by Anna Manning
JLF’s Health Care Policy Analyst, Jordan Roberts, explains how an auction-based system of purchasing health care puts the consumer in charge and exerts pressure on providers to compete for patients based on quality service at a lower cost:
It’s no secret that Americans pay more for health care than any other industrialized country in the world. In 2017, health care spending reached $3.5 trillion or roughly $10,739 a person. The share of health care spending as a portion of Gross Domestic Product (GDP) reached 17.9 percent. The Centers for Medicare and Medicaid Services (CMS) projects health care spending will grow at a rate of 5.5 percent a year until the year 2026, where Americans will spend a projected $5.7 trillion.
Hospital prices have been a major point of concern for many patients and health scholars. Provider networks are one of the culprits. Facilities and physicians can either be “in-network” or “out-of-network.” The negotiations between network providers and insurance companies are among the factors that determine the final bill when a procedure is completed.
“Surprise” bills arise when private insurance providers, health care facilities, and physicians can’t agree on pre-negotiated prices for specific services or procedures. The customer bears the costs of those failed agreements.
What if insurance companies did not negotiate on behalf of the patient? What if patients were able to choose from a variety of doctors willing to perform the procedure? That is the idea behind an auction-based system of purchasing health care.
Auction-based systems place the patient in control of the purchasing process. Patients get to choose the doctor who will perform the procedure they require. In this type of arrangement, there is downward pressure on physicians and facilities to respond to the market demands of the patients. Instead of a guaranteed procedure through an insurance contract, providers would have to compete with each other to win the business of the patient. Patients are better off when there is more competition between providers to offer the highest quality procedure at the lowest cost.
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