Gerard Gianoli, M.D.
In a previous editorial (Trump Transparent Pricing—Part One), I commended candidate Trump’s proposal of price transparency for hospitals and doctors. It is astounding that this has not been an element of the GOP formula for healthcare reform until now and that an outsider had to bring it up. It is so obviously part of a free market that only in an overly regulated healthcare market could it be overlooked. However, there is another element of price transparency that the Trump campaign (along with the rest of the GOP hopefuls) missed. What about insurance industry price transparency?
Insurance premiums and deductibles are advertised by the insurance industry, but patients do not know what they are really getting for their money. Patients have no idea how much the insurance company will pay the hospital or the doctor for any of the services rendered. And most doctors and hospitals don’t know how much they will be paid by the insurance companies either.
Some may think this is unimportant. But these same people may also wonder why their insurance is not accepted by most of the doctors or hospitals in their town.
For example, imagine that the Cheapo Insurance Co. pays a cardiologist $500 to do an angioplasty and the Luxor Insurance Co. pays a cardiologist $5,000 for the same procedure. Which insurance company do you think most cardiologists will want to sign with? Most would obviously not want to accept the Cheapo Insurance because they might actually lose money every time they did an angioplasty. Yes, doctors can lose money when they are paid too little. If the doctor’s overhead is $600 per hour and it takes him an hour to do the angioplasty, he just lost $100 on the patient with Cheapo Insurance. Many doctors, who are focused on doing a good job, are not even aware of this until it’s too late.
Now, as a patient, you wouldn’t care so much what the exact fees your insurance company is paying your doctor or hospital. However, you would want to know how much they’re paying the doctor or hospital relative to how much your treatment costs. If you learn that almost all of the cardiologists accept Luxor Insurance, but almost none accept Cheapo Insurance, and that the reason is that the Cheapo payment doesn’t cover most doctors’ costs, you might have some concerns about going to the cardiologist that accepts Cheapo Insurance. He might be desperate, or foolish, or both.
Unfortunately, the situation is not quite so simple. In the real world, the fees an insurance company pay doctors or hospitals will usually not be the same for all. If a hospital has a large patient population or has a monopoly in the community, it can negotiate much higher fees from an insurance company. The insurance company has no option but to make a deal with that hospital if it wants to be in the market in that town. However, that is an unusual situation. Most of the leverage is on the side of the insurance company. A large private company like Blue Cross of Louisiana insures close to half of the privately insured patients in the entire state. So, if Blue Cross doesn’t make a deal with a particular hospital, it could ruin the hospital financially by sending half of the privately insured patients to the hospital’s competitors. In the eyes of the insurance companies, all doctors are all equivalent. For doctors, the insurance contract is a take-it-or leave-it deal.
The insurance companies don’t want price transparency since this would result in reducing their competitive edge and hurt their bottom line. Doctors, hospitals, and patients all suffer. So why isn’t the Republican Party pushing for price transparency for insurance companies? Why hasn’t the Democrat Party mentioned it either? It seems apparent that lobbyists for the insurance industry have more influence with both politicians of both parties than their constituents do. In a free market, honest prices are essential—not just for what doctors and hospitals charge, but for what insurance companies pay.
Dr. Gerard J. Gianoli specializes in Neuro-otology and Skull Base Surgery. He is in private practice at The Ear and Balance Institute, located in Covington, but is also a Clinical Associate Professor in the Departments of Otolaryngology and Pediatrics at Tulane University School of Medicine. He pioneered treatments for Superior Semicircular Canal Dehiscence and other vestibular disorders. His private practice has a worldwide reach, with patient referrals coming from all over the United States and from around the world.
Dr. Gianoli opted out of Medicare in 2001 and has had a 100% third-party-free practice since 2005. He’s lectured and written extensively (as well as had numerous media interviews) on third party free medical practices and free market medicine. His editorials have appeared in The Wall Street Journal, Forbes, Investor’s Business Daily, The Hill and other popular periodicals.
He has received numerous awards, including the American Academy of Otolaryngology’s Honor Award, and has been named in America’s Top Doctors and America’s Top Physicians every year since their inception in 2001 and 2003 respectively. Dr. Gianoli practices all aspects of neuro-otology but has a special interest in vestibular (balance) disorders. He has researched, lectured and published extensively on the topic of vestibular disorders.