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Blurring the Expense of Medical Care

A Commentary By Stephen Moore

Tuesday, June 25, 2019

Several years ago, I had a shoulder injury, and the doctor told me I might need surgery to fix the small tear in my rotator cuff. So, I asked, "Doctor, if I have this surgery, about how much will it cost?"

He looked at me confusedly and said, "Steve, I've been doing these surgeries for 20 years, and you are the first patient to ever ask me what it costs!"

Then he thought about it and laughed: "I don't know how much this will cost you."

Wow. Health care is one of the most expensive items we buy each year, and yet most Americans haven't a clue what all of this costs. For everything else we buy as Americans, we are bargain hunters -- for cars, homes and restaurants but not for health and medical services, which are about one-seventh of our entire economy.

Then we wonder why medical costs are running at well over double the rate of inflation over the last 20 years compared to all other consumer items. According to the Bureau of Labor Statistics, since 2000, while prices of most consumer items -- from toys to computer to cars -- have been level or even falling, medical costs have roughly doubled.

One major reason for this is the third-party payment system, which anesthetizes Americans from the true costs of drugs, hospitals and procedures. If someone else is paying the tab, who cares what it costs? The over-insurance problem in health care makes it more expensive for everyone.

But a second problem is that we are seldom told the costs of medical procedures or drugs. So it is hard to be a cost-conscious consumer, even if we want to be. This is one of many reasons why "free government-run health care," such as Medicare for All, is such a dangerous idea.

President Donald Trump will sign an executive order this week requiring medical providers, hospitals, drug companies, physicians and others to post their prices so people know what things cost. I'm not generally in favor of regulations and mandates, but given that the government runs and pays for half of the health care costs, this executive order, on balance, makes sense.

One problem is that most of the prices will be the out-of-pocket costs to the patients, not the real costs, including what the insurance company pays for pills or hospital stays. Another problem is that you and I could buy the exact same drug and pay wildly different prices depending on what kind of insurance we have. So this is imperfect, but it will, at the margin, make consumers more price-sensitive and thus should help cut into the exploding cost of medicine.

As one practical example, starting soon, ads for drugs costing at least $35 per month will have to post their prices. This could force drugmakers to lower their prices or lose thrifty customers.

Yes, I know this action by the White House treats symptoms -- not the disease of third-party payers for health care.

But it has always amazed me that America has the highest-quality health care in the world with amazing new cures and treatments -- almost all invented here -- and yet we use such a dump method of paying the $3 trillion annual cost. The alternative to using markets and price transparency to control health costs is price controls, waiting lines and, eventually, death panels. The latter will drive down costs by driving down the quality of our health services.

By the way, I never did get that shoulder surgery. Turns out it was too expensive.

Stephen Moore is a senior fellow at the Heritage Foundation and an economic consultant with FreedomWorks. He is the co-author of "Trumponomics: Inside the America First Plan to Revive the American Economy." To find out more about Stephen Moore and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate webpage at www.creators.com.

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