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NYT Continues Medical Pricing Beat
They're starting to get closer.
It is well-known that the NYT will plan out long-term foci for sustained coverage, taking their own perspective, keeping it in their pages in a variety of ways. I've covered a few in recent months; this one is in the "Your Money" section.
The piece focuses on the author's experience with his wife's mastectomy for breast cancer plus reconstructive surgery and the role that prior authorization played in it. What's that?
Why? The only reason they describe comes from their characterization of the insurance industry's response:
I'd like to steelman the idea of prior authorization by rolling it into my own perspective that I've been trying to sustain over time.
The fundamental principle is that prices matter to patients. This statement simultaneously seems trivial and is also quite profound in context of the medical industry. There are doctors even here on The Motte who have sworn up and down that prices don't matter, but frankly, they're just wrong about this. This NYT piece reinforces this basic principle, though it does not state it quite so forthrightly.
That is, the story of the article is that, two days before the planned surgery, the author and his wife
This was disconcerting to them, which is somewhat strange if one thinks that prices don't matter. It seemed to matter to them. He writes:
Contrary to what you might have heard doctors say, that prices don't matter because patients can't possibly make choices with price information, they actually can. Here are actual people, considering making the choice to skip a possibly life-saving surgery, because they have uncertainty concerning the price. I've pointed before to another, doctor-written op-ed in NYT that acknowledges this reality:
It also tells the story of an emergency room patient, in quite bad condition, that the author really felt should be admitted as an inpatient. The patient was concerned about the possible cost. No one could tell him anything. He chose to go home that evening.
Prices matter. Patients will make choices based on prices. Patients will make choices based on uncertainty about prices. This week's NYT piece drives this home with yet another example, this time concerning a surgical procedure.
They ultimately decided to go through with it, and it turns out that the author managed to talk to a billing specialist from the surgery provider while his wife was under the knife. What he learned:
Let's ignore the whackiness (and the veracity) of the claim that the provider would eat any uncovered charges for now. The article makes a fair amount of hash over the issue that they hadn't opted-in for electronic communications from their insurance company, so they only received a delayed snail mail, but the provider was notified earlier and didn't tell them either! Why not?
They are just sooo addicted to price opacity; it's ridiculous. The author is not buying it:
Prices matter. Prices matter. Prices matter. Get it through your thick skulls, providers and insurers. Just tell your patients. Tell them. They need to know. They're currently making decisions under uncertainty, and you can just tell them. The author closes with basically this exact plea:
Just tell the patient what's going on. Just tell them the price. Do it before services are rendered.
Ok, with the basics out of the way, I should probably get around to that steelman of prior authorization that I promised. The fact of the matter is that there are going to be some drugs/procedures that insurance won't cover, at least under some circumstances. There's probably not a reasonable way out of this with a rule like, "Insurance must just cover literally anything all the time, no matter what." Obviously, there's going to be a spectrum, with some routine things being covered ~100% of the time, with others having significantly more variance. The useful idea behind prior authorization is that the provider and the insurance company should get together... get their shit together... and figure out what the price is going to be for the patient. And, frankly, that makes sense, especially for items that often have significant variance. It's hard to make hard and fast rules here, but my sense that many insurance companies have a list of items where there is significant variance and so they require prior authorization.
It is good for them to get their shit together. It would be even better for them to get their shit together more routinely and then to tell the patient what things are going to cost. It is a pox on both their houses that they haven't gotten their shit together. The old NYT op-ed was written by a doctor, so it's no surprise that they wanted to put all the blame on the insurance companies. This week's was written by just a guy, one of the journalists on staff, talking about his own experience, and he more rightfully pointed out that both providers and insurers are failing.
NYT is getting closer, but they're not quite there yet. They've given multiple examples of why giving patients prices matters, but they haven't quite figured out that they just need to beat that drum directly.
Firstly, prices only reliably influence decision making if you have skin in the game.
If I am at a bar and paying for my own drinks, I will carefully consider the trade-offs between different options. If some corporation is paying for drinks, different things could happen. Perhaps I am indifferent to the company spending money, then I might use high prices as Bayesian evidence for "is a good drink". Or I like the corporation and do not want them to spend money needlessly, then I might still consider the trade-offs. Or I hate them and want to try my best to bankrupt them through my liver, then I might simply drink the fanciest drinks I can find even if they taste like horse piss to me.
For major surgeries, patients typically do not have skin in the game, their health insurance is paying for them. Price transparency is nice for society, but not crucial for patients.
Secondly, the health insurer and the hospital already have a pre-existing agreement on a price list. What they are negotiating about is which medical procedures (and line items) are indicated.
In a borderline sane medical system (e.g. what we have in Germany), that should be wholly between the health insurer and the clinic. The doctors use whatever procedures they see medically indicated, and then their billing department will settle with the health insurer. Sometimes the health insurer will dispute the charges. If dispute resolution favors the insurer, the hospital will just eat the charges. Running a hospital is a mixed calculation, you can afford to lose money on a few cases if you make some money on average. The patient would only be on the hook if they had lied about having health insurance.
Of course, the US health care system was lovingly hand-crafted by Moloch himself. Take competing health insurers, but then let the employer -- who cares very little about coverage but a whole lot about costs -- pick the health insurance company for their employees. Then pass a lot of regulations forcing Dog Butcher Healthcare to actually cover anything. Let every insurer build their own network based on secretly negotiated prices so that people will have to change their therapist when the change jobs. Sprinkle in some socialized healthcare for the poor. Have juries award excessive malpractice damages to keep everything expensive. Also link in the Molochian university and student loan system for the same reason.
I agree that there are plenty of situations where the patient doesn't really have much skin in the game or where price mostly doesn't matter for whatever reason. I wrote about an example of the former here.
The latter are probably quite routine, too. This is sort of unsurprising in economics. Demand curves slope downward, and everyone to the left of the equilibrium point gets consumer surplus. The further left you go, the more surplus they get. If I'm a customer who would buy an apple for $2, and prices usually vary a bit around $1, but maybe if there's a bad harvest, they're like $1.50, then yeah, for the most part, the price doesn't matter to me. That doesn't really imply that the price doesn't matter in general. So, riffing of what you say:
Price transparency of apples is not crucial for a bunch of people whose willingness to pay isn't somewhat close to what the price actually is. But it's actually pretty important for society and for a bunch of people whose willingness to pay is much closer to the actual price.
Many people are discovering the headline-grabbing version of the problem, too. Imagine if apples usually cost about a dollar. It varied from day to day, but they didn't tell you up front. Some times, incomprehensibly to the individual, they suddenly cost $1k. But they also didn't tell you this until after you'd eaten it (after services were rendered). Everyone knows it's kind of sketch, but no one can bring themselves to just make the grocery stores give people a price up front. This is how a lot of people view the current lack of transparency. Memes abound about how you got a papercut, spun the roulette wheel of the American Medical Industry, and found out later whether it cost you $1 or $100k.
Yup. This cuts out most of the arguments for why patients shouldn't get prices. At the very least, providers can provide an estimate of what procedures (and line items) they're planning to bill. They can look at the pre-existing, agreed upon price list, that they have, and give you the relevant information. Of course there will be cases where 'something happens', and it turns out to not be correct. The classic example is that you're going in for a relatively routine surgery, and there's like a 1% chance they're going to find something that 100x's the price. Well guess what? There's a good chance that the doctor already told the patient that there was something like a 1% chance of finding something that significantly changed the nature of the procedure. That's just good informed consent. That same informed consent should at least include some form of, "...and yeah, if that happens, it'll 100x the price." (Now, that may not meaningfully matter for some insurance cases, but just inform them, people!)
For the most part, providers and insurance know where the line items are that typically get argued over. Sometimes, a pre-auth is actually good to do. Providers can at least tell the patient what their plan is, but it would also be nice if they gave their perspective on whether the planned billing was likely to run into difficulties or not. As the linked article puts it:
Just communicate. If there's likely to be some sort of issues with haggling over line items, inform your patient the best you can.
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Let’s also add EMTALA- hospitals get left on the hook for care for genuinely uninsured patients.
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