The Most Powerful Force for Reducing Healthcare Costs: The Marketplace
August 15, 2016
News Article
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.
