Imagine for a minute you want to buy a car. There is only one dealership within a reasonable distance to a population. When that dealership opened 50 years ago, they sold a quality car at a fair price. Since they were the only ones in town and they sold a good product, the dealership became very popular and everyone in the area bought and serviced their car there.
Due to unending trust and a monopolistic setup, the dealership grew over the years and they raised their prices. After all, customers were not price shopping so how were they to know if they were being overcharged? Then one year, the dealership starts using cheaper part suppliers and lower-wage mechanics, changing the consumer’s end product.
When an entity is not held to high standards by the those consuming the goods and services of that company, inevitably quality declines and pricing increases. This is essentially what has lead to a US healthcare system ranked 37th in the world for quality by the World Health Organization and the #1 most expensive country for health costs.
The issue is not that we don’t have high-quality care providers, the issue is that we have a healthcare system that prioritizes volume and revenue over quality and efficiency. What the lack of transparency has done is allowed us to direct our frustration at the first line of offense, which is the insurance carrier.
While insurance companies are not without flaws themselves, they are not the cause of the problem but rather the result of it. How can we ever have high quality, low-cost health insurance when the care it covers is high cost and low quality?
Transparency and the rise in consumer-driven patients have led providers to have to earn a patient’s business by providing high-value care. Providers are then aligned to be rewarded for lowering costs. Right now, however, their incentives push them in the opposite direction.
Prescription drug pricing presents an entirely different dynamic and standard economic principals are even more out of whack in this space. As drugs age, pricing goes up. When a generic version is developed we’ll initially see a drop in price, but both the name brand and generic pricing will go up again over time. When multiple manufacturers make similar versions of generic drugs, the pricing tends to go up even faster. Where else does that model exist? Supply and pricing should be inversely related.
Learn more about soaring drug prices in the U.S. in the CBS News piece below:
One thing that many patients don’t realize, is that the pharmacy they choose could have a big impact on the price of the drug. With traditional copay plans for prescriptions, people didn’t care what the pharmacy charged so they were able to charge as much as they wanted and they could get away with it. This has resulted in wide variations in price. While many people would go to an out of the way CVS to take advantage of a sale on their favorite shampoo, many more people don’t even think to as ask about ways to save on their prescription costs.
It’s time the American public became aware of how the U.S. health system is impacting our paychecks and learn the little things they can do to save money. It may be a small stepping stone towards solving a bigger problem, but as consumer-driven patients become better educated, our country will be able to save on medical expenses as a whole.
Guest Post By: David Contorno, President of Lake Norman Benefits