They missed the real issue. There is no way you can actually price-shop. The providers and the insurance companies keep their final negotiated price secret. All they will let you compare is cash prices, or a select list of agreed-upon common services. It is absolutely impossible to get the bottom-line cost for any procedure to compare between providers. Beyond that, it also takes up too much time to find the medical code from one group, confirm with the provider that is the code they will use, talk to a third group to see what the cash price is, and then contact your insurer to make sure they actually cover that code.
You can price shop if you put a great deal of effort into it.
I got a MRI on my lower back in April.
Going to my insurance provider I was able to get a list of places to get a MRI near me. Since I kind of live in the boonies, everything was 45 to 60 miles away so it was a difficult search of an unfamiliar area.
Anyways, going through this list I called them and made sure they accepted my insurance plan. This is a super small business plan that costs me $1400/mo. On top of this it has a huge deductible.
The magic words are "contracted rate" - call up the office and get the specific code for the procedure that your doctor prescribed. Call up your insurance company and ask them, at this physician, what is the contracted rate for this code? They will put you on hold for 10-30 minutes and come back with a number.
Doing this 4 times I had 3 places that were between $1100 and $1800. That is my out of pocket cost for the procedure. Then I found one place that had a contracted rate of $440. That's a quarter the most expensive place!
There is NO UI or no realistic way to do this. This process took me about 5 hours of work on the phone to complete.
As a bonus, you can ask the physician what the insurer pays them for the procedure. Once you have all of the numbers in front of you it's a bit easier to tell why one place was 25% the cost of another place.
Anyways. Contracted rate and medical procedure codes. Those are the things you need.
You can price shop if you put a great deal of effort into it.
I'm glad this worked out for you, but if one is visiting the doctor because of some symptoms, rather than visiting a technician to have a specific, prescribed, and highly standardized service (like an MRI) performed, I'm sure you'd agree that situation is different.
It's simply not in the nature of medical care to have price-tags (although the situation could certainly be better that what we have in the US today).
I'd argue this is the case with all sorts of expertise-based services, actually - auto mechanics, lawyers, consultancies of all kinds, etc. You can't know how much a visit to your lawyer will cost unless you know exactly what you need - but much of the time you don't know what you need. You're visiting the lawyer so he can figure out what you need.
Yet every time I see an article that involves economists pondering medical care costs, this fundamental uncertainty (at the personal level) is just elided, as if the economists never thought of that. As if they never actually deal with the health care system themselves.
Lawyers, accountants, and mechanics all have to provide estimates to a client precisely for this reason. I see no reason why medical practitioners should be any different.
As an anecdote, I have found that price comparisons are perfectly feasible in a non-emergency situation. My son broke his arm, and instead of just driving to the nearest emergency room, I called around to a handful of urgent-care clinics and found one that was able to quote me some prices that were reasonable, so we went there to get him treated. Easy.
In any case, I think the ACA is a train wreck, piling on more of the crap that makes our system suck: the disconnect between consumer and producer. If we ever want to make our healthcare market sane, we will have to largely cut out the middleman ("insurance"), and the only way to do that is have patients pay for their own care (particularly routine care).
How long were you on hold while your kid was clutching his arm?
On the one hand, on the other hand. Many people are not good at judging what is an emergency and what isn't when it comes to health care, especially since vast swathes of the public no longer have more than rudimentary home health-care skills. So breaking your arm -- emergency or not? Concussion -- emergency or not? Falling out of a tree or off a ladder and having lots of bleeding, but not sure what happened -- emergency or not? Chest pain -- emergency or not? And what if you're the one sick? Say you've got what you think is a gallstone and you're in a lot of pain. How do you shop around? How can you evaluate for yourself how long it is ok to wait, and how do you deal with it when you go to see the cheaper internist for an evaluation but want the surgery done at the cheaper surgery but the internist looks at you and says, "Holy )(&! you're going in now" and they take you to the expensive surgery? And then how do you make sure some specialist doesn't visit you while you are unconscious and then charge for that "consultation"?
A fun read with respect to the last question is on pregnancy in the US [1].
I agree with you in many ways -- it would be reasonable to give estimates, the ACA is insurance "reform" rather than health care reform, insurance is not health care. One big problem is that if your car doesn't work you can put off repairing it for a bit until you find a decent mechanic, but when you get acutely ill you can't put off care. (Well, you can try, but it just costs more later unless you die quickly.)
> How long were you on hold while your kid was clutching his arm?
None at all. Possibly less time than I would have spent with a 911 operator asking me my address and whatnot.
> Many people are not good at judging what is an emergency
Perhaps, but I think in the main emergency care is an outlier in relative terms. I have no citation for you, but I just can't imagine that emergency care (i.e., you don't have time to make decisions about who to see, etc) is a very large proportion of healthcare dollars spent (and is also where insurance can actually make sense).
I think the goal should be to optimize the system for non-emergency care by making it a consumer-oriented market. As long as third parties are spending most of the money it can't be that, and until we have price transparency, the control of expenditures can never be with the patient.
There's a law called The Funeral Rule[1] that, among other things, requires that funeral homes provide a General Price List and quote prices over the phone without the consumer being required to give contact information.
The equivalent is sorely needed in healthcare. One of my biggest (indeed, one of my only major) complaints about the ACA is that neither the GOP nor Democrats saw fit to make any moves towards requiring pricing transparency in the law. Its a travesty. This is a free-market reform that would have completely on its own transformed the economics of the industry, even for consumers that couldn't do the research under acute circumstances.
Even without that, the ACA is far from a trainwreck. I'm guessing you didn't have to spend a lot of time dealing with procurement of individual policies prior to the ACA. I did, and its a godsend.
> I'm guessing you didn't have to spend a lot of time dealing with procurement of individual policies prior to the ACA. I did, and its a godsend.
A lot? I guess not, but I did shop for individual (+family) insurance plans before the ACA, and I much prefer the before to the after. I absolutely despise the stupid metal-color tiers, in which every single plan is a cookie cutter of another within the same tier. Nevermind that plans that before ACA could be obtained relatively cheaply are now quite a lot more expensive - in some cases, more than double. So there is far less consumer choice, and everything is more expensive. If that's not a trainwreck, I don't know what is.
P.S. - I 100% agree about price transparency. I'm ambivalent whether the way to accomplish it is through a regulatory rule.
Right, and we'd just be headed over a cliff like the rest of them. Nationalized healthcare is a disaster economically and in patient outcomes, not to mention patient and physician autonomy.
That is because economists are either academics or work for large blue chip companies and have gold plated health insurance policies. They actually never have to deal with this on a personal level.
It's up to your insurer to provide that information in a usable format. There are products out there that will present this information in a searchable format that makes it easy to do cost-comparisons like your example, all from within your insurer's portal. The problem is getting these insurers to realize that features like these are important to their clients.
I can't comprehend why the author of the article couldn't come up with this glaringly obvious reason.
In every other aspect of my life, the price tag is attached to the item. If I want the item, and the listed price is good, I can either buy it then, or keep shopping.
With U.S. medical care, I can go to my general physician ($30 copay) and complain about a specific symptom. She can then refer me to a specialist ($50 copay), or send me to the lab for a test ($???), or prescribe a medication ($???) and schedule a follow-up (future $30 copay). After my pockets have been emptied, I literally have no idea about the size of the bill I will be expecting in the mail, because my insurance rejected the claim or my deductible hadn't been met, or whatever bogus flimflam.
It is easier to shop around for 20 mixer-truck-loads of concrete than for one blood test. It is easier to shop for, finance, and buy a new car than a new hip joint. It is easier to plan a 30-destination worldwide vacation than it is to plot your own cancer treatment.
And as someone else already mentioned, all this pricing data is already computerized. We are not allowed access to it, because it people were able to shop around on the basis of price, they would do it, and prices would immediately fall to actual cost plus reasonable operating margin.
I agree 100% and would just add this as another way of saying what you just said: the healthcare industry _is_ a market, it's just that patients aren't the customers, we're a product that the insurance company sells to medical providers (much like google offers us "free" email and then sells us to advertisers).
To echo the other comment, free markets have nothing to do with fairness. Free markets use price as an information signal to allocate resources. Fairness is about ethics and justice. The is-ought problem quickly follows.
Even where there is at least gross-level of price transparency. Like in the case where you have to choose between an Urgent Care Center and an Emergency Department.
The former is much cheaper than the later in most cases. But how do you self-triage? There are 4 possible outcomes:
1. You go to an UCC and they treat you. You made the right choice and saved the most.
2. You go to an ED and they treat you but an UCC would've been enough. You made a mistake and pay more than you should.
3. You go to an ED and it was the right choice. Congratulations you saved money and got prompt care.
4. You go to an UCC, they can't treat you and refer you to an ED, you need need to pay both and quite possibly an ambulance ride for the transfer.
Now suppose you have sharp abdominal pain... Medically, the right thing to do is go to an ED (especially if you still have an appendix.) But will you gamble that the cheaper UCC is the right place? You have some chances of being right.
This is probably a case where limiting choice to a smallish set of identical (save for price) options[1] that can be compared apples-to-apples would actual improve market efficiency, since the education/information imbalance is so huge and unlikely to improve otherwise. It'd also provide a lot of the same administrative cost-cutting that e.g. single-payer would, since there'd be (say) a dozen plans to check against ("does this plan cover this procedure, and at what out-of-pocket expense?") rather than... hundreds? Thousands? Dispute resolution would be easier, too.
It's what I thought the categories on the Federal exchange were aimed at accomplishing, but it turns out the range of coverage in each category is way too large to be helpful. Two "silver, low-deductible" plans can be almost nothing alike once you dig in to the fine print.
If we must keep using something more-or-less like our current system, that'd be a big help.
[1] (EDIT) I mean health insurance plans, specifically
I recently visited a sports doc, and had this exact experience. I had no way of figuring out what my cost would be, even for something as simple as a 15-minute consult, until the receptionist tallied the bill at the end of the visit. The only criteria I could use to pick a care provider were Google reviews, credentials, and a few weak "scores" my insurance company provides for each provider.
My experience did mirror another comment in the article- I rejected a speculative X-Ray from a nurse as I was pretty sure it was unnecessary and I was paying 100% out of pocket, which I realized at the moment was (in a way) the HDP at work. (The doc later agreed with my choice)
I have also noticed that "cash only" prices are usually much lower than "out-of-pocket cash with HDHP". It looks like insurance companies have negotiated with providers to suck out that deductible from the patient as soon as possible.
It's a bit baffling, for someone living outside the US, why any reasonable person would have expected that sick people, of all people, would spend a lot of time comparison shopping.
The appendectomy example really underscores the insanity of the idea -- who in their right mind, when facing a burst appendix, would risk their life by stopping to do some in-depth reading of price lists to find the best deal on continuing to live?
Your only concern at that point should be getting yourself to the nearest emergency ward. It's crazy to think that you're supposed to stop and figure out if Big Al's Discount Appendectomies three towns over is having double-coupon Thursdays.
Emergency care is only about 2-8% of healthcare costs. Most of what we spend on healthcare is for chronic conditions that you have for years, decades, or your lifetime.
@waynemr's comment gets it right -- the real issue is that prices are secret in healthcare, and quality metrics are nonstandardized, so there's no information on which to base your decision.
The Affordable Care Act is laying some of the groundwork for healthcare markets. For example, look at the experiments in bundled pricing that CMS is starting:
http://innovation.cms.gov/initiatives/ccjr/
No dude. The real issue is that you don't consider health care to be a human right or even something that should be a high priority for wellbeing.
I have never, ever had to even think two seconds about going to a doctor for any ailment I've ever had. I would shit my pants if I had to take monetary decisions with regards to that.
> Emergency care is only about 2-8% of healthcare costs.
Are you counting only ER costs, are counting ER costs plus the full cost of the treatment following admission from the ER. If its the former, it doesn't seem to make sense for discussing the viability of price shopping.
The pricing of healthcare is so opaque and full of subjectivity (Is this doctor good? How much do I need this?) I don't see how a patient can make an educated decision.
It's exactly like getting your car fixed if you know nothing about cars and engines. You go to a garage when you can't avoid it, you close your eyes and you pray you won't get fleeced. And if you find a garage you trust, you always go there and you don't shop around to 5 places to get competing quotes.
I think the opacity argument is beginning to shift. I was listening to NPR on my drive home the other day and some people have really started working on this very interesting problem.
There are now 3rd party companies that work with insurance companies that will show you the costs that they incur from specific providers. Not only that, but there's an economic incentive for you to skip on going to the highest priced location for drugs or a physician. An example is MRI costs. They differ wildly in costs for the exact same thing. Anywhere from $1K-$10K. There really isn't much difference in either company in terms of quality of service. So what happens is that the insurance company hedges their bet. They'd rather pay you a certain amount of money (say $100) to go to maybe a $2K place instead of the place in Beverly Hills due to their pricing.
So it's changing, but it's taking some time... Either way, it is a brilliant economic mechanism to solve the problem of rising costs in healthcare.
and the name of the company in the episode is Smart Shopper, and a quick google search appears to the website to be https://www.vitalssmartshopper.com. Unfortunately their list of U.S. states doesn't include where I live.
>Instead, both healthy and sick patients simply used way less health care.
>This raises a scary possibility: Perhaps higher deductibles don't lead to smarter shoppers but rather, in the long run, sicker patients.
Spot the leap. The author implicitly assumes health care usage/health care spending is correlated to health care outcomes, but there is _highly_ convincing evidence that that is not the case. So: has Sarah Kliff (senior editor, "Writing about health care.") never heard of the Oregon Medicaid health experiment, or is she just pretending it never happened?
Also the impossibility of price-shopping is obviously a huge problem.
The Oregon Medicaid experiment was very interesting but clearly wasn't the definitive word on emergency use and outcomes, and as to whether Kliff had heard of it, here's one of many articles she's written on the subject;
I don't understand how health care "economists" can even imagine that Doctors are fungible commodities. Last I checked we're still using actual humans for the task, we haven't invented good, working medical droids just yet. From that perspective of course people aren't going to shop for a Doctor like they shop for a dishwasher: most people pick a general practitioner/family practitioner based upon their social culture. How many people's GP is an old friend or a family member? People develop attachments for their GPs. Their GPs are generally a part of their extended community. It's then their GPs that recommend their Specialists, typically through the GP's own social network/community... Shopping for a Doctor as if they were a dishwasher is a bit like trying to shop for a new pet or spouse on the Home Shopping Channel.
The article is based on an odd premise. It sounds like the employees in the study were given an HSA with a deposit equal to their deductible, so they could spend up to that limit without incurring any personal cost. The trick here is that an HSA should encourage you to eliminate unnecessary spending because you get to keep the money you save and bank it for bigger health care costs down the road. I'm 27 and healthy, had a really uninformative annual physical last year where my doctor bilked me for a totally unnecessary EKG, and as a result I skipped my annual physical this year and am banking the savings for a serious illness in the future. The study should actually look at whether people went to the doctor less over the long-run for serious issues -- like not going to the doctor for symptoms diabetes, which left untreated can cause much larger long-term costs to the system -- rather than whether they simply avoided "valuable" medical visits, which in this case as "preventative care" has unclear value.
EDIT: The answer to her question "Why wouldn't this group get the care they wanted, pay for it with the HSA, and just run through the out-of-pocket spending earlier in the year?" is that "the care they wanted" is treatment for a catastrophic illness later in my life rather than dubiously valuable preventative care right now. I'd rather skip a doctor visit for the flu and have more money banked in the future for cancer treatment or a heart attack.
> In 2006, about one in 10 employees had a health insurance
> deductible over $1,000. Today? About half do.
> To health economists, this sounded like good news; they've
> long theorized that higher deductibles would force down
> health-care costs. The idea was that higher deductibles
> would make patients become smarter shoppers: If they had to
> pay more of the cost, they'd likely choose something closer
> to the $1,529 appendectomy than the $186,955 appendectomy
> (yes, some doctors really do charge that much). This would
> push the really expensive doctors to lower their prices so
> cheaper physicians didn't steal their business.
This seems so illogical that I think I must be missing something. Presumably, the patient pays the deductible out of pocket, and the remainder is covered by the insurance.
Case A: $1,529 appendectomy.
Patient pays $1000, receives "cheap" appendectomy.
Case B: $186,955 appendectomy.
Patient pays $1000, receives "luxury" appendectomy.
Why would the "health economists" think that a patient be incentivized to choose the less expensive option? Rightly or wrongly, the frequent presumption is that more expensive services are higher quality. Why would a patient go out of their way to choose the lower priced option if they are paying a flat rate?
> But when the researchers looked at why spending dropped,
> they found it had nothing to do with smarter shopping. The
> average price of a doctor visit wasn't dropping.
>
> Instead, under the high-deductible plan, workers just went
> to the doctor way less. The paper finds that "spending
> reductions are entirely due to outright reductions in
> quantity." Workers did use less "potentially wasteful
> care," like imaging services, but they also cut back on
> "potentially valuable care," like preventive visits.
Clearly the incentive is for the patient to avoid costs that are less than the deductible. Lo and behold, the patients chose to avoid costs that are less than the deductible (doctors visits and preventative care), and to ignore cost in cases that are higher than the deductible (surgeries and emergencies). How can this be construed as a surprise?
Plans with a deductible "over $1,000" usually have deductibles well over $1,000, e.g. $3,000 to $6,000+, and only cover something like 20% costs after the deductible.
So, neglecting the annual limit, the $1,529 vs. $186,955 appendectomy situation wouldn't be $1,000 vs. $1,000, it would be more like (with $3,000 of unused deductible at the time of the procedure) $1,529 vs. $39,791.
I was concentrating on the lousy logic expressed in the article rather than specific numbers in the study. I think my point stands, since the total cost for any appendectomy is almost certain to exceed any deductible.
As you point out, the real difference in costs (and the factors that actually might influence patient behavior) are the percentage of coverage after the deductible and the levels for out-of-pocket max. As you probably noticed, these weren't mentioned in the article.
I'd hope the actual paper has a better discussion of this, but it doesn't seem to be publicly available: http://www.nber.org/papers/w21632
The annual deductible in this study is $3,750. So, as long as a patient hasn't spent over $3,750, they have the incentive to reduce costs. You are correct, after a patient hits their deductible they have no incentive to reduce costs.
There was a recent Planet Money episode about a company that will shop around for medical care for you and give you a cut of the money that the insurance company saves:
What a big shocker!
You are telling me that a sick person would not try and spend many hours comparison shopping for doctors with poor metrics for quality and low pricing info and then make a possibly large upfront payment based on a guess?
That they would just say - forget it; and get much sicker?
Universal Medicare with single payer systems is the way to go as most of Europe and Canada seems to have figured out decades ago.
this is the only industry in the US that has an anti-trust exemption. So they can charge people differently for different services and they do not have to publish prices.
I think if the employees in the study were given a web interface that is required for booking any appointments, they could get better results. The booking interface could show all qualified specialists that work with their plan, and they could also display prices for specific treatment or average costs for a visit to each particular specialist. So instead of forcing people to price shop, they get to see the prices at the point of booking.
Why is it impossible to show prices? Medicare and private insurances have defined price lists. They should just be forced to make them public.
A system where one group gets charged too little (is that really true in the case of Medicare? I doubt it) which then forces another group to be ripped off in a hidden way doesn't make sense and hurts the country.
It is absolutely true in the case of both medicare and medicaid for certain things (not everything). My dad ran business and R&D for pathology ta state level hospital at a major university and he often had to figure out how to continue offering services to medicare patients by making up the money somewhere else when medicare wouldn't even cover the cost of materials.
We are about to switch to high-deductible only health insurance plans here at work (they had a PPO and an HMO but they're getting rid of them). I already avoid seeing the doctor more than I should. I don't need even more reason to avoid them. Ugh. This isn't good.
High deductibles save health insurance companies billions. We already know that health insurance companies own congress: that's why we don't have a sane socialized medicine system in the US. So high deductibles are here to stay. The only thing that's going to change that is consumers becoming more savvy; economists have no power here. They should, but they don't.
Economists might be surprised. Actuaries are not. In most actuarial health cost models, cost sharing induces changes in utilization, not cost-per-service.
Health insurance in America is actually about managing cash flow rather than managing an insurance policy. After extensive research and data investigations, you'll discover that the actuaries at insurance companies are fantastic at what they do: you'll usually end up spending the same amount out-of-pocket in a year no matter the plan--the question is just would you rather spend more at the beginning of the year on lower premium plans, or spread out costs evenly throughout the year on higher premium plans.
A few associates and I are working on a (very very alpha) tool for plotting out actual expenditures for all plans for which you qualify, giving you a report of where you'll spend the least based on your expected health events. The tool saved me over $4,000 this year by guiding me towards a better health plan than what I had originally picked out when I switched to self employment.
If interested, check out http://lucentary.com/ (but please keep in mind we're still fleshing out an MVP!).
And as a side note, for my family I actually love high deductible plans when I can get the deductible around the same dollar figure as my max HSA contribution. Once I can hit the deductible for an individual, free healthcare!
I never hit it, because I have very few health needs. But add a pregnancy and delivery into the mix and you're set. It's the opposite effect of what the theory in the article supposed, but just one data point.
This was obvious. The whole point of high deductible plans and PPOs is to push costs onto patients who then don't choose care unless it is absolutely necessary. Preventative care suddenly becomes $400 a visit instead of $40.
I understand that the economists who made this study are not the ones calling the shots on the (bad) way the health insurance business is conducted, but man, they're pretty dense if you take the article at its word.
"To health economists, this sounded like good news; they've long theorized that higher deductibles would force down health-care costs. The idea was that higher deductibles would make patients become smarter shoppers: If they had to pay more of the cost, they'd likely choose something closer to the $1,529 appendectomy than the $186,955 appendectomy (yes, some doctors really do charge that much). This would push the really expensive doctors to lower their prices so cheaper physicians didn't steal their business."
Even the sloppiest and most cursory examination of human behavior refutes this line of thinking-- patients don't shop around for life-saving medical procedures because they need them urgently or semi-urgently, meaning locations close-ish to home are the only choices, if there's even more than one choice that accepts their insurance. For plastic surgery, sure, whatever. For a bypass? No. I guess this gaping hole in their analysis went unnoticed or somehow explained away by their insufficient economic model.
"The new paper 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 would expect to see more plans converted to high-deductible plans after a finding like this percolates through the insurance companies. This behavior is health insurance working as designed: unused, making a fat profit for the insurers while the patients scrape by until they're in critical condition and can't refuse care for the sake of cost-cutting on their end. This system is evil, and it is intentionally evil for the sake of producing more money.
""I am a little bit surprised at just how poorly patients were able to do when looking at very similar products, like MRI scans, and with a shopping tool," says Kolstad, an economist at University of California Berkeley and one of the study's co-author. "Two years in, and there's still no evidence they're price shopping.""
This man is a fool of the highest order, truly an overflowing septic tank of stupidity unparalleled in obliviousness even when compared to a slime mold. How are patients supposed to understand comparisons between medical procedures? "A shopping tool" would be too simplistic, anyway. You need a real doctor to answer questions about care choices.
"Workers' health spending dropped, and did so quickly. Average per-patient spending fell from $5,222.60 in 2012 to $4,446.08 in 2013. That's about a 15 percent decline in a single year — and it held true across all types of health services. Between 2012 and 2014, there was a 25 percent drop in emergency room spending, an 18 percent decline in physician office visits, and a 6 percent decrease in mental health services."
Great job, the patients have been made sicker as a result of cost-cutting measures. Looking forward to seeing more high-deductible plans.
Finally, there is no "shopping around" in the sense these economists mean. Try getting a straight itemized quote for a given medical procedure before you get it. Try comparing that with someone else's quote for the same thing. At this point, you've probably wasted a few weeks on the phone/email trying to finagle these things out of the horrendous systems in place. Then, you can cross reference the results with your insurance benefits, and see how badly you're going to get fucked. Yeah, right.
I wouldn't be quite that harsh, but I agree with you overall. I don't understand why in the world they thought this would work.
Are they confusing deductibles with co-insurance? I know the field is confusing, and that sort of confusion is the only way this study makes any sense.
With a deductible ANY non-routine spending means you go over it. So why bother price shopping? It makes no difference.
With co-insurance you pay a portion of every bill, so in that case price matters.
Virtually every economist I've ever seen write on this subject over the past several decades has pointed to the same features (required expertise to evaluate quality of services offered against cost, lack of pricing transparency, major needs being unpredictable, lack of the luxury of time to do price shopping -- even if it was possible -- when a need arises, etc.) that has been pointed out in this thread as reasons why health care did correspond to the assumptions of the rational choice model on which the conclusion of the efficiency of free markets with direct user purchasing rests.
So, I'm not surprised by the results of the study, only with the fact that there are "health economists" that find it surprising.