OP-ED

Consumer-Driven Medicine’s Fatal Flaw

The possibility that the Supreme Court will strike down all or part of the Affordable Care Act has given new life to Republican calls to put market mechanisms to work in holding down health care costs. The public is certain to hear lots more about it on the campaign trail later this year.

There’s one big problem, though. Markets cannot work when consumers and patients have almost no information about the prices they pay for health care.

Rep. Paul Ryan, R-Wis., chairman of the House Budget Committee, has resuscitated his proposal to turn Medicare over to insurance carriers. Future retirees would be offered financial help to pay for policies sold through public exchanges similar to the ones set up under the health care reform law, a.k.a. Obamacare. The subsidy would be limited to the value of the second-lowest cost plan offered on the market. The idea is that over-65 consumers, who would still have the option of remaining in traditional fee-for-service Medicare, would drive down costs by forcing the plans to compete for their business by offering lower-cost alternatives.

Other Republicans and conservative think tanks are touting laws that would allow insurance carriers to sell individuals policies across state lines, which would be coupled with incentives to shift people away from employer-based coverage. Under such plans, individuals could buy catastrophic coverage for expensive hospital stays while using the savings to pay the entire cost of routine health services, just like they pay out-of-pocket now for lawyers, flat-screen TVs or the week’s groceries.

Again, the idea is that people putting up their own money will be much more likely to scrutinize the price of tests, drugs and procedures, and choose accordingly. If they comparison shop, they might even visit the provider down the street.

Where Are The Prices?

Employers are already moving in the direction of giving consumers “more skin in the game,” according to a recent survey by the Employee Benefits Research Institute. One in five Americans are already in high-deductible insurance plans, an all-time high, even though this approach is leading many to skimp on preventive services that could avoid higher health care costs down the road.

Unfortunately for the architects of such proposals, there’s a crucial element missing from their proposals, something that is necessary to make any market work: accurate and easily accessible price information for consumers. Have you ever walked into a doctor’s office and seen a price posted for all the tests, products or procedures that might be offered during your visit? At the hospital? Ever seen a price list at the local pharmacy?

The problem of price opacity in health care is not easily solved. Health care providers are more like airlines than the local Best Buy or Macy’s. They charge different patients different prices depending on who insures them. The uninsured pay the highest prices, the equivalent of a hotel rack rate.

Medicare sets prices. Medicaid patients get the lowest available price. Privately insured patients are offered differing discounts, with larger groups afforded bigger discounts than smaller groups. The prices between the groups vary wildly.

Insurance carriers frequently refuse to turn over claims data, which would enable them to compare prices between the different local providers. “One specific factor driving the high cost of healthcare is the significant price variation – sometimes more than 100 percent – for the same healthcare services in the same geographic market,” said Bobbi Coluni, senior director for consumer innovations at Thomson Reuters, in a recently issued report claiming consumers could reduce health care costs $36 billion a year with full pricing transparency.

One example offered in the report: a typical Illinois employer could save $29,000 or 33 percent off the cost of knee arthroscopy, and the patient could reduce his or her co-pays by $300, simply by switching from the highest cost to the median cost price offered by different hospitals in that employer’s area.

Yet employers are powerless to get the price data, many complain. Their insurance carriers frequently refuse to turn over claims data, which would enable them to compare prices between the different local providers and encourage their workers and families to choose the best value.

The insurers cite “proprietary information and preexisting confidentiality agreements with providers,” charged Shawn Leavitt, a benefits manager at Minneapolis-based Carlson, which owns and operates nearly 2,000 hotels and restaurants worldwide. “These excuses are a cover for health plans’ real concern: to keep health care purchasing decisions as opaque as possible to substantiate excessive administrative costs, and maintain the illusion of well-managed networks and large discounts.”

MARKETING HIGH COST HEALTH CARE

It’s not just insurers. Drug companies offer a wide array of discounts to insurers and pharmacy benefit managers. They’ve even begun offering coupons and discounts directly to consumers to keep them on branded drugs coming off patent, like the discounting recently adopted by Pfizer to keep people on Lipitor instead of switching to generic brands.

Medical device manufacturers that sell implanted heart devices, artificial knees and hips and spinal implants are also heavily into the discount game, which they couple with exorbitantly high rack rates. They negotiate different discounts with different hospitals, and then require each to sign a contract that forbids releasing pricing data to their competitors across town.

Rep. Stephen Kagan, a Democrat from Wisconsin who lost his seat in 2010 to a Tea Party-backed candidate, introduced a simple three-page bill in the last session of Congress that would end pricing secrecy in the medical industry. The “Transparency in All Health Care Pricing Act of 2010” said “any and all individuals or business entities, including hospitals, physicians, nurses, pharmacies, pharmaceutical manufacturers, dentists and the insurance entities . . . shall publicly disclose, on a continuous basis, all prices for products, services or procedures . . . at the point of purchase, in print, and on the Internet.”

Though it received one sympathetic hearing, the bill was not included in the Democrats’ health care reform legislation after intense opposition surfaced from virtually every health care provider group. No one has reintroduced the bill in the current session of Congress.

“Overly broad proposals that aim to disclose confidential pricing agreements and terms could undermine vigorous competition and have a negative impact on patients,” the Pharmaceutical Research and Manufacturers of America said this week in a prepared statement.

A spokeswoman for the American Hospital Association said the group had supported an alternative bill introduced by Rep. Michael Burgess, a Republican from Texas who is also a doctor. That legislation would have had the Agency for Healthcare Research and Quality study the question. It didn’t pass either.

Merrill Goozner has been writing about economics and health care for many years. The former chief economics correspondent for the Chicago Tribune, Merrill has written for a long list of publications including the New York Times, The American Prospect, The Washington Post. This post first appeared in the The Fiscal Times. You can read more by him at GoozNews.

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46 replies »

  1. The PPACA generally prohibits annual limits on the dollar value of Essential Health Benefits,

    Non essential benefits can be capped.

    Most likely, if you have provider agreements that set that as the payment then seeking treatment from someone outside that list would be akin to going to a non ppo provider. If on the other hand you set reimbursement below what any provider would accept they would probably accuse you of setting an illegal limit on essential benefits.

    For someone trying to circumvent the law that would be one of the first areas to try, i don’t think HHS would look kindly on it. You would also get into areas of how far can you require someone to go…hundred miles? 500? What if my plan set reimbursement based on available cost in India?

    PPACA wasn’t written by people that understand health insurance, there are many grey areas that will only be clarified by years and years of lawsuits.

  2. Nate Ogden — can you explain your comment a few days ago:”In the old days we could just limit the liver transplant benefit to $200,000, that is illegal now.” Where does it say an insurer can;t limit the benefit? PPACA? Calpers in California pays $30,000 to hospitals for a knee or hip replacement; if the patient wants to go to a higher priced hospital, the patient has to pay the hospital above the amount. Is this illegal? Straighten me out.

  3. I like your suggested standardized pricing system (seriously). There are only two numbers to remember: the multiplier of your insurance benefit and the multiplier of your health care provider.

    If physicians and hospital don’t like the ratios in the Medicare baseline, they are free to propose their own baseline as long as all providers and insurers within the same region agree to it.

  4. The article is not about traditional co-pays. It’s about people with high deductible plans that have no way of knowing how much they are going to be paying before getting a service.

  5. “Have you ever walked into a doctor’s office and seen a price posted for all the tests, products or procedures that might be offered during your visit? At the hospital? Ever seen a price list at the local pharmacy?”

    Have you ever asked? The reason people never ask for the real prices of the procedures/products is that they have already reviewed the “price” they pay and comparison shopped when they picked their insurance carrier. People currently pay the co-pays and make decisions on what insurance plan to buy based on that and what value they get.

  6. Uwe Reinhardt and others have noted that, in theory, all providers could base their fees on the Medicare fee schedule. Once Medicare determines what the value of one RBRVS unit is each year, including regional adjustments for differences in medical input costs, all providers would need to do is to post their “conversion factor” or multiple of Medicare that they charge and/or have negotiated with insurers. The same approach could presumably be used for hospital based DRG’s.

    The problem, as Nate alludes to, is that Medicare overpays for some procedures, underpays for others, and pays more generously for procedures than for evaluation and management codes. Of course, some doctors could also run more tests than others in the course of treating the patient which would increase the bill, perhaps unnecessarily, while others might opt to perform procedures that are not medically necessary or of only marginal benefit at best.

    Even perfect price transparency would not address the latter two issues though some reasonable measure of provider quality and cost-effectiveness might. At the end of the day, the medical industry needs to work to make price and quality transparency as available and useful as possible rather than try to sustain the systemic opacity that we’ve had for decades.

  7. “Other Republicans and conservative think tanks are touting laws that would allow insurance carriers to sell individuals policies across state lines, which would be coupled with incentives to shift people away from employer-based coverage. Under such plans, individuals could buy catastrophic coverage for expensive hospital stays while using the savings to pay the entire cost of routine health services”
    Why are you conflating so many completely mutually exclusive concepts? Selling across state lines is completely different from giving an individual the same tax advantage as a company, which is completely different from offering catastrophic coverage options. I do not believe the republicans and conservative think tanks are as confused as you are. Also, who has ever stated (besides you) that the savings from buying catastrophic coverage is enough to pay the entire cost of routine health care?
    “One in five Americans is already in high-deductible insurance plans, an all-time high…even though this approach is leading many to skimp on preventive services that could avoid higher health care costs down the road.”
    I believe it past time to stop calling something a high deductible (or catastrophic coverage) simply because the deductible meets a legal requirement or is higher than it used to be. In the 60’s, an average deductible was around $200. Based on medical inflation over the past 50 years, the average deductible should be over $20,000.
    “One example offered in the report: a typical Illinois employer could save $29,000 or 33 percent off the cost of knee arthroscopy, and the patient could reduce his or her co-pays by $300, simply by switching from the highest cost to the median cost price offered by different hospitals in that employer’s area.”
    3 minutes to find average cost of knee arthroscopy surgery 29889 at $10,500 in Chicago 60606. I doubt the typical employer has 9 of these procedures in a decade.
    “The insurers cite “proprietary information and preexisting confidentiality agreements with providers,” charged Shawn Leavitt, a benefits manager at Minneapolis-based Carlson, which owns and operates nearly 2,000 hotels and restaurants worldwide. “These excuses are a cover for health plans’ real concern: to keep health care purchasing decisions as opaque as possible to substantiate excessive administrative costs, and maintain the illusion of well-managed networks and large discounts.”
    Please request your friend, Shawn Leavitt disclose every discount given to every guest for every room on Carlson’s website to avoid the dreaded opacity.
    “Rep. Stephen Kagan, a Democrat from Wisconsin who lost his seat in 2010 to a Tea Party-backed candidate, introduced a simple three-page bill…“Transparency in All Health Care Pricing Act of 2010” said “any and all individuals or business entities, including hospitals, physicians,…insurance entities . . . shall publicly”
    Is Wisconsin overrun by Tea Party members or insurance carriers?

  8. It would be very easy system wide to implement a Medicare based fee schedule for physician services and most of your non hospital care.

    Insurers would pay Medicare times X% and disclose it in the policies. This way consumers would know exactly what their insurance will pay.

    Providers can post we charge Medicare time X% so you know what the bill will be. If your doctor bills more then your insurance pays you would know your liable for the difference.

    Hopefully one of the doctors or Steve will answere this possible problem, do physicians value the difference in codes the same as RBRVS? Lets say Medicare has a 8% difference between 99213 and 99214 will most providers accept that? Or do some value it at 4% and others 15%?

    When we owned a PPO our contracts were all based on RBRVS and no one complained but that was a few years back.

  9. If I heard them correctly, UnitedHealth Group stated on its first quarter earnings conference call this morning that it will be adding enhancements to its web based medical cost estimator over the next several months that will include disclosure of actual provider contract reimbursement rates. They mentioned it in the context of choosing doctors but if it includes hospital costs as well, it could be a huge step in the right direction.

  10. Amend the ACA if necessary (not so clear to me that is needed) to let this happen. If patients want the more expensive place, they should pay the difference, with some caveats. Distance should be a factor. This should also be broadened to things like prostate cancer care where you have multiple effective treatments at widely different prices.

    Steve

  11. why not? If someone wants to purchase a policy they can afford that provides 1 million in coverage why can’t they? In your scenerio what prevents someone at the end of their life spending millions on care with little to no chance of even prolonging life? Your arguing in bumper stickers, yes in an ideal world it would be nice if everyone can get everything they want but its not praticle, we need limits. We can’t afford to have people consume 30 million in healthcare by them selves.

    Know what else would be nice, if auto insurance covered all of the medical expenses from an accident, instead people are allowed to buy policies with limits like 15K/15K/30K

    It would be nice if everyone had enough life insurance so the public didn’t have to pay for burials.

    It would be great if disability insurance didn’t have benefit periods.

    There is a reason that for 200+ years insurance has existed there were limits.

  12. The point is that nobody who goes to an in-network provider for a covered service gets stuck with a $100k (or more) bill. It’s OK to restrict network size. It’s OK to redirect a patient to a cheaper provider. It’s NOT OK to tell a patient that service X is covered by an in-network provider Y, and then let the patient eat all the cost when limit Z is reached.

  13. check your state consumer protection laws, you might be shocked exactly how much power you do have.

  14. that would remove them for all the other services they provide as well. If you compare price or cost of hospitals they aren’t uniformly the highest.

    Not sure members could handle different networks for each service.

    It raised another issue though, If I can just eliminate all the providers charging over a set amount from my network then what is the point of PPACA eliminating dollar maximums? This would be a pretty good example of a law that accomplished nothing but making legit work harder to do.

  15. Why not remove from the network any provider that charges more than $200k for a liver transplant? As a consumer, I would rather be told to go to a different provider than being stuck with a $100k bill for exceeding my limit on an in-network provider.

  16. Yes, you are correct. In an ideal system all market players have complete information, they have equal market power, and profit converges to zero. Microeconomics 101.

    However, in the real world, I don’t have the market power and pricing leverage of a large employer or insurer. Maybe some day I will be able to negotiate a better price at MGH than BCBS. But I am not counting on it. In the meanwhile I need to rely on in-network pricing negotiated by a 3rd party in order to pay less.

  17. Well yes, 17/66 is a lot better than 0/66. However, none of these 17 hospitals is near where I live, they are not known by family/friends, and they are not places where our physicians refer to by default.

    I am guessing that the hospitals that do disclose price are probably going to be cheaper than the hospitals that don’t. But I really don’t know for sure. I don’t know how much money I would be saving by going to one of these places. On a practical level, I’d also like to know the difference in pricing between the two (relatively well known) suburban hospitals closest to where I live. But neither discloses prices.

    The same is true for a large number of physicians in the area.

  18. Nate –

    That’s a good and fair point. I think there is a lot more that employers can do, supplemented with efforts by firms like yours, to help employees better understand that healthcare spending is not just about the employee’s personal or family OOP. It should be made clear that the cost to the employer, whether self-funded or not, is part of the employee’s total compensation and the more that can be done to control inappropriate and excessive spending on healthcare, the more room there will be for raises and additional hiring to grow the business and compete in the marketplace.

    I have long advocated that employers routinely provide their employees with annual statements showing their wage or salary plus the cost to the employer of all benefits for which the employer either paid cash or incurred a liability to provide benefits in the future like a defined benefit pension. Such benefits include health insurance, the employer share of FICA taxes, life and disability insurance, tuition reimbursement, 401-K or 403-B matching contributions, etc. The combined cost for salary and benefits is their total compensation which significantly exceeds the salary alone. While some companies already do this and have done it for years, way too many employees don’t have a clue how much their employer spends for health insurance on their behalf and don’t connect it to either their current salary or its potential for growth. If employees and their doctors work together to make cost-effective and value added healthcare choices, I think we would see the medical cost growth curve flatten out.

    Price and quality transparency tools are a critical part of that effort as well. Doctors, for their part, need to incorporate the wise stewardship of society’s limited resources into their practice patterns. They need to view knowing and caring about costs as part of their job.

  19. We need to figure out how to incentivise large claims when PPACA caps out of pocket. A recent example of a claim we have;

    Liver Transplant

    CC $300,000
    Henry Ford $160,000
    U of M $180,000

    Some outliers and other provisions but this is roughly what we are looking at. Member is going to pay their $6000 OOP either way, what can we offer to motivate them to save the plan $120,000 or $140,000? In the old days we could just limit the liver transplant benefit to $200,000, that is illegal now. These large claims is where the most waste is right now. HF is almost a 50% savings. Saving 50% of your 40% facility spend is 20% saving of total plan cost.

  20. My understanding is that the most powerful hospitals in Massachusetts originally refused to sign tiered network contracts that placed their physicians and facilities in anything other than the most preferred tier until the state legislature stepped in and made that stance illegal. I think this is a clear example of regulatory power enhancing competition. I think regulators in MA and elsewhere also need to stand up to the hospital, physician and insurance lobbies and put an end to confidentiality agreements regarding contract reimbursement rates. Individual providers could still refuse to disclose contract rates but it would be because they want to and not because they have to and insurers would be able to disclose prices even if providers themselves don’t.

    I also like tiered networks not only because they help to steer patients toward the most cost-effective high quality providers but also because they help insurers to create countervailing power against hospitals with significant local or regional market power due to either their recognized brand name or the fact that they may be the only hospital for many miles around in less populated areas. Both referring doctors and their patients need to be able to access contract reimbursement rates easily and quickly.

  21. Not trying to be disagreeable, Paolo, as you make some good points, and I understand your point given the limitations of the current system, but why should we want, in an ideal system, HDHPs tied to the prices insurance companies have worked out in their contracts? Wouldn’t it make the most sense if you could spend your HSA dollars or cash at a place that was able to give you the best price period? It is criminal that current laws prevent this from happening.

  22. Not sure how “I can get pricing information for 17 out of 66” translates into difficulty getting a price. Why would you get your MRI at a place that won’t tell you the price? You would in fact go to the place that did quote you a price which, in your region, is apparently 17 locations. That sounds like choice to me. In my little county of about 130,000 population, there are three MRI machines – one at the county hospital were it is difficult to get a price, one at the physician owned speciality hospital where if you ask they will give you a discount for cash, and another in a local neurosurgeon’s office where they are happy for the business and will readily quote a price. Again, sounds like choice to me.

  23. I completely agree. Furthermore, pricing and quality information should also be available to prospective buyers of health plans. If I have to decide between buying HDHP A and HDHP B, I want to know which one gives me access to the best provider pricing. If that information is not available, you don’t have an efficient market for high-deductible health plans.

  24. For an MRI of the knee, I can get pricing information for 17 out of 66 hospitals in the region and 16 out of 58 facilities. I can’t get pricing for the premium hospitals in the city, nor for the two suburban hospitals closest to home. And the reason given for the lack of pricing information is simply that the provider has requested not to show it.

  25. I think the ability to see actual insurance company contract reimbursement rates would be even more useful to referring doctors than to patients especially for expensive hospital based procedures and care. I know that insurers think disclosure of contract rates could lead to higher prices as the lower paid hospitals clamor for higher rates while the higher paid hospitals won’t willingly lower theirs but I think it’s worth a try at least on a pilot basis. Insurers could try it in a few markets or for the 25 or 50 most common procedures in a given state.

    A complicating factor for doctors who work for a large health system that includes one or more hospitals and have a good part of their compensation tied to relative value units billed and / or referrals to the mother ship could result in higher cost practice patterns. Insurers could combat this issue by offering referring doctors meaningful bonuses if they control healthcare costs by both minimizing unnecessary care and ensuring that necessary care is delivered by the most cost-effective high quality providers. Patients who insist on going to high cost providers for irrational non-medical reasons should pay more for the privilege.

    If it were up to me, I would outlaw the confidentiality agreements that currently preclude disclosure of contract rates. I would also like to see more use of tiered networks that expose patients to higher coinsurance if they insist on going to a higher cost facility even though its quality and outcomes are no better than their lower cost regional competitors. For the handful of sophisticated procedures that the high cost big name academic medical centers really excel at, they could be in the most preferred tier for those.

    Price and quality transparency information needs to be available in a user friendly format to both patients and referring doctors. Even most hospital based care, including all outpatient procedures outside of the ER, are scheduled in advance which leaves time for comparison shopping by either patients or their doctors or both. If the tools were as good as the car shopping tools, the usage would be a lot higher.

  26. I have “dual citizenship” in that I’m both an academic in health economics and work in the health care industry, and think I can reconcile Nate’s observations with what I’m seeing in the market today.

    There are a number of intermediaries out there (TPA’s, brokers, consultants) who can readily identify the costs of providers in a given geographical area based on whose contracts they fall under (e.g., what he refers to as the PPO allowable). They’re accustomed to working with historical claims dumps of de-identified data for clients as one of their principal tools to do this.

    Health insurance companies vary greatly in the quality of tools they provide and in their motivation to share such data, even within the same company but from one geographical area to another. Most are beginning to realize that for CDHP to do more than just shift costs from employers to employees, they need to improve their transparency/health care “shopping” tools. They are both developing such tools and working with vendors who have such tools to meet the needs of their customers.

    However, also to Nate’s point, putting the data out there, even with consumers having a greater financial stake in the costs of care, still is no guarantee that they will actually use it. Other features such as provider reputation, existing relationships and emergencies often play a much greater role in where consumers actually go for health care.

  27. Yes, but it is ridiculous to complain about consumer driven health care by pointing out the lack of price transparency when what will drive price transparency is more consumer driven health care. Major medical plans should be taylored to handle the big stuff (thus mostly taking hospital prices out of the equation) leaving mostly doc visits, urgent care, lab, and x-ray. If the number of patients with HSAs and HDHPs increased, there would be more demand for price lists in these areas. It may be difficult currently to find out what your knee replacements total costs are going to be, but it really isn’t difficult to find out the cost of a CBC or MRI of the knee. The government of course is the greatest hinderance to price transparency since the only approved mechanism for giving cash paying patients a discount is the sliding scale based on income. There is no recognition of the costs involved in bringing insurance into the picture and thus providers are afraid to post prices when they accept both cash and insurance – the insurers (including govt) will demand they be given the better cash price.

  28. “I dont really know if transparency will work, but it will not happen in a useable, easy to find manner unless it is legislated.”

    What good does it do to legislate availability if you also don’t require use? This is the exact same waste of time we went through with EDI were the government legislated payors accept EDI but didn’t require anyone to use it.

    The transparency solutions we use have 100% of the network with no hidden prices. We don’t need the government to muddle something that already exist by legislating it, consumers just need to demand and purchase a better product.

    If you drag government into it all of a sudden there will be reporting requirements, $1000 per day fines for every misplaced punctuation, and so on. It is far easier for individuals such as yourself and Paolo to just buy a better product.

    Ideally PPOs wont even be here in 5 years. If the government in a half witted attempt to legislate transparency mandates the use of PPOs we would all be worse off. Every piece of HCR legislation passed since 1965 shows they have no idea what they are doing and the unintended consequences are always worse then the few benefits.

    No large group should be renting a PPO, they should all be moving to Medicare + for physician and cost + for facility then keeping a list of providers that agree to accept it. Transparency and inflation solved.

  29. I have lunch with our marketing guys every now and then, mostly to trash talk sports (they think the Mets will win something some day), but we also talk business. They realize that it is very hard to move market share. Pricing makes very little difference. A pt with a newly diagnosed cancer does not go look for the cheapest care, they look for familiarity and security. The elderly man needing his knee replaced does not look for the cheapest care, he looks for the hospital that makes it easiest for his wife to come visit and make it back to walk the dog.

    I would also note that our experience in PA is much more like Paolo’s. With a lot of effort, you can sometimes find out what something will cost for some procedures at some places. I dont really know if transparency will work, but it will not happen in a useable, easy to find manner unless it is legislated.

    Steve

  30. Have your people contact me, we can fix that right away. If you want things done right you don’t go to a very large insurance company, they are more concerned about their relationship with their hospital then they are serving their clients that pay them.

  31. If the consumer buys a high-deductible plan, the consumer will be paying straight out of his pocket until he reaches the deductible. Hence the need for the consumer to do comparison shopping for the actual services.

  32. I have a HDHP with a fortune 100 employer. I am financially motivated to know the price of elective procedures. The plan is administered by one of the very large insurance companies. When I use the “pricing tools” on the plan’s website this is what I get:

    Boston area, procedure is C-section: I get a list of 50 hospitals. There is a “price estimate” for only 8 of them. The price ranges from $3000 at a no-name hospital to $10,000 at another no-name hospital. Only one of the 8 is actually in Boston. For the big-name city hospitals there is a note saying that the price is not shown at the hospital’s request. For the affiliated city and suburban hospitals the same note is shown (and no price is displayed). And for the remaining hospitals, there is apparently not enough data to get a price estimate.

    If I try carpal tunnel surgery, I get exactly ZERO results. Not enough data from some hospitals and cost not shown at the hospital’s request for the hospitals that apparently do a lot of these surgeries.

    These “pricing tools” are a good start but have a long way to go to be practical and useful to the average consumer. The day there is a health care version of edmunds.com people will start using it.

  33. We use a transparency tool in the Cincinnati, OH market. I can’t share everything due to confidentially agreements but here are the basics of a member that actually used it last month;

    Carpal Tunnel surgery. Zip 45248

    Big name 4 star quality hospital $2502 to $3002

    Big name Hospital $6153 to $7383

    This is common, not always the same hospitals but the pricing spread is always 2-3 times from lowest to highest.

    Not sure who Ginsburg is but if he is prominent academic then that is the problem.

    Hospital prices are meaningless, you need to know PPO allowables. Even in Urban areas there are huge price swings. When I have a member at Metro Health it cost me a third of what Cleveland Clinic would expect.

    When you can schedule procedures in advance and thus play hospitals off each other you can do even better. Hospitals don’t make any money off patients they don’t treat.

    In regards to Rx Wal Mart would be a great example of members paying $20-$30 or more for an Rx they can get at Wal Mart for $4. Locally we have stories like Giant Eagle what have free anti biotic list yet members are still filling them across the street at Walgreens.

    Despite what Merrill and other clueless academics claim the problem is not lack of transparency. Its lack of members willing to use it. We get low single digit usage of our transparency and pricing tools. How much money would you expect us to spend to keep pushing these tools no one will use?

    PPACA makes this even worse. We need to start punishing people that make bad decisions, until we do all the transparency tools in the world wont make a difference.

  34. In discussing the ideas alluded to as potential alternatives to PPACA, the product for which the consumers need to know the price is the insurance policy, not the cost of the services for which the insurance company will be billed. Hello.

  35. I would be curious to see the numbers Nate. I know that multi-tiering of pharmacy benefits along with carveouts/generic substitution have really done a lot to compress pharmacy trend spends the last few years. Just isn’t that apparent to the patient since they just pay the copay when they pick up their script at the pharmacy or get it in the mail.

    From what I saw if you posted hospital prices in an MSA, the decreases in rates you saw from the higher-priced AMCs and larger urban hospitals would largely be offset by the lower rates from community hospitals increasing so that the overall effect wouldn’t be that great on hospital pricing. I know that several other prominent healthcare folks including Ginsburg have said as much too.

  36. Have to disagree MG, from our block of business and clients that have done it we can cut cost 30% or more just by choosing different hospitals and prescriptions/pharmacies. The profit in Rx and hospitals is an easy double digit reduction in spending without compromising any care.

  37. Pricing transparency effects on taming healthcare costs are largely inflated for several reasons. It helps but it is far from the panacea to cure healthcare inflation that some make it out to be.

    The much bigger issue is the lack of safety and quality information though regarding providers and medical equipment & drugs. Been an issue since MMA Act of 2003 was passed and will remain a huge one through 2020.

  38. I’ll get in trouble if I post links to all the companies and websites that prove your dated and wrong Merrill but this is a great example of what many companies are offering.

    http://www.clearcosthealth.com/index.html

    Share your PBM and I’ll show you where they cover the Rx part you claim doesn’t exist.

    Others have also linked to where your wrong on preventive care.

  39. Know what would be a really fun test, is for Merrill to share who his health insurance is with and which PBM he uses. I’ll bet anything of his choosing that both offer the exact information Merrill claims is not available.

    I won’t hold my breath on Merrill taking the bet.

  40. “even though this approach is leading many to skimp on preventive services that could avoid higher health care costs down the road.”

    Preventive is covered 100% with no cost to the employee, so why are they skimping Merrill? Cost of gas to much to go to the doctor? Your making the same tired arguments you were 5 years ago. They were BS then and they are BS now., Vast majority of HSAs have covered preventive at 100%. Time to recycle your propaganda, it doesn’t even apply anymore your so dated.

    “there’s a crucial element missing from their proposals,”

    No Merrill there is crucial elements missing from your knowledge, they are readily available in the market. Again your so out of touch in your ivory tower you don’t even have a clue how the market works. We offer our high deductible clients multiple ways to access price information.

    FYI no one that has the slightest idea what they are talking about would look for price posted in the doctors office, you need to know the PPO allowable. It’s the only number that matters.

    “Ever seen a price list at the local pharmacy?”

    Again don’t be such a tool. Go to your PBMs website and I guarantee you can look up price, most will not only give you the allowed price at the pharmacy you choose but lower prices nearby.

    We work with 5 PBMs and all have had this for years.

    “The problem of price opacity in health care is not easily solved.”

    Really, that is pretty shocking seeing as how its been solved for over 3 years now.

    “Yet employers are powerless to get the price data”

    Unless they have been a client of anyone like me any time in the past 3 years. Or Aetna, or Anthem, or any of the other numerous carriers. Or used something like Health Advocate. Or asked the UR staff. Really powerless.

    I strongly suggest you take a few weeks off from writing Merrill, did you actually write this or just dust it off from 4 years ago, and read the following book;

    http://www.amazon.com/Company-That-Solved-Health-Care/dp/1935618199/ref=sr_1_1?ie=UTF8&qid=1334691898&sr=8-1

    It’s basically the Chairman of this company telling you your full of it he has been doing for 8 years what you say doesn’t exist. The problem is not the resources being available its people not being interested in using them. As this book and the experience of everyone that actually does this for a living would tell you.

    Sad that people that insist on spending so much time writing about health insurance can’t spend 5 minutes to learn what they are actually talking about.

    There are numerous products groups can by that will tell employees the range of PPO allowables for procedures and test that would allow them to shop. We have used one for three years, the biggest problem by far is getting employees to use it.

    We have had drug pricing available for close to 5 years and again the struggle is getting people to check the price before they go to the pharmacy.

    What is really frustrating is in the time people wasted reading Merrill’s factually dated rant they could have go online and probably saved 10-20% of their next healthcare expense….but won’t because they don’t have time.

  41. “One in five Americans are already in high-deductible insurance plans, an all-time high, even though this approach is leading many to skimp on preventive services that could avoid higher health care costs down the road.”

    Please realize that an extensive list of preventative services are covered at first dollar, without your having to pay a co-payment or co-insurance or meet your deductible, under all plans including high deductible plans. So your statement that I quoted above has been incorrect since 2010.

    http://www.healthcare.gov/news/factsheets/2010/07/preventive-services-list.html

    I agree that introducing price transparency with consumer driven plans is a better answer to our health care costs, than a government controlled single payer system that some are touting as the best solution. The popular Healthy Indiana Medicaid program utilizes health savings accounts to incentivize patients to get the recommended preventative care services. In fact the participating Medicaid patients achieved preventive care participation rates that were higher than the privately-insured population.
    http://www.forbes.com/sites/aroy/2011/11/11/obama-administration-denies-waiver-for-indianas-popular-medicaid-reform/

  42. Health care costs, charges, discounts, prices and premiums are too often used interchangeably thought they aren’t synonymous. We really do need a basic education in economics of health care hopefully devoid of political BS.

  43. And besides, how many health care professionals understand accounting well enough to grasp that professional compensation and profit are not only not the same, but are actually on opposite sides of any balance sheet?

  44. “Transparency” and “Profit” are significantly inversely correlated. As Yves Smith pointed out, the most “efficient markets” are by definition the lowest margin, a core principle lost on unregulated “free market” types.

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