Critiques of out-of-pocket spending in healthcare have long centered on the erratic nature of prices, with comparisons resting on sticker stability in other industries — a reference point that may not be as valid today as it once was.
Christopher Beam, writing fellow at The Atlantic, delves into the plethora of pricing models confronting consumers daily and the idea that add-ons, surges and personalization mean “there’s no such thing as a price anymore,” as his headline asserts.
Airlines pioneered the use of dynamic pricing going back to the 1980s, marking one of the early widespread instances where customers could buy at lower prices by booking early, with prices escalating for later bookings. In the 2000s, they moved on to master the art of the fee — those for checked luggage, Wi-Fi, meals and six inches of extra leg room, among others. “The practice spread and soon became a major driver of airline profits,” according to The Atlantic.
Travel and events industries followed suit. Unexplained “resort fees” peppered hotel bills, “facility fees” came with car rentals, and ticketing websites charging markups as high as 78% for concerts. “Some fees sounded like jokes,” writes Mr. Beam. “In 2014, an airport in Venezuela charged customers a fee to cover its ventilation system, a surcharge widely mocked as a ‘breathing tax.'”
More recently, personalized pricing has entered the scene, in which user data is used to set prices to a different amount based on users’ calculated willingness to pay. “The concept of willingness to pay contains endless potential for mischief,” Mr. Beam writes, a concern that becomes particularly palpable with AI-based pricing and anything related to necessary, life-saving healthcare.
Healthcare services are riddled with pricing complexities, marked by opaque processes, inconsistencies, and hurdles like prior authorizations with insurers. But the once-valid comparisons to better pricing experiences in other industries are becoming less compelling, too. As more companies and industries experiment with Frankenstein prices aimed at maximizing profits, leaders in pricing integrity are increasingly difficult to come by.
It now takes a company such as Mark Cuban’s to remind consumers — and competitors — that pricing models in 2024 can still be sane. Mr. Cuban’s pricing model for his pharmaceutical wholesaler has become a competitive advantage, and it can be explained in one sentence: Each drug is priced at its manufacturing cost, plus a 15% markup, $5 pharmacy fee and $5 shipping fee.
But of course, this model rests on an uncommon attitude. Mr. Cuban has made his interest in maximizing profits clear: “I could make a fortune from this,” Mr. Cuban said in late 2021. “But I won’t. I’ve got enough money. I’d rather f— up the drug industry in every way possible.”
