On the today show, 10/30/13 edition, the “expert” they brought on the show to comment about Ralph Weber’s company, Medibid (a health care auction site, where physicians, facilities and patients can match needs with bid prices!), said sternly, “..you get what you pay for.”  There is more to his comment than might first appear obvious.

In a free market, “you get what you pay for” is often times (but not always) true.  This is because people are, by and large, good shoppers, comparing cost and quality, arriving at a certain value proposition. This is certainly not the case in health care as those who will display, let alone reveal pricing are rare (but not for long).  There is no doubt in my mind that the actual relationship between quality and price in health care is inverse.  Let me explain.

Newcomers in a competitive market have to attract customer attention in some way and given their relative “newness” on the scene, their quality is not necessarily known or apparent.  The easiest way to gain a foothold or traction in a market, then, is to dazzle with a good price.  This serves to get people in the door so that they can ascertain for themselves what sort of quality experience or product is likely.  These customers, lured in with low and competitive pricing, are typically highly skeptical, looking intently for the “catch.”  The pressure on the business newcomer to demonstrate and deliver quality is intense.  This customer scrutiny is accompanied by the unforgiving discipline and accountability that only the free market can deliver.  Failure to deliver quality good and services at a fair price brings…well….failure.  Government failures, on the other hand, bring larger budgets.

In healthcare, the game is typically rigged, with hospitals and insurance companies and the government working together to discourage competition and new competitors from entering the marketplace.  Quasi-monopolies are the result and the pricing that emerges is predictable.  You don’t really get what you pay for.  You get what you get and they charge you whatever they want!  Indeed, extremely high-priced health care is more of a comment about the marketplace environment and lack of competition, than it is a comment about any individual competitor in that marketplace.  

It should come as no surprise that areas of the country where  competition in health care is most ruthlessly discouraged, are the same areas where the price of health care is the highest.  States with “certificate of need” laws, for instance, are states that are more likely to see patients get on an airplane and fly to Oklahoma City to have their affordable surgery.  This choice by the patient is much more a comment about the state of the marketplace where they live, than it is anything else.  To say “you get what you pay for” in health care, is just as incorrect as thinking that individuals are not competent health care shoppers.  

G. Keith Smith, M.D.