India needs a radical and effective medical costs transparency law, and needs it urgently
20-Sep-2022 •Dhirendra Kumar
There are a trillion prices in the USA's healthcare and insurance system. That's a shocking number but it appears to be true. From July this year, under a new transparency rule, the US health insurance companies have started releasing data on the prices that they have negotiated with each hospital in the country. The idea behind the rule obviously was that transparent pricing would help customers choose the best deals in health insurance and treatments. However, the insurance industry has released data that is so complex and so humongous that it's impossible to get any actionable information from it in any cost-effective way. You can visit https://bit.ly/trillionprices to read an analysis of the data set's size.
You might ask why I am talking about this when my brief in this column has always been personal finance issues related to my readers. The answer is simple - healthcare costs are the iceberg that is floating towards the ship of your personal finances, and the same issues of high and opaque prices are now a huge problem for anyone who needs healthcare in India. The impact this is having on the finances and the savings of the Indian middle class is a disaster. We all know well that almost any encounter with private healthcare providers is a huge financial shock for most people in India. One bout with a severe illness can easily wipe out five, ten or even more years of savings and investments. The magnitude and financial impact is growing and the actual service delivered is highly questionable.
One lesson that savers and financial planners have taken away from the entire episode of the Chinese virus is that they are under-allocating potential healthcare costs. As you grow older, the possibility of a large, negative health shock is an absolute certainty. One way or another, between the ages of 55-60 till you die, someone is going to take away 10 or 20 or maybe 30 lakh rupees from you. It's going to happen - there's almost no way of avoiding it.
At a personal level, there is little you can do except to prepare for this by taking appropriate care of both your finances and your health. However, there is another, deeper change that is needed, and that must come from the regulatory system. We need a system of medical cost transparency.
There is complete opacity of healthcare costs in India. If you want to buy a mobile phone or a pair of shoes or a car, you can pull out your phone and find out exactly how much it will cost. You cannot do the same for a hospitalisation episode. Note that I said 'hospitalisation episode' and not 'medical procedure'. We have a kind of a sham transparency system in some places where the price of a procedure can be revealed but so much is added to it that the original price is meaningless.
It's as if you go to a restaurant and order a dish from the menu. However, when the bill comes you have been charged for every time you sprinkle salt on your food and for every time you wipe your mouth with the napkin. Not just that, you have also been billed for the waiter asking you whether the food was fine. This sounds like a joke but for those who have been treated in some of India's more rapacious hospital chains, this will ring absolutely true.
So how should this transparency function in practice, so that it does not become a joke like the US system has become? Here's how: Everyone should be able to go online and for any condition, see the total hospitalisation expense for treatment of a large set of conditions. For every hospital, they should be able to see the average, median, minimum and maximum prices for any time period. If someone wants, they should also be able to see the detailed breakup of actual bills.
Those in the disease business (I use that term because parts of this industry are in the business of disease, not health) will say that this is confidential business information. However, given the helplessness of customers when they need to make treatment decisions, such protests should be overlooked.