Pilot Letter: Knowledge won’t help


The writer makes a limiting assumption.

The benefit of price knowledge is not that you, alone and facing terrible consequences, will then be equipped to make rational choices. The benefit is that others before you will have done so. Their decisions and reactions will help prepare the ground for you before you ever step foot on it.

Technically, this means that current pricing in a functioning market tends to factor in past experience. Prices that once were too high tend to be lowered, and prices that once were too low tend to be raised, all without you.

Even if, in your own crisis moment, you can’t go shopping for health care, you get the benefit of the “shopping effect.”

7 thoughts on “Pilot Letter: Knowledge won’t help

  1. Good points. Anything that makes more and better information available cannot hurt and might help.

    One of the unintended consequences of fuller disclosure on pricing will be increased support for Medicare-for-all because it will help people understand what a dog’s breakfast our current system is.

    A couple of years ago, my wife was referred for a scan for what turned out to be a kidney stone. The bill was shocking. The price to our insurer was something like $400 of which I had a co-pay of around $100. The price to the uninsured for that same service was $6,000. There is something seriously wrong when that kind of price gouging of the uninsured is legal.

    Liked by 4 people

  2. “The benefit is that others before you will have done so.”

    What others? How are they going to be better equipped than you?

    Currently there is NO rhyme nor reason for the prices in the masterbook at the hospital now.

    Liked by 3 people

    1. RE: “Currently there is NO rhyme nor reason for the prices in the masterbook at the hospital now.”

      Of course there is. Hospitals serve multiple constituencies. They also face various types of legal exposure. As a result, they don’t set prices arbitrarily.

      Not knowing the rationale doesn’t mean there is no rationale.

      But the problem at issue is that most of us don’t know the prices we’ll be paying for medical services before we incur the obligation to pay. Changing that alone would change a lot of other things.


  3. Most privately provided healthcare is provided through Participating Provider Organization (PPO) policies.

    While, as an individual, your bargaining position if you need an appendectomy is poor, your insurer’s position is strong. He buys appendectomies in bulk at a prenegotiated price you could never get as an individual.

    That’s why destroying the health insurance business is a bad idea.

    Multiple insurance companies bargaining with multiple providers while competing for your, or your employer’s, business creates a secondary market that better than a single payer system bargaining with a doctor’s union, a nurses’ union, a janitor’s union etc.

    As soon as you make health care providers employees instead of independent businesses, they become eligible for collective bargaining.


    1. I don’t know which is more powerful, the insurance company’s role as pricing expert, or its role as price negotiator. Either way, market pricing in general is probably lower as a result of the function it performs.

      Still, we should note that insurance prices are not really transparent to the end user. For one thing, an insurance company’s negotiated catalog of services may include offsets of various kinds, either to raise or lower the unit price of certain items. For another, how an insurance company ages its payables may affect whether it pays the A, B or C catalog price for some or all items it buys.

      As a result, some mechanism for improving public knowledge of actual health care pricing would probably be helpful. A consumer might learn, for example, that the insurance company he uses routinely overpays for common services.


    2. So, it is okay for insurance companies to effectively administer prices to maximize THEIR profits, but not okay for Medicare to administer prices for the benefit of everyone? It is a very, very high price we have been paying for the “services” of these insurers. High prices, excessive paper work, wide-spread poor health, millions of bankruptcies and tens of thousands of avoidable deaths every year. Obama foolishly tried to save the for-profit model with the ACA and naively believed that Republicans would help him do it. They didn’t. Time to cut the Gordian Knot and create Medicare-for-all.


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