Things that don't make sense

From the things that don't make sense to me about Consumer Directed Health Care File, we have this recent news:

CMS likely will reduce Medicare reimbursements to physicians by 4.6% in 2007 because of increased program spending on physician services, Herb Kuhn, director of the Center for Medicare Management at the agency, said on Friday in a letter to Glenn Hackbarth, chair of the Medicare Payment Advisory Commission, CQ HealthBeat reports. 

Cuts were supposed to be 4.4% in 2006 but political forces were able to put them off for a year.  The announcement last year was met with much vehemence -- mostly complaints over the fiscal stability of physician practices.

Now let's take a look at this comment from Matthew Holt's post on health savings accounts from yesterday:

Transparency is a problem... but will not be solved by legislation. People and employers will begin demanding better cost information as time goes on with HDHP. I am not sure what the magic number is in terms of market penetration, but it will occur.

As a practicioner, once all of the insurers post prices online, I no longer need to participate, and I can reduce my overhead expenses by setting prices at levels I deem reasonable. If that idea became widespread, then costs would decrease for most Americans.

First, isn't this comment presupposing the insurer is gone?  Isn't that the case if the physician is doing the underwriting?  And why, exactly, when doctors complain again and again about how salaries have fallen, would they decide that prices should be lower than what the underwriter forces upon them?  But let's suppose that's not what the commenter means, the insurer is still around.  The administrative costs saved from this particular  excisement are quite small, and if you really want to save administrative costs, go single-payer.

But here's my real question: if doctors are rebelling this much against Medicare-led payment rates, and consumer directed health care largely functions on the idea that consumers will force providers to lower payments, why should we expect CDHC to work?  It's not like patients can say, "gee, I guess I won't have that coronary bypass after all..".  The administrative overhead is still in place, because you still go through insurers, you have even more billing because now a good portion is going directly to the patient rather than the insurer.  I just can't understand how this kind of push for price transparency is actually going to bring down prices.  Refer, as well, to Paul Ginsberg on the relatively nontransparent prices for Lasik. 

Or South Africa, where their HSA experiment led to a race to the bottom, and did not, in fact, reduce prices. 

I invite anyone who strongly believes otherwise to try and convince me, because I honestly cannot see how it would work.

Comments

[Nate Ogden]

With CDHC the price would be agreed to by the patient and the doctor not dictated by the insurer. If a Dr charges more then average and the patient thinks the Dr worth it they can pay it. The payment, whatever amount it is, would be paid at the time of service by the patient, credit card linked to HDHP, eliminating billing, waiting for payment, and processing payments then balance billing the patient. Vast majority of care, measured as visits not dollars, are routine office visits or care, this would drastically cut the providers administrative cost. All they would do is forward a copy of the HCFA to insurer for record keeping, thats done through EDI and cost pennies. Reduced paper, postage, and labor would easily be a double digit increase to revenue allowing billed price to drop.