As the 2020 elections approach, healthcare continues to be the number one issue on the minds of both Republicans and Democrats. Voters are increasingly outraged by ever-rising costs (the average annual costs of health coverage for families just passed $20,000) and are demanding change.
If voters want to understand why change is difficult, they need look no further than the debate among Democratic candidates for president about whether to embrace free market capitalism or socialism. Democrats continued this fight last night, with the candidates struggling with basic questions about the cost and impact of their programs.
A more revealing exchange occurred in a recent interview when Bernie Sanders took a shot at Elizabeth Warren: “There are differences between Elizabeth and myself. Elizabeth, I think, as you know, has said that she is a capitalist through her bones. I’m not.”
Sanders continued, “I am, I believe, the only candidate who’s going to say to the ruling class of this country, ‘Enough. Enough with your greed, and with your corruption. We need real change in this country.’”
The problem is that neither Sanders nor the rest of the Democratic field is truly willing the take on the “ruling class” on healthcare because it would require them to side with and partner with their nemesis: President Trump.
In June, Trump issued an executive order requiring hospitals to post actual prices. The president said, “To make fully informed decisions about their healthcare, patients must know the price and quality of a good or service in advance.”
Trump is making a simple but profound point that our healthcare economy should look like the rest of the economy. Consumers who shop on Amazon.com or on airline- or hotel-booking sites demand to know the price in advance. No one would tolerate learning the price of a package after it arrives or the price a hotel after they check out.
This expectation — the right to know the price of things in advance — is the heart of capitalism. For the past 250 years, this system has made our economy the most powerful in history. In a capitalist system, consumer demand for transparency drives down costs and improves quality and access.
Hospitals and insurance companies are fighting back, arguing that an end to secretive pricing practices could actually cause prices to increase — a point thoroughly refuted by hundreds of years of economics and recent experience. When patients do have an opportunity to truly shop and see healthcare prices in advance, costs go down. For example, when California used a transparent reference price model for state employees, costs went down between 17% and 21%. Meanwhile, economist Larry Van Horn has shown that transparent cash prices are, on average, nearly 40% below traditional healthcare costs.
Employers across the country are also using price transparency to negotiate better rates with insurers — a win-win for employees and employers. Rosen Hotels & Resorts in Florida spends 55% less than average on healthcare and has saved $240 million over 24 years. The company has also invested $11 million in community programs, including preschool for the underserved.
Spirit Aerosystems in Wichita, Kan., was about to offshore some jobs. Instead, it reduced healthcare costs by using direct contracting for primary care. Meanwhile, Seats — a 500-employee company in Wisconsin that makes seating products for heavy-duty trucks, school buses, and industrial vehicles — is using transparency to get lower costs and better care and productivity. Even as premiums increased by 29% nationwide, Seats’ employees actually paid lower premiums in 2013 than they did in 2008.
Ironically, Democrats are now siding with the “ruling class” when it comes to healthcare. They are giving hospitals and insurance companies a pass on price transparency because they would rather shift those artificially inflated costs on to consumers and taxpayers in a government-run, single-payer system that they have rebranded as “Medicare for all.”
Democrats are missing both the point and a bipartisan opportunity to work on real reform. The best approach is to protect what’s working and fix what’s broken. No serious solution can start with kicking more than 150 million Americans off their plans and repealing Medicare as we know it, which “Medicare for all” would do.
The answer to the challenges of our third-party system is not government-run, single-payer healthcare, but putting patients and doctors in charge. Price transparency works whenever it’s tried. It’s time for Democrats to give it a chance in healthcare.
Katy Talento served in the White House as Special Assistant to President Trump on the Domestic Policy Council.
