Can Health Care Be Bought and Sold on eBay?

John C. Goodman

2/25/2012 12:01:00 AM - John C. Goodman

We're not quite there yet. But there is a new website that is getting close.

A small, emerging online service called MediBid is creating an actual market that puts doctors together with patients who need care.

Here's the best thing about it. Patients who use this service can cut their health care costs in half. No, that's not a misprint. Patients who obtain care through MediBid pay about half as much as BlueCross pays. Ditto for all the major employer plans as well as the other big insurance companies. Patients frequently pay even less than what government pays under Medicare.

Here's the worst thing about it. Once ObamaCare kicks in, entrepreneurial ventures like this one will probably be nipped in the bud. That's because the Obama administration doesn't believe that patients can or should be able to buy care in an open marketplace. In fact, once they get through implementing the 2,700-page bill with 159 regulatory agencies and 10,000 pages of regulations, patients are unlikely to ever see a real price for any type of care.

At least for the time being, however, a market for medical care is emerging. Here's how it works.

Patients who are willing to travel and able to pay cash, can request bids or estimates for specific medical procedures. They fill out medical questionnaires and they can upload their medical records. The patient’s identity is kept confidential until a transaction is consummated. MediBid-affiliated physicians and other medical providers respond by submitting competitive bids for the requested care.

Business at the site is growing. For example, last year the company facilitated:

•More than 50 knee replacements, at an average price of about $12,000, almost one-third of what the insurance companies typically pay and about half of what Medicare pays.

•Sixty-six colonoscopies with an average price between $500 and $800, half of what you would ordinarily expect to pay.

•Forty-five knee and shoulder arthroscopic surgeries, with average prices between $4,000 and $5,000.

•Thirty-three hernia repairs with an average price of $3,500.

MediBid facilitates the transaction, but the agreement is between doctor and patient, both of who must come to an agreement on the price and service.

One key component of all this is the willingness to travel. If you ask a hospital in your neighborhood to give you a package price on a standard surgical procedure, you will probably be turned down. After the government suppression of normal market forces for the better part of a century, hospitals are rarely interested in competing on price for patients they are likely to get as customers anyway.

A traveling patient is a different matter. This is a customer the hospital is not going to get if it doesn't compete. That's why a growing number of U.S. hospitals are willing to give transparent, package prices to out-of-towners; and these prices often are close to the marginal cost of the care they deliver. Interestingly, a lot of the out-of-towners getting the cut-rate prices are foreigners.

North American Surgery has negotiated deep discounts with about two dozen surgery centers, hospitals and clinics across the United States, mainly for Canadians who are unable to get timely care in their own country. The company’s cash price for a knee replacement in the United States is $16,000 to $19,000, depending on the facility a patient chooses.

But the service is not restricted to foreigners. The same economic principles that apply to the foreign patient who is willing to travel to the United States for surgery also apply to any patient who is willing to travel. That includes U.S. citizens. You don't have to be a Canadian to take advantage of North American Surgery's ability to obtain low-cost package prices. Everyone can do it.

The implications of all this are staggering. The United States is supposed to have the most expensive medical care found anywhere. Yet many U.S. hospitals are able to offer traveling patients package prices that are competitive with the prices charged by top-rated medical tourist facilities in such places as India, Thailand and Singapore.

All of this illustrates something many of my readers already know. Markets in medical care can work and work well — provided government gets out of the way.