Another View: A viable health care fixBy: Mitchell White, candidate for Congress
As a senior accountant for Ernst & Young, most of my time was devoted to auditing large hospitals in our region. I had the unique opportunity to see how health care organizations work behind the scenes. And what I found was reprehensible. I knew our health care system had flaws, but I didn’t know why. Now I do.
Republican, Democrat or independent, we all know America needs health care reform. The health care market lacks competition because it lacks transparency. To have transparency in a market allows easy price comparisons between competing suppliers. This benefits consumers as suppliers respond with better services and better prices. If you ask a health care provider for the cost of a service, the question rarely yields a simple answer. There is usually a discounted price that insurance companies have negotiated for, which complicates the process.
Even worse, the current health care system price-gouges people who are struggling the most. Instead of blatantly setting a higher price for uninsured patients, hospitals have taken a more devious approach. They increase the gross price on the chargemaster (i.e. the price on the menu) and then discount the insured patients down to the negotiated price, leaving only the uninsured patients with the initial high price. The uninsured often get no discount at all.
Statistics from the American Hospital Association in 2014 show the average discount was 66.2 percent. In other words, the uninsured are billed an average of three times as much as the combined amount owed from the insurance company and insured patient for the same service.
Contractual allowance is the discount given only to those with insurance, so they pay the fair price. The problem is, the uninsured are the only group not receiving this discount and it hinders transparency for the insured. The health care bill I’m proposing would prohibit health care organizations from applying contractual allowance.
Insurance companies would still have the negotiation power to get fair prices, and as a result the gross price of health care services would drop to the price paid on an insured patient’s account. The biggest impact would be for the uninsured, as they would now be paying a competitive price.
Currently, insured patients can get large discounts due to the negotiation power of the insurance company. However, the insurance contracts are extensive and do not always provide the best final price for each individual service. The final price differs vastly from hospital to hospital. By prohibiting contractual allowance, we would significantly increase price transparency as the insured patient would be able to see the final price each hospital offers. This would allow patients to make informed decisions and encourage competition within hospitals, saving money for patients and insurance companies.
No service would be out of coverage. All services would be competitively priced and everyone charged an equal amount. To be clear, I am not proposing regulated prices. I am only proposing that services be the same cost for everyone. Insurance companies would still be used to cover the cost for insured patients, but now the uninsured would not be price-gouged.
Those who are insured would have more options in choosing hospitals. Currently, insurance companies do not have contractual agreements with all hospitals and discourage their patients from visiting certain hospitals as they would be price-gouged. If all services were competitively priced, insurance companies would allow patients to visit any hospital that offers reasonable pricing. As a result, insured patients would shop at more hospitals, increasing competition and lowering prices.
Some states are attempting to patch this problem. Nevada has legislation that requires all major hospitals to provide a 30-percent discount on all inpatient charges for uninsured people. Illinois provides a discount to the uninsured for all amounts over 135 percent of the costs the hospital incurs in performing the services. While these laws are a promising start, I believe we can do more.
My bill replaces the flawed health care system with a new structure that does not allow for contractual allowance. It would remove the obstacles hindering transparency and competition in the health care market, allowing us to finally repeal and replace Obamacare.
Mitchell White is a candidate for Congress in California’s 4th District.