC prescribes, it suddenly pays for all of us to get on the cheapest health care plan we can find and then go anywhere – out of network – to get health care.
Since the provider cannot charge his usual prices, we get the health care equivalent of a night at the Waldorf Astoria for the price of a Super 8. That might sound like a sweet deal if you’re the one staying the night, but ask yourself this: who could stay in business under such circumstances? Just like nobody would build a Waldorf Astoria if he would get paid at Super 8 prices, nobody would provide first-rate medical services if his patients paid him for low-quality health care.
The LHCC is a classic example of government trying to solve a problem while creating new ones. Let us hope that Congress does not send this bill to the White House. If they do, let us hope that President Trump, who has expressed interest in this type of bill, decides to change his mind.