Friday, September 09, 2011

Market Competition in Health Care

As a means of getting cost under control, market competition in health care is an idea that sounds good but the prospect of implementing it makes us nervous. When we are sick or injured, we want to think we are getting the best care available without regard to economic considerations.

But the idea persists and Blue Cross Blue Shield of Massachusetts has taken a step in its direction with its Hospital Choice Cost Sharing Plan.

Under that plan, the subscriber has free choice of hospital, but the deductible is higher at high cost institutions.

The example given in the promotion material is an MRI for which Hospital A charges $1200 and Hospital B charges $725. Subscribers getting the service from Hospital B pay no deductible, but those using Hospital A pay a deductible of $450.

I plugged in a fictitious couple to get rates and for one of the plans, the basic rate was $1297.93 per month. The same plan with Hospital Choice Cost Sharing was $1134.29 for a difference of almost $165.

That’s about a 13% reduction; probably enough to cause people to think about how much benefit there really is in getting an MRI at Massachusetts General instead of at their local hospitals.

It also illustrates the potential of pursuing health care reform at the local as compared with the national level. It is hard to imagine anything like Hospital Choice Cost Sharing being implemented by the federal government. Any such proposal would bring the lobbyists out in droves and tempt politicians to decry the attempt by an evil administration to put dollars before patients.

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