Yes, People Shop for Health care. But are they Good at it?

flying cadeuciiWe used to hear “no one shops for health care.” But we know that not to be true;here’s a blog post I wrote about how people are doing just that.

So, now that we know they do shop, do they do it well? That’s a good question too.

recent study from some Berkeley economists found that people on high deductible plans don’t shop well. Sarah Kliff, writing about it in Vox, says the study “shows that when faced with a higher deductible, patients did not price shop for a better deal. Instead, both healthy and sick patients simply used way less health care.”

I read the paper, by Zarek C. Brot-Goldberg, Amitabh Chandra, Benjamin R. Handel and Jonathan T. Kolstad, and had some questions and thoughts: First, the company studied has relatively well-paid workers — “employees at the firm are relatively high income (median income $125,000-$150,000),” we are told. Higher income=Less price sensitivity.

Also, we know women shop more for health care and men shop less; women make 80 to 90 percent of the health care decisions in the U.S., and they are deeply in touch with this issue, while men aren’t. I did not see a gender breakdown in the methodology. So I wonder: Men or women?

Also, we learn that workers got tools to use to assess care, but we don’t see those tools — and believe me, I have seen some terrible ones. For example, here’s a post from one of our partners, Elana Gordon at WHYY public radio in Philadelphia, about how bad one insurer’s tools were for one couple.

Also, we don’t know what kind of education on their new system the workers got, so it’s a little bit murky (though the original study is incredibly long).

The rational health care shopper

Taking up the topic again, in a recent piece titled “Patients aren’t consumers, but the fiction of the rational health care shopper continues,” my friend Trudy Lieberman puts forth an argument that people are not rational health care shoppers. I sort of agree, but disagree deeply on the causes. One big reason that people aren’t “rational” shoppers:  they don’t have information. Other reasons: 1) They’re sick and don’t want to shop. 2) They don’t expect to get robbed at the doctor’s office.

Lieberman discusses the Berkeley study in her piece, for the Center for Health Journalism at the University of Southern California Annenberg Center, then quotes me as saying our work on price transparency is good journalism and good public service. She then concludes:

“That may be, but the evidence, including the latest strong results from the Berkeley study, tells us that the focus on turning patients into shoppers has significant downsides. When people can’t distinguish between low- and high-value care or forego needed treatment because even a ‘cheap’ price is too high for the family budget, the cost of treating them may eventually be far greater. Remember, that was one of the arguments for the Affordable Care Act. But the high cost-sharing the exchange policies demand turns that premise on its head. I’m all for transparency and think Pinder’s work, as well as Steven Brill’s in Time and Elisabeth Rosenthal’s in The New York Times, goes a long way to acquaint the public about the American cost of health care. Just don’t count on 320 million people looking for the cheapest CT scan to lower the high price tag for American health care.”

I am not a Berkeley economist, and didn’t see the data or do the analysis they did, and my questions about that study persist. Also, I deeply respect and admire Trudy, and will always treasure our friendship. Her work is amazing. And I am a pig for a compliment, and so thanks, Trudy!

And yet, I have some thoughts on this piece.

Information is hard to find

From the boldfaced passages above:

1. Quality transparency is broken. People have a hard time distinguishing between high- and low-value care because the information that would help them decide what’s high and low value is hard to find. There’s some promising work being done, but it’s hard to find good, actionable information.

2. Price transparency is broken. People may skip treatment because they see the terrifyingly high sticker (Chargemaster) prices on bills.  Why are those prices so crazy high to begin with — $6,221 for an MRI? Really? Also, perhaps they don’t realize that a cash price might be lower, or they might pay a negotiated rate under their plan, not the sticker price. Also, lower-cost treatment alternatives with nearly equal merit might be available.

3. High cost-sharing is not limited to exchange policies via the Affordable Care Act: it’s rife in employer policies now too. Here’sa recent Kaiser studydetailing the rising premium cost to employees of employer-sponsored care (the employee share of premiums averages $4,955 a year for a family, almost double what it was in 2005), and the rising deductibles in employer-sponsored care (now an average of $1,077, more than triple what it was in 2006).

4. People who know prices might choose to pay less. Further, once they understand that health care pricing is random and capricious, we might see real policy change. We’re not counting on The Little Guy or Gal to be able to effectively cut through the murk, profiteering and doublespeak effectively and thus fix the health care marketplace. But we’re trying to help.

Of course, the health care experience is fraught with emotion: it’s not like shopping for a tomato or a car. People don’t want to “shop” for health care when they’re in an emergency. Truly, they don’t want to “shop” for health care at all, in my experience: they just want to get treated and get well. But increasingly, they realize that they must find information about price and quality to protect themselves.

People don’t like this, and they don’t like being in the dark. Look at this study remarking on how people want to know — and how hard they say it is to find information. (I blogged about it here.) Funded by the Robert Wood Johnson Foundation and completed by Public Agenda, the study found:

  • 56 percent of Americans have tried to find information about health care prices before getting care.
  • Most Americans seem open to looking for better-value care. The majority of Americans do not believe that higher-priced care is necessarily better quality.
  • Most Americans who have compared prices say they saved money.

Also, there’s this study about how higher prices are not necessarily better. And there’s this about high- and low- priced hospitals and links to quality.

Also, perspectives matter: if you have great health insurance with low co-pays and deductibles, and no co-insurance — and a good income and good health — you may be seeing the entire market through that prism, and may believe that others don’t shop. But they do shop, and often quite well — when they have the tools to do so.

MRI - Lower Back

An inexpensive MRI.

What you will see is that some people bought that MRI for $475, or $575, or $580, while others paid much more (see screenshots at right).

One insured person was charged $2,885; insurance paid $944.97, and the individual paid $1,940.03.

Some places charge $6,221 for that MRI.

Here’s our KPCC partnership page; here’s our WHYY partnership page.

Pricey MRI

A pricey MRI.

MRI charge: $580.“I was told procedure would be 1850. I have a 7500 deductaible. So I talked to the office mgr who said if I paid upfront and agreed not to report the procedure to Blue Cross, that it would be $580″

MRI charge: $3,163. “High deductible so paid the whole thing and then found out I could have had it done for *HALF* the price only blocks away. My first foray into individual insurance and it sucked. Need to shop around assuming can even get a price quote.”

Then there was the woman who called ClearHealthCosts from Missouri to say her husband was unemployed and she was off work on disability, but could go back if she showed an MRI — but she would have to pay herself. How might she shop for an MRI? she asked.

A woman from New Jersey called with a similar question — this time, though, there was a baby crying in the background.

A really pricey MRI

A really pricey MRI.

Rising deductibles

People are paying more for health care in rising deductibles and co-insurance, but this phenomenon is not limited to Affordable Care Act plans: It is seen throughout the entire marketplace.

This was not caused by the A.C.A. The high deductibles and co-insurance are a function of the way our marketplace works. It keeps people in the dark about price charged, price paid, quality, outcomes, malfeasance and the like.

The system of third-party payers (insurance companies and government payers), plus the presence of employers buying insurance for employees, makes it even messier.

Also, the presence in this marketplace of for-profit companies is a driver of prices. For-profit companies need to maximize profits.

Here’s one way of thinking about it: Goldman Sachs is investing in health care. Goldman Sachs is here for the money. If there’s more for Goldman, there’s less for you. In this context, I hasten to add that nonprofit status does not confer saintlihood, especially not in this marketplace.

On quality metrics: The responsibility for making quality assessments clear falls on the providers or on regulators, not on the patients.

Yes, it’s hard, but it must be done. You have never lived until you’ve seen a bunch of radiologists arguing over what makes a good MRI. Imagine that for every procedure, every pill.

But if people can’t find this information because the radiologists (or other specialists or industry players or regulators) cannot agree, or make this a low priority, or decide not to publicize information, are patients responsible?

A path forward

If we want people to shop well for health care, we should ask ourselves what kind of tools they need.

If we give people good and workable tools for discerning price and quality, they will be better able to perform this work. That’s the problem we’re trying to solve here at ClearHealthCosts.com. We’re not seeking wholesale reform of the system, though that might be a laudable goal: We just don’t think that’s in the cards right now, and that’s not where we’re putting our energy.

Here are some suggestions: Make all the information public and easily usable, all the time.

On prices: Make public all Chargemaster rates, private-payer reimbursement rates, Medicare reimbursement rates, and cash rates, all the time.

On quality: Make public all performance data, outcomes, frequency of procedures, disciplinary actions, payoffs to providers and similar data, all the time. (Hats off to ProPublica, for example, for working to find this data and make it usable, as well as the Leapfrog Group, U.S. News and World Report, Consumer Reports and all the others who are working this problem.)

And listen to people. Here’s a note from our mailbox:

“I just want to say that your website is amazing “Please don‘t stop because you are helping people everyday, many of whom are struggling to make ends meet while others are just looking for a some transparency in a market where there has traditionally been very little.

“Thanks again,


Jeanne Pinder, is the founder and CEO of ClearHealthCosts.

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16 replies »

  1. I agree with your view Jeanne. First consumer should decide what kind of tools they needed.

  2. Good points. Jeanne. but we need tougher laws to protect consumers against price gouging.
    I favor the creation of arbitration panels in every state, where a consumer (for no charge) could bring in complaints of price gouging.

    The arbritrators would have authority to reduce or even cancel outrageous charges.
    The board’s action would also be public record, which would be catnip for journalists.

    Doctors and hospitals would soon dread these arbitrations, both for cost and damage to reputation, and would clean up their act.

    Hospitals would take a big hit, as they rely to some extent on overpriced outpatient treatments for solvency. That is their problem!

  3. OK….I read the two links that summarize the UC Berkeley study and I read the abstract of the study at Nat. Bur. Econ. Research. Here is a quote from the abstract:

    “Consumers reduce quantities across the spectrum of health care services, including potentially valuable care (e.g. preventive services) and potentially wasteful care (e.g. imaging services).” Note the “potentially valuable”.

    My conclusion is: the high deductible plans do a great job of reducing health care expenditures and there is no evidence of a net decline in health status of patients who reduce their consumption.

    Most medical journalists and the Berkeley economists are quick to assume the reduced consumption will lead to harm for patients….but this has not been shown.

    Medical journalism and medical research are sadly not doing a good job. As Nortin Hadler M.D (UNC) has pointed out: “For many clinical interventions, the science fails to demonstrate any efficacy.(Citizen Patient page 214).

  4. Jeanne,
    As you know, there is a lot of noise due to methodology in most studies….so I admit I did not dive deeply into your links. Did you think the study looked at whether the reduced utilization was due to not having “good” vs. “bad” procedures…..it would be impressive if it tried to tackle this issue.
    Also, just getting familiar with your site and tools……great stuff.

  5. Sorry for delay,

    In my state, its 100% (ok, 99.9999%) of PCP’s who take Medicaid. Thus, the ONLY reason for people to use the ER for the standard “headache,” or “runny nose,” or “my child has a fever [of 100.2]” is that the ER is avail 24/7. Often times the patients even report “I called my doctor but he couldn’t see me till tomorrow.”

    In my state, we also have a bogus “managed care application” for a large % of our Medicaid population. Still they pour into the ED for non-urgent, non-even-remotely-urgent issues like toothaches, back pain, etc.

  6. Yes on overconsumption! I think the point in this article was that people did less of the good kind of care, as well as the bad.

  7. Hey Dr. Palmer, this is really interesting. What is “charged what we needed,” exactly? If it’s not based on costs, then what is it based on?

  8. I sat on the Board of my hospital for awhile. We charged what we needed. Costs had almost nothing to do with it. The entire system continues to be a disgrace, yet we know how to bring down prices: monopsony purchasing; shopping with competition; command economy. Pick one.

  9. Re: “Sarah Kliff, writing about it in Vox, says the study “shows that when faced with a higher deductible, patients did not price shop for a better deal. Instead, both healthy and sick patients simply used way less health care.”

    Using less health care IS evidence of shopping wisely…..informed observers and independent think tanks (Rand) all estimate over consumption of health care ranges from 30% up to 50%,

  10. Here is some research by the Kaiser Foundation on ACA in the new JAMA.
    I am actually surprised at the results. http://jama.jamanetwork.com/article.aspx?articleid=2470432
    The ACA mandated increased payments for physicians under Medicaid for 2 years 13-15 I believe, but those are now expired, see this article in USA today:
    I don’t do Primary Care, but I would say if you add up the documentation hassles and the lower pay, it would be surprising if doctors continued to take many new Medicaid patients.

  11. Good question. Around here, there are reportedly not many, though that is received wisdom and not something we’ve researched carefully. Do you know of any good statistics on this?

  12. There’s a wide range of user experiences in the IT for the exchanges, both at healthcare.gov and the states. In fact, mediocre IT is a hallmark of a lot of the health world. In other words, it’s not always how comfortable people are in shopping, but what kind of tools we give them!

  13. Unrelated but relevant —

    What do the current problems the insurance exchanges are experiencing tell us about how comfortable people are shopping for healthcare related things online?

  14. “It’s called Medicaid and it is a free credit card to use the (uber-expensive) ER as a walk-in clinic 24/7.”

    I’d have to ask, what is the availability of PCPs who take Medicaid?

  15. Nice blog, on an important issue. But you forgot the 70 Million people in the United States don’t care how much health care costs, because they are not paying one single penny for it.

    It’s called Medicaid and it is a free credit card to use the (uber-expensive) ER as a walk-in clinic 24/7. The taxpayers foot the bill. I might be able to “shop around” and find the most inexpensive MRI for me (since I have a $7500 deductible), but who am I supposed to see about negotiating the costs of providing free care to 1 out of every 4 people in my state?