End the medical-cost guessing game

It’s become increasingly fashionable to argue that the problem with health care in the United States is capitalism. The profit motive, proponents of a more socialist plan say, allows prices to skyrocket and corporate pirates to get filthy rich and keep white tigers as pets.

That’s certainly been the reaction to an Associated Press analysis of brand-name prescription prices released Monday that says the ratio of drug prices hiked to those reduced was 96 to 1 in the first half of 2018.

The problem with arguing that capitalism in health care is causing the huge price hikes for drugs and services is that true free markets do the exact opposite. In free markets driven by profit, consumers paying with their own money check the prices and quality of several providers, then decide. When it comes to buying a name-brand drug or a generic, an MRI or an appendectomy, we often don’t know any of that clearly even after we pay.

Imagine that after all the sitting and snacking that years of column-writing entails, your back aches and you need an MRI. You’d want to shop around on price and quality. But there is essentially no answer when you ask a provider, “How much does your MRI cost?” because it depends on who is paying and how. It could be free, or $3,000.

That also likely will be true of any back treatment you get thereafter, any hospital stays and any prescription drugs. With the help of a seance and a nuclear-powered abacus, you might eventually figure out what you owe. But you’d never know the “price” of the goods and services because individuals and insurance plans are charged such varying amounts that the “price” is an abstraction.

And most of us don’t care as much as we should, because we have insurance, and we’re not paying. That’s not how free capitalist markets work. And that’s why from 1998 to 2016, the average cost of all medical services increased 100 percent, more than double inflation. Costs of hospital care and related services increased 177 percent.

But it doesn’t have to be that way. When patients shop on price and pay for services themselves, like cosmetic surgery and corrective eye surgery, prices generally grow more slowly than inflation or decline.

Botox prices went down 11 percent from 1998 to 2016. Laser hair removal went down 21 percent, and chemical peels went down 35 percent. Plastic surgery prices overall increased just 32 percent, while the inflation rate was 47 percent. And LASIK surgery, with dramatically improved technology, now costs the same $2,100 per eye as in 1998.

If we had a real price list on how much name-brand drugs cost, and that price were the same regardless of who paid, and we knew which generics were available for the same maladies and how well they worked in comparison and how much they cost, drug prices would stop skyrocketing.

Amazon, Berkshire Hathaway and JPMorgan Chase announced earlier this year they were banding together to take on health care. I’d suggest they do this with their nearly unlimited resources: Commit to producing every generic drug with a clear, advertised list of prices paid equally by all buyers with just enough markup to create a 15 percent profit. If Aetna pays $19, then so does Medicare, and so does Lane out of his wallet. Then start doing the same with MRIs, X-rays, leg casts and surgery.

That wouldn’t mean the government couldn’t buy those things for poor people, or that employers couldn’t buy them for workers, or that insurance couldn’t hedge against the costs. But it would be a start to making the costs make sense, which is what free markets do.

Lane Filler is a member of Newsday’s editorial board.