Today, dedicated platforms search dozens of airlines for destinations and prices and allow consumers accessibility to their results even as conveniently as from their personal phone. A few clicks puts consumers in control. They decide the airline, the destination and what they’ll spend.
It wasn’t always this way. And that’s why it’s a good lesson for the American health care industry.
Prior to 1978, airlines had federal restrictions on both fares and the routes they could fly. The passage of the Airline Deregulation Act changed all that. This opened the door for airlines to develop routes and prices based on the market. Strangely enough, airlines weren’t very happy about this bipartisan effort and encouraged their employees to oppose the passage of the bill. But despite their resistance, President Jimmy Carter signed the bill into law with strong support of both parties.
According to Cynthia Fisher of Patient Rights Advocate, “After airline deregulation, a functional, competitive airfare marketplace emerged, reducing prices by about 50% while improving quality, safety, and access.” This was important because prior to deregulation, “Travelers were forced to visit high-priced travel agents, who could price gouge without consequence.”
This is not to say that the highly regulated airline industry immediately complied to the new standards placed upon it. Even with transparency requirements, airlines still attempted to hide the full price of their fares, and they were successful in doing so until 2012. Prior to that, the Department of Transportation allowed airlines to advertise ticket prices before taxes and fees or one-way ticket prices. The Department of Transportation prevailed in court by establishing the full-fare advertising rule, a rule which determined that the posting of misleading and deceptive pricing was false advertising. The law provided for a maximum penalty of $27,500 in civil penalties per day while the violation was .
The hospital industry follows this model as another highly regulated industry, one that’s outcome consists of high price points for those who pay the bills. Insurance brokers are akin to the travel agents, as they have no incentive to bring the costs down for they claim to represent. Because brokers receive commissions from insurers, their work serves the insurer rather than the employer. Agreements between the hospital and insurer prevent the negotiated rates from being exposed, even to the customers they say they represent.
An executive order and Texas state law mandating hospital price transparency have not borne much fruit on this front. Without the compliance of hospitals, it remains incredibly difficult for patients and employers to make informed decisions and provide informed consent.
Perhaps hospital pricing and insurance negotiations are far more complex than the flight prices of competing airlines; this comparison is not drawn to advocate for the creation of comparative search engines for medical procedures. It is drawn instead to exemplify the power of transparency in competitive markets and the need for enforcement of regulations requiring such change.
Hospitals and insurers clearly benefit from opacity and secrecy much like the airline industry did. And just as what happened with increased transparency in airline pricing, as more facilities comply with the law, consumers directly reap the benefit. Patients and employers will no longer be expected to bear the burden of unfair, unreasonable health care service pricing out of involuntary ignorance. Instead, they will be given the opportunity to weigh their options at multiple hospitals when in need of medical services, just as they would review multiple airlines when in need of a flight.
The various prices would be influenced and decided upon not by outside agencies that do not have the best interest of the patient in mind but by the competitive market. Such a market is cultivated among hospitals when they choose to comply with transparency regulation and the result is lower prices and increased access to care for consumers.