Medical Price Transparency Law Backfires
Plus, Uber in Saudi Arabia; WSJ suspends skepticism; Biden’s Israeli war casualties
Will forcing health-care providers to publish their prices help lower costs by helping patients shop around? Or will it have an unintended consequence, informing underpriced providers about their costlier peers, and encouraging price increases?
Four economists—Kayleigh Barnes of the Federal Reserve, Sherry Glied and Grace Kim of New York University, and Benjamin Handel of University of California, Berkeley—did an experiment in New York. They randomly released some of the pricing information and withheld some of it. They found prices went up, “consistent with tacit collusion, or conscious parallelism, between providers who realized that they are under-charging relative to their peers.”
They conclude, “Although price transparency is a laudable goal in a healthcare market dominated by information asymmetries, there may be perverse price effects due to supply constraints, the inelastic nature of the demand for healthcare services and opportunity for providers to engage in price-setting. Our results suggest caution about price transparency if physicians are more likely to leverage that information than consumers to set prices.”
The study was released today as a working paper from the National Bureau of Economic Research, titled, “The Impact of Price Transparency in Outpatient Provider Markets.”
This remains a live issue in New York and elsewhere, with politicians passing, and claiming credit for, new price transparency laws based on claims that they will lower prices by helping patients shop around. In June 2023, New York City enacted a new law requiring price transparency for hospitals. “New Yorkers shouldn’t have to break the bank to get the health care they need, and Intro. 844-A will help ensure that New Yorkers have all the information they need to stay healthy and get the care they deserve,” Mayor Adams said of the new law.
“We cannot allow exorbitant health care costs to burden our families, businesses, and city government any longer,” New York City Councilmember Julie Menin said.
It’d be ironic indeed if, instead of pushing prices down through competition, the government’s newly mandated transparency pushes prices up by letting the lower-priced hospitals know more about the uppermost rates that the market will bear. It wouldn’t be the first time that a government regulation has the opposite of its intended effect, making the risk of such an outcome useful as a general-purpose argument against many proposed government regulations.
It’d be fun to see whether, if some of these laws are repealed, price increases slow, or, alternatively, if the providers find some other method than the government-mandated state website—say, a commercial database—to obtain the price information. Any such alternative method would have to be consistent with antitrust law. Maybe the economists will someday be able to conduct a follow-up study.
The Wall Street Journal disappoints on Gaza, West Bank coverage: The Wall Street Journal’s editorials and opinion coverage on the Israel-Hamas war have been so consistently good that the paper overall gets a lot of slack from pro-Israel readers. But the news coverage of Gaza and the West Bank has been really disappointing.
A couple of recent examples should serve to illustrate the point.
One article by Abeer Ayyoub is headlined, “The Hostages Next Door: Inside a Notable Gaza Family’s Dark Secret.” The subheadline is “To the outside world, they were a physician, a journalist. No one suspected their apartment had become a prison.”
The article reports, “It was common knowledge in Nuseirat that the Al-Jamal family was close to Hamas, according to local residents who spoke to The Wall Street Journal. But they said few people in the densely populated area in central Gaza knew of the secret locked in the small, darkened room in the family’s apartment.”
The Journal quotes “Ali Bkhit, a social-media consultant who was born and raised in the neighborhood,” and who “said he was shocked to learn that the Al-Jamals had been holding hostages in their home.”
What do you expect the Gazans to tell the Wall Street Journal? Yes, sure, of course, we all knew the hostages were there? The Journal presents the “shocked” claim with all apparent sincerity, but the word choice reminded me of the scene in the movie “Casablanca” in which Captain Renault disingenuously declares “I’m shocked, shocked to find that gambling is going on in here!” only to have the croupier arrive and announce, “Your winnings, sir.”
The subheadline that “no one suspected” isn’t accurate, because clearly enough people suspected, and knew, that when the Israelis sent an advance undercover team in to roam the market of the refugee camp, they were able to develop “solid information about the exact location of the four hostages,” as the Jewish Chronicle of London reported, but the Journal doesn’t mention. Maybe the people who did suspect it, or knew about it, aren’t talking to the Wall Street Journal about it, or, if they are, aren’t being fully candid.
Until Hamas is totally defeated, it has the ability to retaliate against anyone quoted giving away secrets or saying the wrong thing to foreign journalists. So anything coming from inside Gaza should be taken with a giant dose of skepticism that goes way beyond anything the Journal’s editors seem to have applied to this story.
A second example comes in a Journal article by Omar Abdel-Baqui headlined “Gen Z Palestinians See Door Slamming Shut on Coexistence with Israel.” It reports, “Young Palestinians in Gaza and the West Bank have never known life without restrictions on their movement, which include not only walls but also military checkpoints and a complicated permit regime that determines where Palestinians can go. Many young Palestinians have never left their home territory.”
A 2023 Pew survey found 29 percent of Americans aged 18 to 29 have never been outside of the United States. Worldwide, many people, especially in low income countries, never leave their home territory. Those who do will encounter walls, military checkpoints, and complicated permit regimes—try applying for a U.S. Passport sometime. I’m not saying life for West Bank Palestinians is a picnic or that the travel restrictions Israel imposes are precisely analogous to those faced by Americans traveling abroad or by foreign travelers to America, but they are closer to those than to “apartheid in South Africa,” which is the analogy offered up by a source quoted in the Journal news article.
Anyway, readers hoping that the Wall Street Journal news pages would play this story straight down the middle will probably find themselves, like me, disappointed by these two articles. Both would have benefited from more skeptical editing.
Uber in Saudi Arabia: A long New York Times travel article about Saudi Arabia reports, “Maysoon, a young woman I met in Jeddah, made extra money by occasionally driving for Uber.”
The Times doesn’t provide additional details, but it looks like this could be an example of an American company helping to advance freedom and American values overseas.
The Saudi Arabian Public Investment Fund, the kingdom’s sovereign wealth fund, announced a $3.5 billion investment in Uber back in 2016. Saudi Arabia lifted its longstanding ban on women drivers in June 2018. Uber went public in 2019. A listing of major holders as of March 30, 2024 shows the Saudi stake as worth about $5.1 billion.
I’m not suggesting that women Uber drivers will solve all the Middle East’s problems. But the long-run positive impact could exceed what is implied by the single sentence the Times devotes to it. That is a mere fraction of the word-count the paper devotes to the incremental ins and outs of ceasefire negotiations about Gaza.
The negative caricature of multinational corporations is that they are exploitative or wind up going native, collaborating with human rights abusers and perpetuating abuses. In this situation, Uber is helping Saudi women earn money and a measure of increased independence. The more women in Saudi Arabia who rely on Uber for income, and the more Saudis who rely on women-driven Ubers to get around, the harder it’ll be to reverse reforms such as that decision to allow women drivers. Capitalism often works against discrimination, because it benefits businesses to draw from the widest possible pool of potential labor. Businesses can sometimes find advantages by hiring employees, such as women drivers in Saudi Arabia, that sexists or bigots might irrationally avoid.
Ideally, Saudi Arabia wouldn’t have a sovereign wealth fund, and the government would instead leave the investing to individuals and firms. So long as it does, though, this particular investment looks like one that is advancing modernization and liberalization alongside the financial returns.
Biden’s Israeli war casualties: The main blame for the deaths of eight Israeli soldiers Saturday lies with Hamas and its Iranian sponsors. Yet some culpability, too, belongs to President Biden and Secretary of State Blinken for telling Israel for so long not to go into Rafah, for insisting on more humanitarian aid to Gaza, and for pressing Israel about entering Rafah in a more limited way than it had conducted earlier phases of the war in Gaza. The delay gave Israel’s enemies more time to prepare, and the limits on large bombs and lecturing about civilian casualties meant Israeli troops were more vulnerable. The enemy fighters are better fed and equipped than they might otherwise be, because Hamas gets a cut of the aid that enters Gaza. You can go on the Times of Israel website and look at the pictures of Wassem Mahmoud, Eliyahu Moshe Zimbalist, Itay Amar, Stanislav Kostarev, Orr Blumovitz, Oz Yeshaya Gruber, Yakir Ya’akov Levi, and Shalom Menachem. Itay Amar was 19 years old, and the others were in their early 20s. As a rule I try to avoid blame-America-first thinking. Yet looking at their faces it is hard to suppress the thought that perhaps one of the 2,000-pound bombs whose delivery Biden announced he was delaying might have made their path more safe. Had Biden and Blinken put less emphasis on minimizing Palestinian casualties and more emphasis on backing a rapid and complete Israeli victory, these Israeli soldiers might still have long lives ahead of them, rather than being pictured with news of their funerals.
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The Editors says ideally Saudi Arabia wouldn’t have a sovereign wealth fund, and the government would instead leave the investing to individuals and firms.
Based on the ideas of Henry George lad (including the oil within the land) is a common heritage for all people. I think SA's policy of investing the funds derived from that land to provide for all of its citizens it desirable.