Price Transparency and All Its Very Large Warts

Transparency – including price, quality, and effectiveness of medical services is a vital component to lowering costs and improving outcomes.  However, it is imperative transparency go hand-in-hand with financial incentives for patients and consumers; otherwise the quest will be in vain.  The single best way of reducing costs while not worsening health outcomes is to redistribute resources from less cost-effective health services to more cost-effective ones.  Americans are extremely uncomfortable with the idea of making decisions based on cost but we must become fluent in the language of cost and more comfortable making decisions based on price information for healthcare expenditures to stabilize. 

Legislators in more than 30 states have proposed legislation to promote price transparency, with most efforts focused around publishing average or median prices for hospital services. Some states already have price transparency policies in place. California requires hospitals to give patients cost estimates for the 25 most common outpatient procedures. Texas requires providers to disclose price information to patients upon request. Ohio passed price transparency legislation last year; however a lawsuit filed by the Ohio Hospital Association has delayed implementation.  The cost of a knee replacement is $15,500 at the Surgery Center of Oklahoma, whereas the national average is $49,500

Trends suggest in the future Americans will be more price-sensitive when seeking care as high-deductible insurance plans become commonplace coupled with greater cost-sharing.  For consumers, paying less out-of-pocket costs could be a powerful motivator.   According to an article in Health Affairs, price transparency has helped reduce costs in the long run.  Another study found consumer-driven health plans led to lower use of name-brand medications, less inpatient care, and lower use of specialists. 

Comprehensive transparency is only relevant if packaged in a reliable comparative context.  Information regarding cost, value, and effectiveness should be readily accessible to patients enabling them to make meaningful comparisons across providers and specialists. However, choices must be incentivized properly, so they are not only empowered but also motivated to use the information to make informed choices.

A benign, viral skin infection known as molluscum contagiosum (MC) provides a simple case for transparency because there are a vast number of ways to successfully treat these wart-like bumps (called mollusca.)  They can occur extensively on the face and genitalia, are contagious, and may cause itching or tenderness, yet are not harmful.  Looking at four different treatment modalities can illustrate where transparency, for cost, value, and efficacy might make a difference.  It illustrates perfectly how health insurance can incentivize incorrectly resulting in higher expenditures with no difference in outcome. Molluscum can be treated by application of topical cantharidin or liquid nitrogen, oral cimetidine, surgical curettage, or no medical intervention.  The efficacy of each is roughly equivalent in that the benign lesions eventually resolve. Lesions can last two weeks to four years –the average being two years without treatment.

On average, children have about 15-30 lesions by the time a family seeks treatment.  Liquid nitrogen costs $50 per patient for supplies; Cantharidin, an extraction from blister beetles, is a topical vesicant that costs about $100.  There are two CPT codes for lesion destruction in the physicians’ office:  17110 ($113.75) and 17111 ($134.69.)  A follow-up treatment is usually necessary one time after 3-6 weeks at which point lesions resolve. Total expenditure is approximately $500.  Most insurance plans do not cover this procedure so cost is borne by the patient out-of-pocket. 

Oral Cimetidine is a controversial treatment, because efficacy is somewhat lower compared to topical or surgical methods, but has held up well enough in studies to remain a viable, painless treatment option.  Time to cure is 2-3 months.  Including the physician visit of 9921X x 3 plus the prescription for 3 months ($16/mo), we are looking at a total cost to resolution of approximately $300-$450, with a 20-25% failure rate.  Insurance covers cost of office visit and medication except for applicable co-payments, so out-of-pocket could be as little as $100.  There may be medication side effects and parents must remember to give their children medication twice per day for 3 months, increasing the “nuisance factor” (lowering “value” for some.) 

Some physicians incise and drain each bump individually as the core contains infected cells and if they are surgically removed, the body can “do the rest” to fight the infection.  Lesions often reappear 6 weeks later (as with topical methods) because they represent areas already infected at the first visit but too small to be seen, so a second round of treatment is necessary.  Cost estimates are in the ballpark of $1K-2K per treatment, as cost information was difficult to find.  Total cost to cure is $2000-4000.  Surgical intervention is partly covered by insurance with out-of-pocket costs in the $500 range, though this is an educated guess.

Finally, no medical intervention is safe, low in cost, and efficacious.  However, watchful waiting can be challenging for parents when there are multiple children at home with one contagious infected child during the two year time period until the lesions completely resolve.  Cost of one physician visit for diagnosis: $125.  Cost for google to diagnose: $0.

As an insurance company executive, I would incentivize topical therapy for treatment of molluscum resulting in lower expenditures and less need for specialty care.  Most private insurance companies do not cover codes 17110 or 17111, instead kicking the entire balance to the patient.  Unfortunately, they incentivize the less efficacious oral medication or partially subsidize surgical curettage.  In plain, straightforward language: this is utterly stupid.  If patients are not financially incentivized to choose the lowest cost, most effective option then efforts toward transparency are a waste of time as healthcare expenditures will not decline. 

Not every condition can be easily evaluated as I have done above (though many can.) Redistributing resources from less cost-effective health services to those that are more cost-effective is a winning strategy for patients, physicians, and insurance.  Individual physicians and hospitals should post prices for general well and sick visits (including applicable facility fees), basic procedures, and other services offered whenever feasible, because it is the right move to empower patients to make informed decisions.  Finally, insurance companies should financially incentivize patients to choose the lower cost, equally efficacious treatment methods if they want transparency of cost, quality, and efficacy to have a large impact on driving down expenditures.     

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52 replies »

  1. “The individual health insurance market for U.S. style hospital/doctor care in Canada is non-existent.”

    Of course U.S. style hospital/doctor care in Canada is non-existent. It’s non existent all over the world and German type care is non-existent in France. The type of knowledge you bring to the table isn’t very helpful.

    After the Chaoulli v Quebec decision the Quebec government was considering passing laws to make sure that any doctor practicing private medicine had to put in a certain number of hours into the public program. What or how it happened is something I never followed and simply say I don’t know for sure. You on the other hand make all sorts of claims based upon rumor and what you want to believe. I think we call those things Peterisms.

    You have changed the conversation because it is a fact that market-based care leads to transparency and the Oklahoma Clinic demonstrated that point since Canadians knowing the price are travellling there for surgery.

  2. “I can’t be sure either, but they carry insurance for health related items such as dental and things not covered by their national insurance.”

    Yes, dental outside of a hospital is not covered by Canadian Medicare, neither are drugs, but drugs prices are government controlled. Most dental coverage is through the employer.

    The individual health insurance market for U.S. style hospital/doctor care in Canada is non-existent. If it existed you’d be able to find data. Trying to get me (or anyone else) to prove a negative is impossible – you should know that.

  3. Take them. I took my family to both Disneyland and Disneyworld (Orlando) numerous times and it was wonderful though we like the Orlando park much better than the California park. The downside is that the costs involved are like a high medical bill. I think around 20 million visit Disnyeworld alone and they aren’t all rich. Somehow people save money in order to go.

  4. Niran, wouldn’t you say that paying the insurer directly (not ESI) and choosing one’s own insurance would have a similar effect to paying cash? Wouldn’t it also be true that subsidies entering from outside the insurance premiums of others mingled with one’s own cash would also have a similar effect?

    If patients could choose and pay for their own insurance I believe most would choose high deductible insurance with less mandates and be more interested in keeping the costs to the insurer down. It is not the fault of the insurer that costs are so high. That is in great part to third parties paying too many bills.

  5. Peter, you don’t know whether some Canadians carry private insurance or not. If you actually know then provide proof because it is tiring dealing with your fantasies. I can’t be sure either, but they carry insurance for health related items such as dental and things not covered by their national insurance. They may or may not have riders attached that can insure them for private healthcare. Addtionally the distance for many Canadians is relatively short to a major American hospital and a tremendous number of Canadians cross the border for healthcare.

    I am not interested in discussing Canadian healthcare. That is their problem and if they are happy with it then that is fine with me. My major reason for bringing up Canada was to provide an example of “Price Transparancy” the topic presently being dealt with. When there is a freemarket place price transparancy quickly develops. Take note how the hospitals catering to Canadian cash are transparant to Candians, but apparently not so much to Americans that have insurance.

  6. Paying cash can be one good option. It is not necessarily a widespread solution for health care, but it does add an element of choice. In and of itself, cash medical care will not drive prices down, however if patients become more savvy consumers of healthcare, paying more attention when they have deductibles in excess of 25K, then they will choose “options” and if enough independent practices, surgical centers, etc… come to life well then prices may have to come down. This is post number 2 of a four pronged solution to help bring prices down, I just want to remind all those reading to keep this one small piece in perspective.

  7. Niran, you compare two situations where the only way to get Tricare in-patient care (knee replacement) is to travel. Why would you travel to OK for $15K when you could travel to a Tricare facility to get fully reimbursed?

    If you read the OK price sheet, it leaves open complications and extended care charges. For people with little resources this is not an option.

    I did travel to India for hip surgery when I was uninsured. Total cost $10k, included airfare, hotel, hospital, doctor (very qualified). But I had substantial resources to cover this as well as any unforeseen problems. As well I was retired and did not need time off from work.

    Paying cash can be good, but it’s not a widespread solution for health care and will not drive prices down.

  8. You are correct Barry. Here in NC there are very strict income/asset limits. Medicaid tends to be for mothers and children and is for the poorest of the poor. Can’t say that some aren’t gaming the system, but hell, Trump doesn’t pay taxes by gaming the system and all his supporters look up to him.

    For the most part there are no “welfare queens”.

    Niran, if you have concerns about Medicaid abuse then I’d suggest you report it to HHS.

  9. Allan, if you actually do additional research on that decision (only applies in PQ) where it allowed people to buy separate, non-government insurance, you’ll find that no one purchased private health insurance after the decision. I guess most people in PQ are happy with the their government insurance and it’s cost.

    Still not sure how this relates to cost control and price transparency in the U.S.

  10. Just to clarify, I consider the CHIP program to be very different from Medicaid. CHIP has much higher income eligibility limits, doesn’t take assets into account for determining eligibility and premiums vary based on both income and the number of children to be covered. So, even if reimbursement rates are the same as Medicaid, it’s not the same program at all. Medicaid is for poor people and CHIP includes lots of middle class people. Children covered under the CHIP should not be viewed as Medicaid patients in this context, in my opinion.

  11. Niran, I thought Medicaid was for people with a poverty level income and minimal assets. How can they afford to have a home, multiple cars and take a family of five to Disneyland? Are they making a substantial income in the cash / underground economy? Are they gaming the system and cheating taxpayers? Just wondering.

  12. Steve – you are only including one type of cost in your calculation. The 15K in Oklahoma includes physician, equipment, aftercare and is the entire thing all bundled together. Believe me, it is an outstanding deal.

  13. Chaoulli v Quebec

    The judge in that case called the delay in treatment unconscionable and not following the Constitution.

    “delays in treatment that adversely affect the citizen’s security of the person. Where a law adversely affects life, liberty or security of the person, it must conform to the principles of fundamental justice.”

  14. #1) I don’t know enough about the Oklahoma Clinic. Will Medicare reimburse the patient equally for their services, both professional and the center, as they would to those that are participating in Medicare? That is a question I would like to know the answer to. However, I do know what happens if a Medicare patient and a physician not opted out of the program try to contract with one another. It is illegal even if the physician and patient have a written cash contract where no bills will be subitted to Medicare.

    That means a physician who didn’t want to take new Medicare patients, but wanted to continue treating his old patients under Medicare could not charge cash to willing new purchasers of his services without Medicare paying a dime.

    There are loads of ways the government prevents true marketplace competition.

    #2) Your response didn’t seem to mean very much.

    #3) AS usual your mind strays. I wasn’t discussing the new bill. If someone was drowning in the ocean and Trump walked on water saving the man’s life you would argue that Trump couldn’t swim.

  15. You know they could ask to negotiate for a 99214 charge with me. However, nowadays, I am literally overwhelmed and drowning with patients (7 new ones called today.) If I have a line out the door of people wanting to pay $155 for a 99214, then I would turn away someone asking to pay say much less unless it was direct pay and not involving insurance. If cash pay, I can discount that considerably. I had an adult patient the other day haggling not to pay their copay (an insurance contract requirement), I advised them I could not see them and they would need to go to urgent care. They came here and paid the co pay. They could absolutely have chosen to go somewhere else… oh, but where I am the “somewhere else” is rapidly disappearing…

  16. Actually, there is a private system in Canada and many people pay out of pocket rather than wait for public clinic to have space. The prices tend to be transparent.

  17. Why thank you. Many of my patients (including most on Medicaid) indeed do have multiple cars, a home, and take great vacations. One told me today they are taking their 3 children to Disneyland next week. I still haven’t taken my own children.

  18. Good memory Peter. So let’s talk about my Tricare. I am responsible for 20% of the entire bill after paying a 3K deductible if I seek care outside of the local military system. There is no system here as it recently closed, only outpatient clinics.

    15K or 49K for my hypothetical knee replacement. Now, remember, 49K does not necessarily cover the after care, facility fee’s etc… that number is just the basic charges for physicians, anesthesia and other medical supplies.
    49K = 3K deductible + 9900 = 12K
    15k= 15k out of pocket for before care, after care, no added facility fee.

    The average facility fee is based upon “rental time” + other supplies/equipment etc based on this http://www.healthline.com/health/total-knee-replacement-surgery/understanding-costs#6. Add – on costs total another $13K, for which I am responsible for 20%. = $2600.

    So, really, either way I am paying about 15K for a knee replacement unless I have medicare. Now all that means there are no “hidden” charges at the hospital, so that number could vary.

    I will say again, the bundled price with no hidden charges is financially and probably medically better going with Surgery Center of Ok. Correct, I am not mentioning travel, but I am hoping more Surgery Centers spring up all around America and travel becomes less costly to go to an outpatient center like that one.

  19. Peter, in no way do I have the “solution” for runaway health care costs. If someone did, they would have done it by now. What I do have and what I believe the readers appreciate is “real-world, boots on the ground” experience. I am in my clinic every day, fighting for my patients, my own survival, and that of medicine as a profession.
    If one has a deductible that is now >$15000, then you are committed to that amount regardless, so instead of having to pay $18000 (random average deductible of patients in my clinic today), you would save 3k paying to go to Oklahoma. Furthermore, some insurances would negotiate and pay a portion depending on your situation. It is practical for people, just like buying a home is practical for some and not for others.
    I care about my patients and people in general (which should be obvious already.) I understand people do not have 15K socked away for a rainy day, well what do you think happens when a self-employed business person has a deductible of that size? Same darn thing.

  20. “Unfortunately government prevents that from occurring and government prevents true marketplace competition.”

    How is the government not allowing cash pay private providers like the one in Oklahoma?

    “but take note the knee replacement was the most expensive surgery listed for the knee.”

    Well yes, if you need a knee replacement.

    “Lowering costs in the U.S. is all about reducing access and coverage and using high deductibles to shift cost. ”
    “You don’t know what you are talking about.”

    So the Republican plan just introduced gives us better coverage at lower cost and more affordable deductibles?

    Tell that to the CBO.

  21. “ There is no need for price transparency in Canada ”

    I wasn’t discussing price transparency in Canada. I was in part discussing the effect of price transparency in America. You didn’t seem to understand what Niran was saying which led to my first reply to you. Now you are missing the point once again.

    “If you think Oklahoma cash prices are suppressing the rest of U.S. prices then you’re delusional.”

    I think cash based practices informs us of things we seem to have lost track of. Can others do the same, yes. Unfortunately government prevents that from occurring and government prevents true marketplace competition.

    “You’re quote for Obamacare policies are without the subsidy”

    I was talking about max out of pocket exclusive of the premium and you are talking about premiums

    So what? My point was that patients have to pay this price without subsidies and their tax dollars are reducing their disposable income. I am not comparing Oklahoma to coverage, but take note the knee replacement was the most expensive surgery listed for the knee. I’m not advocating that people carry no insurance. I carry a lot of insurance and advise people to carry it as well, but the ACA is ridiculous insurance that impoverishes the recipients and the nation.

    “Lowering costs in the U.S. is all about reducing access and coverage and using high deductibles to shift cost. ”

    You don’t know what you are talking about. You are an ideologue that is in above his head.

  22. There is no need for price transparency in Canada because patients don’t pay the bill or get co-pays and deductibles – the cost is government controlled. Why would you need transparency for a free service. If you mean US medical services post prices for Canadians, well only about 1% of Canadians go out of the country for medical care, not all of it necessary, and not all of it to the U.S. – but that comes at a steep price. Of course they’re going to pay cash, no other method. There are some private medical services in Canada that work outside of Medicare, but that’s not what is keeping Canadian prices lower.

    If you think Oklahoma cash prices are suppressing the rest of U.S. prices then you’re delusional.

    You’re quote for Obamacare policies are without the subsidy and the policies include no pre-exist, no max coverage, preventive care, etc, they are good policies – not stripped down faux insurance. Obamacare does not demand you buy from an Obamacare insurance exchange, only that you’re covered, if people could get coverage cheaper than Obamacare they could buy from anyone. Why would all of those people have signed up for Obamacare if they were paying more than what they would pay anywhere else. Why were signups at a record level this year if it’s such a bad deal.

    Lowering costs in the U.S. is all about reducing access and coverage and using high deductibles to shift cost. That’s what’s in the Repugs plan – lower coverage and access. You don’t understand the math either.

    But Trump says, “no one will loose coverage, he’ll give us better coverage, cheaper coverage and “insurance for everybody”, even honest Repugs say that can’t be done.

  23. Peter, stop being so ignorant. The topic was and discussion involves “Price Transparency”. There is a whole industry in Canada that is making some American medicine price transparent for Canadians. I feel confident that some of Niran’s patients have cars or homes or both.

    In many cases the car is more necessary for the family than the knee surgery which though disabling doesn’t prevent a worker from getting to his job.

    This type of clinic induces others to try and copy it and even in the future possibly compete on prices. My bet is that the one’s that founded the clinic are making a ton of money.

    You don’t even bother to look at the amount people pay for Obamacare. Let me help you. A family’s maximum out of pocket expenses are $14,300 and that doesn’t include the premium or out of pocket expenses.

    Open your mind up and recognize you don’t have the slightest idea of how to lower costs while maintaining access and quality.

  24. As usual Allan you’re missing the point, I didn’t think we were discussing Canada.

    Ask Niran how many of her low(er) income patients can come up with the $15,000 plus travel plus possible other medical costs just to get a lower cost. Niran stated she needs her Tricare to afford medical coverage.

    This is not the way to lower costs. Buying a car is not requiring knee surgery, the analogy is just stupid.

  25. That leads to the nature of factoring. People sell their debt for immediate cash. That of course can lead to a slightly higher price, but guaranteed payment. Dentists do this quite frequently and so do some physician groups. Of course the patient can do this as well, but you seem to want to put all the responsibility onto the physician so he doesn’t have enough time to do his job.

    (See John Irvine’s reply to you.)

  26. Barry, how much stress occurs during knee surgery? How much stress occurs while playing racketball? Should racketball only be played in a hospital?

  27. If the true cost of a knee replacement in various areas of the country is $5,000 with good quality and not averaged in with those that didn’t pay their bills, then that is one proof that the present run government system for insurance and care has totally failed and we need to move to a freer marketplace.

  28. Get real. The knee replacement was the most expensive knee surgery on their list. Try and get a knee replacement in Britain and then consider Canada which I believe was where a lot of their patients came from.

    Then consider that this price, I believe, is lower than Medicare’s pricing. This is a private ongoing facility run by physicians with an exceptionally low infection rate. Compare their cost and quality to our government’s VA hospitals.

    How do people buy cars and homes? People save, take out loans and ask for help from family members. Where knee surgery is concerned there is plenty of time to raise the funds for many.

    Canadians are doing it in Oklahoma and a lot of Canadians go to Florida. Cash flows into America. It’s like exporting products except the service is done here and the finished product goes home.


  29. Can you share with us how your network managed price transparency. What is the make up of physicians?

    It’s good to hear real efforts.

  30. I don’t negotiate prices with supermarkets or department stores, etc. I either accept the transparent price for an item I’m interested in buying or I don’t. Maybe I go somewhere else where it’s cheaper or I pass on it altogether. Patients aren’t going to negotiate with a PCP over a posted price for a 99214 but they may ask for a payment plan if they’re in financial difficulty. Your billing person should be able to work that out.

  31. Steve 2 – My question for you is that if all the well insured and low risk surgical procedures took place in ASC’s and the hospitals only got the more complex cases and the poorly insured, would that be better for healthcare system costs at the end of the day or not? Covering the uninsured and maybe having Medicaid reimburse closer to costs are both separate issues.

    I note that shortly after World War 2, the U.S. had about 10 inpatient hospital beds per 1,000 of population. The last number I saw was approximately 2.9 and the long term secular trend is down. If we can continue to close or at least downsize unneeded hospital capacity, it should be a good thing. Shouldn’t it?

    On the other hand, as I understand it, in France, most births take place in low cost birthing centers. They have a procedure room in case the patient needs a Cesarean. However, if there are significant complications and the baby needs to be in a NICU, transport to a hospital is required. During that process, things can go south pretty quickly.

    So, if the same issue is present with ASC’s, the fundamental question boils down to cost vs. patient safety. Presumably, if patient safety risk is well within tolerable limits, the more care that can be provided outside of a hospital setting, especially a hospital inpatient setting, the better.

  32. I do agree with John it might not be practical to discuss it multiple times per day, however this is the benefit of posting prices, as I suggested in the post. Transparent. Clear. Obvious. Easy. Accessible.

  33. Actually, Barry it is interesting that the State of Oklahoma is willing to reimburse their employees 100% of the cash price if they are operated on by the Surgery Center because even they, as a large employer, realize the potential savings. They are engaging in reference pricing. Other large employers within geographic proximity, though not necessarily in the State, are catching on as well with 100% reimbursement.

  34. I don’t think the decision is up to one individual. If one has a close relationship with their PCP then they can discuss options, cost, risk, benefit etc. in an open way. It is up to the patient but with reference pricing, we could direct them to the lowest cost, yet most effective treatment.
    I would indeed go to Oklahoma for knee surgery. Obviously, the goal is that this free market approach catches on and their would be a regional center replicating this in various places across the country.
    I have never had anyone suggest “there is a catch” when I talk to them about treatments and prices, but I suppose some feel that way.
    I also agree with Barry that if you solve the cost of hospital care you solve much; however what is really important is to pay attention to how much of hospital care is actually “necessary.”

  35. Most preventive services are minimal in leading to significant benefit. Interestingly enough, GEHA (federal insurance plan) has not been paying immunization charges in children for more than 8 months, kicking charge to patient responsibility. Families were upset with me until I showed them what is happening. GEHA hasn’t fixed the “glitch” (surprise, surprise) yet people still come in for immunizations.

  36. Change is hard for people. I have plenty of patients who are very discerning consumers. Maybe I am biased, and spend time talking about the importance of knowing cost before diving in?

  37. My point exactly except children do not lend themselves to that as easily. Even with restraint, it is hard to nail the ones on their face perfectly. However, your point is spot on. I didn’t realize insurance actually pays for surgical treatment.

  38. You are correct Barry that hospital based care is the most expensive and least price transparent by nature. However, we must start somewhere, no? There are excellent laws throughout the country trying to get hospitals to engage in price transparency… we need patients to demand it.

  39. Steve: Why would you be negotiating a price every time a procedure is done?

    Why shouldn’t you be responsible for your prices just like everyone else?

    Why should you be guaranteed payment?

  40. The biggest single cost problem by far in healthcare, in my opinion, is hospital based care. I’m becoming more supportive of Maryland’s all payer system for hospital based care. Academic medical centers like Johns Hopkins will still be paid more than local community hospitals for a given service, test or procedure and community hospitals in the Baltimore-Washington D.C. corridor will be paid more than community hospitals in Western MD where costs are lower. However, in a given hospital, every patient will be billed the same for a given service, test or procedure including Medicare and Medicaid patients thanks to waivers that were granted when MD’s all payer system was implemented in the late 1970’s.

    There are two key benefits to the all payer approach. The first is that every patient, including the uninsured, is treated the same when it comes to billing so nobody is gouged or otherwise treated unfairly. The second is that it eliminates the need for confidentiality agreements between insurers and hospitals because no payer is paying a given hospital more than any other payer for a given service, test or procedure. It will likely still be less expensive to get imaging at an independent imaging center or a low risk surgical procedure at an ASC but at least price transparency should be far easier to implement with the confidentiality issue eliminated.

    It would probably be difficult if not impossible to provide the Medicare and Medicaid waivers that Maryland received in the late 1970’s because each of those programs would have to pay more than they do now so private insurers could pay less. However, it seems that it should at least be possible to create an all payer system for private insurers for their non-Medicare Advantage and non-Medicaid managed care patients and for the uninsured. In NJ, hospitals cannot charge uninsured patients who make less than 500% of the FPL income more than 115% of Medicare. The cap should probably not exceed 125% of Medicare even for the wealthy unless they freely agree to pay more than that before services are rendered.

    Since Medicare rates are already in the public domain, perhaps CMS could contract out the development of an app that could provide patients with Medicare reimbursement rates for each provider within a zip code, at least for hospitals, ASC’s and imaging centers. That would at least give patients a benchmark zone of reasonableness number that bears a relationship to the cost of providing the care.

    Whether the value is commensurate with the care or not is a separate issue. We already have apps like GoodRx for drug pricing which are very helpful to patients. Several years ago, I called five pharmacies in my local area to get the cash retail price for five drugs that I took at the time. In one instance, the local supermarket pharmacy charged $550 for a 90 day supply of Simvastatin while Costco charged $10, a 55 fold difference!! It’s quite informative to look up the price for drugs advertised on TV. Try it for Humira, for example.

  41. I think John is broadly correct here. Some people like the idea of markets working and patients negotiating prices on every procedure. Every time I see that idea proposed I wonder where we get the time to spend an extra 5-10 minutes negotiating.

  42. He is comparing the COST of knee surgery at the Oklahoma Surgery Center to the average national CHARGE. Most physicians, indeed most people who write on health care understand the difference. If you look at actual costs, they vary highly. In NYC the COST variety is from about $11,000-$18,000. In many areas of the country the COST varies from about $5000-$11,000. The COST at the Oklahoma Center is not that great a deal.

    It is my understanding that the Oklahoma Center screens out sick patients. That is what the orthopedic groups here do. They open surgicenters and take care of the patients with good insurance and the healthy ones on Medicare. Sicker patients go to the hospital for surgery. If a patient has a medical complication they send them to the hospital. For that matter, if they have surgical complications they go to the hospital also.


  43. Barry,

    The doctor is supposed to have an app on their phone that magically solves all of their problems? That conversation is a 5 minute process, minimum. Ten to 15 more times than not. You want them to repeat that fifteen times a day? While the patient in the next room is calling out for somebody to see them?

    Somebody is smoking something.

  44. It’s hard to imagine anything more overwrought than American medicine. These mollusca are as difficult to remove as a blackhead. Take a pin, open the skin a bit over the lesion, and squeeze them out. Voila! they are gone. Sure…a little blood and a little pain. Ascend to adulthood. No cost. No time. Rinse and repeat if a few return.

  45. Peter,
    Glad you read the study. A couple of points:
    1. From Rand: “The HIE found that modest cost-sharing cut costs by reducing consumer use of health care and in most cases, did not lead to worse health outcomes.”
    2. Many high deductible plans fully cover preventive care with no deductible….and if data shows enrollees are skipping value added prevention it would be simple to design incentives to correct this.
    3. On balance most of standard preventive care recommendations lead to zero benefit and even harm. Nortin Hadler is excellent in analyzing this area, though there are others.

  46. Yes Paul, we need to read the whole study, not just your cherry picked conclusion.

    “”But we also found concerning reductions in use of preventive care. This suggests people are cutting both necessary and unnecessary care.”

    Was the cut because of care/no care or same care with lower cost provider. With your plan Paul, do you shop low cost?

  47. Agree completely. Here is an important and large study that confirms what you say. It baffles me that this study seldom gets acknowledged in THCB land.
    Rand Corporation: “Studying more than 800,000 families from across the United States, researchers found that when people shifted into health insurance plans with high deductibles, their health spending dropped an average of 14 percent when compared to families in health plans with lower deductibles.”
    Here is the link:

  48. One of the catches of the Oklahoma surgery center, as I understand it, is that it doesn’t take any insurance. They demand payment up front by cash, check or credit card. I suppose you can submit a claim to your insurance and see what it will pay, if anything, as it’s out of network by definition. I also wonder how many high risk patients they accept even if those patients can pay without insurance. Then, as Peter notes, there is the problem and cost of getting to Oklahoma and back home again.

    At the same time, reference pricing is a reasonable idea for surgical procedures because those lend themselves well to the concept. It needs to be accompanied, though, by credible risk-adjusted outcomes data so patients are not unknowingly sacrificing quality for price / cost.

  49. So who’s responsibility is it to use effective low cost methods – the doctor with the medical training and experience to understand all implications, or the patient who just sees the cost?

    Niran, would you go to Oklahoma for knee surgery? How are patients with limited resources to get to Oklahoma? What about, “You can keep your doctor”, because patients shop their perception of competent doctors before they shop price.

    What is the first reaction by a patient who sees a cost of half – is it not; “What’s the catch”?

    I agree with Barry, solve the cost of hospital care and you solve most of the high cost of health care.

  50. I don’t think it’s very hard for a primary care doctor to be aware of the cost of anything that he or she can do in the office and there are phone apps now like GoodRx that can tell both doctors and patients the full retail price of drugs at local drug stores. Patients can consult their insurer’s drug formulary to see what tier any specific drug is on to determine the patient’s copay, if any. Doctors can communicate treatment options and the probable cost of each.

    Both non-emergency imaging and lab tests lend themselves well to price transparency because they are precisely describable and there are CPT-4 billing codes for each of them.

    The big problem is with hospital based care. Much of it is not shopable including all care that must be delivered under emergency conditions. Significant diagnostic testing may be necessary just to diagnose the patient’s problem(s) and then determine a course of treatment. There needs to be special rules around how much can be charged for this category of care. My own suggestion is a maximum of 125% of Medicare.

    Hospital based care and ASC based care such as surgical procedures, cancer treatment, colonoscopies, endoscopies and the like lend themselves to bundled pricing and/or reference pricing. In any case, what patients need to make price based choices in this category of care are actual insurer contract reimbursement rates, not average or median prices for a limited number of procedures. Confidentiality agreements between insurers and providers that preclude disclosure of actual contract reimbursement rates need to be abolished or outlawed, in my opinion.

    Determining quality and outcomes is easier said than done. For example, how do you risk adjust patients who need complex surgery so surgeons aren’t penalized for taking on high risk patients and rewarded for operating on low risk patients? Patients are mainly interested in outcomes and that includes minimizing hospital acquired infections. The intangibles of the patient experience such as how professional, competent and pleasant the nurses and techs are is relevant as well.

    If providers, especially hospitals, decided that it was a priority to provide timely and accurate price information to patients and potential patients upon request, they could probably do it easily and quickly but right now it’s not a priority. It should be and soon.