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The Smarter Healthcare Consumer Myth

If consumers could review and shop for health care coverage as easily as they do television sets, costs would decline and we wouldn’t have as large a health care crisis. At least that’s what some folks would lead us to believe. But the picture isn’t that clear.

A recent article in The Wall Street Journal reports how companies are using private health insurance exchanges to lower costs and give employees more flexibility. The exchanges are similar in nature to those mandated by the Patient Protection and Affordable Care Act (a.k.a. Obamacare)—the difference being a private company is overseeing the exchange and not the federal government or states. Employees are able to log on to a site, review coverage plans with different benefits and a range of deductibles, and choose what works best for their budget.

A consultant running one such exchange was enthusiastic about its progress thus far. “When people are spending their own money, they tend to be more consumeristic,” Ken Sperling, national health exchange strategy leader for Aon Hewitt, a unit of AON Plc, told the Journal. (Aon itself, as well as Sears Holdings Inc. and Darden Restaurants are using a new Aon run exchange.) Benefits consultants Mercer (part of Marsh & McLennan Cos.) and Buck (part of Xerox) are rolling out similar private exchanges.

There’s no doubt that consumers are more astute, on average, regarding price for benefit when directly paying for goods and services.

With insurance companies acting as the middleman and cutting deals with providers as they see fit, consumers rarely even know the actual cost of a medical service. That lack of knowledge has fostered a world of outrageous price discrepancies– for instance, an ankle MRI can run you anywhere from $400 to $1861 in a mere two mile radius of Washington, D.C.. Such discrepancies are particularly egregious since higher prices do not necessarily equate to better quality of care.

However, the notion that access to prices alone will enable consumers to choose suitable coverage makes two big assumptions about consumers:

(1) that they are in a position to accurately identify and predict their healthcare needs.

(2) that they won’t be inclined to value the short term (i.e., more money in their pocket each month due to lower health insurance premiums for higher deductible plans) over the long term (i.e., access to health care treatment they can actually afford when they most need it ).

The stark reality is that both of these assumptions are wrong.

And affordable access is key since research shows that the underinsured aren’t that much more protected than the uninsured, and thus exhibit much of the same behavior that over the long term leads to higher healthcare spending when they can least afford it. As the Healthcare Hacks blog reported few years ago:

“…53% of underinsured people (compared to 68% of uninsured ones) do not see the doctor when they are sick, do not fill their prescriptions and do not get recommended tests or treatments because of the high out-of-pocket costs that they have to incur. That means that they are foregoing or delaying needed medical care. Moreover, 45% of them have difficulty paying their medical bills, have been contacted by collection agencies for unpaid bills and have changed their lifestyles to pay their bills. In fact, a 2005 study by Harvard University showed that 75% of medically-related bankruptcies occur for people who have health insurance, i.e. the underinsured.”

This isn’t to say that health care exchanges offer no benefit to the consumer. More flexibility in plan choice can give consumers access to services that are important to them. And clearly defined plans (as the Affordable Care Act envisions) can ensure they are educated about what exactly they are paying for and how best they can use those plans. But exchanges are not a panacea and, frankly, can do more harm than good by accelerating the number of underinsured without also protecting the consumers from literally gambling with their health. And that’s a gamble not even the House wins. We all lose.

Author’s note: John S. Wilson analyzes health policy for a state Medicaid agency. The views expressed here are personal and are not those of the state.

John S. Wilson is a health policy analyst focused on long term care and digital health. His work frequently appears in Forbes, CNN, Black Enterprise and the Huffington Post. He is also a Digital Health advisor to the NewMe Accelerator, a start-up tech incubator for minority entrepreneurs. John may be reached on Twitter: @johnwilson. This post originally appeared in Forbes.

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16 replies »

  1. Have these politicians buy into Obama care as well…If they pay into public retirements, medical benefits, and the salaries as middle class Americans would that change the way anything including Obama care is being implemented?

  2. “Have you heard people complain that they don’t know about costs of healthcare visits?”

    People who have insurance don’t care about “cost” but they do know their co-pay. They also know they aren’t required to pay for a membership where they pay even if they don’t use the service. I’m uninsured and it’s not hard for me to find out before hand what the doc’s visit is going to be.

    His clinic may be better for uninsured if they can afford the membership, especially if they have a cronic condition requiring lots of doctor visits.

    “it doesn’t include hospital or specialist care”

    Exactly, primary care is not the cost driver in this system, it’s hospital and specialist care. This clinic is not solving anything for the patient but it is solving the doc’s practice life style for himself.

    “What does it solve for the clinic? He doesn’t have to bill, and I believe that saves him a lot of admin expenses.”

    Do you think he’s taken a pay cut from a standard practice? This type of practice reduces access not increases it.

    Part of the reason for staff overhead is the large number of insurance companies with different rules and different billing procedures and slow/no pay. Single pay would put an end to that – one insurance with same rules and defined reimbursement in timely manner.

  3. Have you heard people complain that they don’t know about costs of healthcare visits? Although it doesn’t include hospital or specialist care, it allows patients to clearly understand what they will pay for services is they don’t have comprehensive insurance. And you have access to house calls – I’ve not seen that as something easily accessed at least here in MN. Maybe where you are that happens all the time.

    What does it solve for the clinic? He doesn’t have to bill, and I believe that saves him a lot of admin expenses. That way he doesn’t have to charge as much to cover billers, etc., and he passes those savings on to patients. Maybe the clinics you know don’t have to spend much on administrative staff. I think he has business!

  4. “One clinic I really love to keep tabs on because they are so innovative is Neucare Family Medicine in the middle of Kansas.”

    “NeuCare is an independent practice and does not participate with any third-party health plans.”

    “Currently, we can only accept Medicare patients whom are enrolled in Advantage (Part C) Plans,”

    “We do not participate in any Medicaid plans”

    Membership:

    under 29 – $10/mth, 30 over – $20/mth

    Family membership – $50/mth.

    + Visits: phone/web – $10, Clinic – $20 15 minutes

    House calls – $100

    Other fees. etc, etc, etc.

    Sandra, what problem does this clinic solve?

  5. Peter,

    I guess time will tell. I’m hopeful that consumers will start to figure things out, and physicians and other clinicians will start to realize that their patients will want and begin to demand more efficient and more convenient ways to meet their needs.

    One clinic I really love to keep tabs on because they are so innovative is Neucare Family Medicine in the middle of Kansas. I hope it catches on!

    http://neucare.net/NeuCare/Home.html

  6. All that from Expedia Health care? We’re not booking vacations you know.

    When your doctor orders a test(s) what medical knowledge will the patient draw on to say, “Hey Doc, I don’t need that test – you don’t know what you’re doing.”

    When you’re under anesthesia and there is a high cost complication when do you alert the surgeon?

    “many times in the UK a patient is expected to try PT before extensive testing and medication is given”

    Fair enough, who changes that, the doc or the patient? What expensive medicines can be deemed unnecessary by PT? Ever look at the cost of PT in this country? Not many Americans look to the NHS for ways to do things better – but at least it is single-pay. Maybe qet can get that too.

    Things can always be different. I just don’t see patients doing this – unless we all go cash pay. That may not make it affordable or give us better outcomes, but it sure will have us pay attention to prices – if we can pry them loose.

  7. Consumers making better decisions because they’re better informed; avoiding high cost and repetitive tests because they aren’t necessary; avoiding high cost complications because mistakes are avoided; I could go on and on but I know it will take a different mindset on the part of consumers and healthcare providers. Many of the things done in other countries could easily be implemented here. For example, many times in the UK a patient is expected to try PT before extensive testing and medication is given – with the thought that many problems are self-limiting, anyway, and a little PT doesn’t hurt. Or “bibliotherapy” as first line of treatment for depression instead of medication. Just a few thoughts. I’m surprised if you don’t see this; most I talk to say “we have to change the incentives first”. I think that’s happening – I’m hoping reading the Brill article in Time will get consumers thinking that avoiding financial ruin is worth putting a bit of energy into figuring out how to make the system work better for them and perhaps for their community as well. I recommend Eric Topol’s “The Creative Destruction of Medicine” – even if you don’t agree with everything, you at least can see that things can be different.

  8. ” I think there are ways to make it way less expensive!”

    How Sandra? What changes: risk, profits, administration, benefits, provider reimbursements?

  9. John –

    it would seem if SP is a better system, and polls show that a majority of people would favor it, then it appears the “political will” we are talking about lies in Congress and the White House – so it would further seem that changing the “political will” to that amenable to SP consists in changing Congress and the White House. Considering that both major parties are inimical to SP (as well as other things we desperately need), methinks we should be concentrating our energies on ousting them and replacing them with those who will go where we need them to. The duopoly is hopelessly in the pockets of the special interests who benefit from our dysfunctional “American” system. Those special interests are “too powerful” only if we accept that the only legislators we are allowed are the ones bought and paid for … We have other choices …

    “Political will” is a nice euphemism for “sell out of the public interest” and i think should be pointed out as such – better to change the political will than to waste so much energy tinkering with our current inherently dysfunctional private insurance system, and that is what the ACA is, for all its hype – a tinker …

  10. CJ, single payer is intriguing but I don’t think the political will is there. Insurance companies are just too powerful.

  11. It is difficult to compare and understand the details of various plans, and even harder to predict future health care needs. The ACA may offer some improvement around the edges, but a system that puts the interests of shareholders before the interests of patients is fundamentally immoral. We have to more toward an efficient, evidence-based single payor system that is aggressive about prevention if we want to solve the health care problem long term.

  12. Insurance costs are mostly based on risk. Exchanges or not, the risk of the pool is a constant. How does an insurance company offer a lower price – (1) by negotiating lower prices from providers, (2) managing their pool to have lower risk, (3) by accepting less profit, (4) by cutting benefits,

    (1) When insurance companies want to attract providers what do you think the sales pitch would be – lower reimbursements, not likely, unless you’re the only game in town.

    (2) Under the ACA they have to accept all comers and not rate pre-existing.

    (3) How do you think “less profits” will sound to their investors – especially the ones on Wall Street. Insurance now argues they only make 5% profit.

    (4) Yes, cutting benefits, that’s the main vehicle for offering a lower price. It’s the one consumers have no idea about and what their future risk and health needs will require. If they accept lower benefits they’ll have to save more to plan for their rainy health episode day – that’s not what most people do.

  13. Better to good medical than cheap one | Great post “If consumers could review and shop for health care coverage as easily as they do television sets, costs would decline and we wouldn’t have as large a health care crisis. At least that’s what some folks would lead us to believe.”

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