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The Most Powerful Force for Reducing Healthcare Costs: The Marketplace

A massive experiment in California is proving embarrassing to the health policy community. It’s showing that one of the most common and doggedly held beliefs of the experts is completely wrong.

Readers who don’t mix and mingle with the health policy types may wonder why anyone should care what policy wonks think. The short answer is that how the “experts” think affects you and me. When they get things wrong (which is about 90 percent of the time), the rest of us must cope with a health care system in which costs are higher, quality lower and access more difficult than if the wonks had chosen a different profession altogether.

So, what’s happening in California that’s so unusual? The giant insurer WellPoint (Anthem) handles health care for California state employees, retirees and their families (Calpers) and historically it did what other insurers do—use its bargaining muscle to get big discounts from hospitals throughout the state. This reflected the conventional view that it takes a large entity to obtain prices that individual patients could never achieve on their own.

Yet with all its financial power representing a huge number of patients, WellPoint was still paying bills for hip and knee replacements that ranged all over the map—from a low of $15,000 to a high $110,000.

John C. Goodman is a Senior Fellow at the Independent Institute, President of the Goodman Institute for Public Policy Research, and author of the widely acclaimed Independent books, A Better Choice: Healthcare Solutions for America, and the award-winning, Priceless: Curing the Healthcare Crisis. The Wall Street Journal and the National Journal, among other media, have called him the “Father of Health Savings Accounts.”

New from John C. Goodman!
A BETTER CHOICE: Healthcare Solutions for America
Obamacare remains highly controversial and faces ongoing legal and political challenges. Polls show that by a large margin Americans remain opposed to the healthcare law and seek to “repeal and replace” it. However, the question is: Replace it with what?

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