Nobody should need convincing that one big obstacle to consumer-directed health care is that we don't know what health services cost. Worse, nobody wants to tell us. Over the last couple of years, this has led well-meaning, often conservative, legislators in many states to support legislation that attempts to compel hospitals to make their actual prices transparent.

I believe that my esteemed and more eloquent colleague from the Texas Public Policy Foundation, Mary Katharine Stout, and I, share the same wary view of these legislative initiatives. Unfortunately, Texas legislators have not been paying enough attention!

The “root cause” of price opaqueness is that hospitals are financially dependent on government, specifically, the Medicare Prospective Payment System, which determines how hospitals generate invoices. Private insurers, who administer government health programs, generate paperwork of the same opaqueness, and this bleeds over to privately-paid health services (because it would be too expensive to build a parallel, sensible, billing system).

Texas' recent law does not address this. Instead, SB 1731 imposes classical government regulatory interventions: “the hospital must do such and such within 30 days.” “The facility physician must do so and so within ten days.” These regulations are too confusing to enforce or for patients to understand, and attempt to make hospitals report potentially proprietary information to government for publication.

A simple metaphor explains why this is futile: When you bought a car, did you go to a DMV website to learn what the price would be?

I think the solution is much simpler. SB 1731 is 33 pages long. A price transparency law need only be one sentence long:

“No patient has an obligation to pay a health care provider unless he has entered into a contract with the provider to pay for a service.”

“Contract”, of course, does not mean that you bring a lawyer with you. It just means you agree on a price before hand.  Note that the contract is between the provider and the patient.  Currently, patients (or their employers) have contracts with insurers; and insurers have contracts with hospitals.  But contracts are not "triangular" (my neologism), as hospitals and insurers will try to claim. 

Imagine if BestBuy allowed you to walk out of the store with a computer that had no price tag on it, and then mailed you an invoice? It would be laughed out of court.  Same deal for hospitals, I'd say.

(Yes, I know some readers will say: "You jerk! What if I'm having a heart attack or a stroke, or dragged out of a burning car?", but I'll deal with that in a future post if there's any demand.  For now, let's just deal with SB 1731.)