For a while, I have been thinking of writing about the issue of
hospitals and clinicians having different rates for same exact
procedures depending on who they are paying.  When I read about Senator
Conrad's efforts to start health insurance co-ops, I thought he might be
interested in the idea.  I therefore submitted the below message to him.
I do not know if he or anyone in his office will pay much attention to
what I wrote, but I thought it would be worth a try.


Senator Conrad,

I commend you on your efforts in healthcare reform.  Your work is vital
for the best interests of this country.

I am writing regarding your proposal for creating healthcare co-ops. I
believe the co-ops are going to fail if an additional change is not also
including in the healthcare legislation.  Any new Co-op will be at a
significant competitive disadvantage when competing with established
insurance companies since 1) they will need to hire an army of contract
negotiators and 2) work in an environment where they pay significantly
more (perhaps 30% to 50%) than their competitors for the same exact
services (until the co-op has significant market share). 

This does not have to be the case.   Currently insurance companies
compete on the basis of their negotiating power.  This provides no
benefit to the patient, and it just rewards monopolistic situations.
The system needs regulation analogous to antitrust legislation that
control monopolies.  The regulation would state that providers should
not charge healthcare co-ops more than what they charge other commercial
insurance company.  This regulation should eliminate the need of the
co-op negotiating rates with all providers in a region (a large portion
of the administrative waste) while getting the co-op a fair price for
the services they pay for.

Going further than needed for the Co-ops, the ability of each provider
to charge different rates to different insurance companies is a major
source of waste in healthcare, and it is a major reason competition in
health insurance is so regional.  I also believe that providers should
not be allowed to charge different commercial health plans different
rates.  This would promote competition by making it easier for plans to
enter areas of the country where that they currently do not serve.
Ideally, providers would post their rates for all consumers to see (as
one might find in an open, transparent market) so that consumers would
have the information they need to make informed choices about their
care.

I specifically propose that the rates providers set for commercial plans
should be set by providers and should not vary by the payer.  The
government should not set the rates since government control of rates
would negate the beneficial aspects of the free market. Therefore, the
rates should not be tied to what providers pay to government plans since
these rates are set by the government.  Tying the rate to these plans
would effectively be governmental price control.  This would do more
harm than good.

I hope you find this suggestion helpful.  If there is anything I can do
to help your reform efforts please let me know.  If you do not like what
I have just presented, I am still a supporter of the healthcare report
reform efforts. I believe you and your committee are doing incredibly
significant work.