even ahead of tort reform, I think, is the simplest: cost transparency. As Barbara Kiviat writes,
A big part of the reason consumer goods are so cheap in the U.S. is because people always know what they’re paying. As a consequence, consumers can push prices lower by voting with their feet. If CVS tries to sell me a toothbrush for $4 when the one at Rite Aid goes for $3, I will shop at Rite Aid and CVS will learn its lesson. This dynamic almost entirely accounts for the success of Wal-Mart. Yes, Wal-Mart has more efficient (and therefore cheaper) distribution than almost any other company on Earth, but the whole reason Wal-Mart is going for cheap in the first place is because there are hundreds of millions of Americans who demand it—a demand that is listened to because people are able to make well-informed decisions about when to walk away.
Lately I’ve been wondering if we might not be wise to unleash such price-crazed consumerism on the field of health care. The great health care debate has two prongs. I don’t know the best way to expand coverage to the uninsured. But I do have an idea about how to drive down the eye-popping cost of medical treatment: price tags. . . .
I have long been fairly quiet about health-care policy because I feel I don’t know enough about the intricacies of the debate. But one thing I do know about is the price-setting power of the enlightened consumer. I know about the effects of price transparency, and I know about what happens when you give Americans the tools to hunt for deals and value. Think about Wal-Mart. Think about going on Expedia to comparison shop airline tickets. Think about the first question you ask when you are considering buying a particular house.
Now think about health care.
Read the whole thing—it’s great.