Imagine that all of the parents that have sent their kids to an elite college took away their credit cards and put them on a budget.  ”Any money you want to spend beyond what I send you at the first of the month will be your business to find, ” might be representative of what this group of parents might have said to their kids.  The bars and restaurants in the college area used to dealing with customers swiping indiscriminately their parent’s credit cards, used to dealing basically with customers who don’t care what anything costs, are in a different game, now. This new game has at least two parts:  the customers want to know now how much stuff costs and there is a limit to what they have to spend.  Value comparisons are much more likely, as well, “is that worth it,” a question that will now be commonplace in the students’ heads.

This is exactly what is going on in California with joint replacement surgery.  Here is an interesting article from my new friend from Philadelphia, Jim Burger.  Interesting what happens when the patients are the ones paying even a portion of the bill, particularly the ridiculous part.  Interesting too, that the hospitals that dropped their prices (and quickly!) certainly didn’t drop them below their profitable price.  This admission that the amounts above the $30,000 cap were “gouging” prices (I call it the “let’s see what we can get away with” pricing) will not likely elicit the well-deserved condemnation of these hospitals (many of which claimed to be “not for profit” even at multiples of this $30,000/hip replacement).  

Instead we will likely hear their spin, an even louder and prouder argument for expanding Medicaid now that they have given up this cost-shifted revenue.  It will be interesting to see if some class action suit is filed in an attempt to recover some of the over $30,000, collected from patients and payers in the past.

Here is what the authors missed, though.  The only reason this declaration of “$30,000 and that’s it!” worked is the fact that the facilities have to now reveal their prices upfront.  Wait a minute!  I thought hospitals couldn’t do this!  That the hospitals have done this for joint replacements begs the question, “why can’t you give everyone prices on the rest of the stuff you do,” doesn’t it?  

The power of an idea and that of a competitive and free market should not be underestimated.  This story is a nightmare for fans of Obamacare, as price deflation, as I have discussed many times on this blog before, removes the wind from the sails of the crisis the government needs so badly to usher in single payer.  

G. Keith Smith, M.D.