Today’s Policy Agenda: Consumers Choose Cheaper Health Care Providers if They See the Prices

by Callie Gable

Okay, so the Obama administration probably is going to do something about tax inversions.

Bloomberg’s Richard Rubin reports that the Treasury Department is considering taking a unilateral action to limit companies’ ability to use a tax-avoidance practice called inversion. In an inversion, essentially, a company moves its legal address to a country with friendlier tax codes or regulations while still performing most of its business operations in the U.S.

This practice is becoming more and more common, especially among large companies:

Treasury Secretary Jacob Lew said a few weeks ago that regulating inversions was outside the purview of the Treasury Department and that only Congress could only enact such regulations. However, Obama said Wednesday that the Treasury Department would “as quickly as possible” to curb the practice, so we’ll have to see what they try.

Americans might be better health-care consumers if they knew the costs of care

In the New York Times, Elisabeth Rosenthal discusses a HealthCore study that indicates price transparency — just knowing what procedures cost, in other words — could lead some patients to choose more cost-efficient options for medical tests. In the study, the insurer WellPoint gave patients a list of lower-cost providers for MRIs and then asked them if they would like to reschedule their current appointment with a provider who offers a better value. The results were encouraging:

The program resulted in a $220 cost reduction (18.7 percent) per test over the course of two years, said Andrea DeVries, the director of payer and provider research at HealthCore, a subsidiary of WellPoint, which conducted the study#…#Better still, Dr. Nussbaum said, the exercise in price transparency had a ripple effect: Hospitals in areas with the program lowered their prices too, because “they were beginning to lose patient referrals.”

Because more expensive providers had to compete with lower prices to keep business, in other words, the cost of an MRI decreased across the board in areas where WellPoint conducted the study.

Patients may be more cost conscious than doctors: An earlier WellPoint study gave doctors the same type of cost information, but most doctors continued referring patients to more expensive providers and prices stayed the same.

These results are encouraging because they indicate that Americans are certainly capable of becoming more-active and savvier consumers of healthcare, a change that could seriously help control costs

Inequality may be bad, but extremely high tax rates are worse.

Michael Schuyler from the conservative Tax Foundation recently crunched the numbers for the economic theory laid out French economist Thomas Piketty’s bestselling book Capital in the Twenty-First Century. Piketty argues that to combat inequality the top income tax rate for the United States should be 80 percent, and that income over $200,000 should be taxed at 50 or 60 percent.

Schuyler found that after the economy adjusts to the higher tax rates, there would be fewer jobs, GDP would shrink, and capital stock would be significantly reduced:

While the higher rates, in theory, leave 90 percent of taxpayers untouched, the new burden on the rich would be passed down to lower-income Americans. Schuyler estimates that poor and middle-class incomes would drop by more than 3 percent. In the long term, increased tax revenues from the upper class won’t be high enough to fill that gap with social programs like Piketty imagines.

The Agenda

NRO’s domestic-policy blog, by Reihan Salam.