Let’s Hope Arizona’s New Health Law Is Contagious

Last April, Arizona governor Doug Ducey signed a law that allows patients to order lab tests directly from a lab, without physician intermediation. The tests will be self-paid: No government nor private health plan has to pay for them.

The legislation was backed by one of the most exciting diagnostic companies in the market: Theranos, founded by an incredibly entrepreneurial young billionaire, Elizabeth Holmes. The firm’s technology allows a battery of tests to be run on a single drop of blood, instead of the long draws we are used to undergoing.

Ms. Holmes’ business strategy necessitates disrupting the very staid world of clinical laboratories, which has been protected from innovation by the government-driven payment model. Instead of lobbying to get inside the model, Ms. Holmes lobbied to be exempt from the model. We need more people like that in health care.

This brings us to an interesting dispute between another billionaire, Mark Cuban, and the journalistic and medical establishment. Mr. Cuban advises everyone who can afford it to have his or her blood tested quarterly. His opponents say that’s overkill. Arizona’s new law makes their opposition obsolete.

(Recall that the Obama Administration has issued a rule allowing anyone direct access to lab results. I was not quite comfortable with it because of a concern for federalism. I have no such concerns with Arizona’s new law.)

Fellow Forbes contributor and health care entrepreneur Dan Munro has taken advantage of the new law. It was a positive experience:

The Theranos process really has removed much of the friction I associate with blood tests I have taken in the past. Access is through a familiar retail facility with pharmacy hours. Billing is a typical retail transaction with credit, debit and HSA cards (or cash/check). The lowest price blood test is $2.70 (Glucose) and Theranos advertises that their pricing is at least 50% below Medicare reimbursement rates for all tests.

The highest price test on the Theranos order form was $59.95 ‒ a comprehensive test for Sexual Health. For comparison purposes, RequestATest (which appears to be an online, front-end for using LabCorp locations around the country), charges $199 for a comprehensive STD test and AnyLabTest Now (with 3 locations in the Phoenix metro) charges $229 for a comprehensive STD test.

The Obama administration is a fan of getting clinical data in the hands of patients. Here is a great opportunity for it to do something I’ve advocated forever: Tell Medicare beneficiaries in Arizona that if they can find a blood test for half the cost of the fee Medicare pays, Medicare will split the savings between the patient and taxpayers, adding some share of the savings to the patient’s Social Security deposit. (Note: Medicare would not recommend or endorse Theranos specifically. Theranos and Walgreens would take care of promoting the option.)

I’d bet that if Medicare adopted such a policy, and beneficiaries in Arizona told their friends on Medicare around the country, other state legislatures would pass laws mimicking Arizona’s pretty quickly.