In response to our post Lost in D.C. with The Dartmouth Atlas, Jonathan Skinner of Dartmouth responded in part that “patient charges…, unlike Medicare payments, are imaginary – no one actually pays them.” I responded,“Nothing could be farther from the truth”.

The mere thought that price is irrelevant is a curious one, especially coming from an economist. Price always matters in a value discussion, whether you are in Tiffany or a Turkish bazaar.

As it relates to healthcare, price matters a great deal. The number of consultants advising healthcare providers on setting charges, aka price, would rival the army of a Nordic country. If price does not matter, then there would not be any managed care agreements based on a percentage of charges. If price does not matter, there would not be differences of as much as 1,000% between markets for the same basket of healthcare goods.

Not only does price matter, but it also tragically has a disproportionate impact on the uninsured, who do not have the benefit of group purchasing to negotiate a lower price. Regardless of your view of the politics of healthcare reform, it is stunning that a Democratic White House and Congress do not grasp this elementary principle. Equally stunning is that Republicans advocating for a free-market economy do not realize that price transparency is a fundamental requirement.

What is inexplicable in my experience of the wheelchair is that there can be more than one “price” and that it can be higher at the distributor level (WheelChair Professionals) than at the retail level (MobilityCo). For more musings on that concept, see Part IV.