Imagine visiting a gas station, but not knowing the price per gallon until your tank is filled. Or buying a TV, but not knowing the cost until your credit card statement arrives.
That’s the scenario most Americans face with health care services. And it’s one of many factors driving up health care spending, which is on track to reach 20% of the GDP by 2020.
Prices fluctuate wildly. An appendectomy can range from $1,529 to $186,990, and hip replacements can cost anywhere from $11,100 to $125,798, according to a report published by George Washington University.
The solution? Greater price transparency, which has the power to lower the cost of health care, says the Robert Wood Johnson Foundation. Others concur. More than 30 states have passed or proposed legislation to increase price transparency.
Skin in the game
Individuals’ interest in the cost of treatment depends largely on their personal out-of-pocket expenses. With fixed co-pays, beneficiaries have little “skin in the game.” But as high deductible health plans and larger coinsurance costs become more prevalent, price information becomes more important.
Public Agenda reports that people with higher deductibles are showing an interest: 67% of those with deductibles ranging from $500 – $3,000 have sought out price information, and 74% of people with a deductible greater than $3,000 tried to find pricing.
Silver and Bronze health plans, available on health insurance exchanges, are also driving interest as beneficiaries pay 30% to 40% of their health care costs out-of-pocket — a sizeable incentive to check prices.
This issue is garnering increased attention.
Time magazine explored the issue with its 2013 cover story, “Bitter Pill: Why Medical Bills Are Killing Us.” And The New York Times “Paying Till It Hurts” series is an ongoing exploration of the $2.7 trillion American health care system.
In reality, shopping for health care isn’t like shopping for a TV. It’s difficult for consumers to get meaningful price information for a variety of reasons including:
- Difficulty of predicting services in advance
- Billing from multiple providers
- Variety of benefit structures
- Contractual non-disclosure agreements between providers and insurers
- Anti-trust concerns
- Fee-for-service payments that rewards providers based on the number of services provided instead of outcomes
Another hurdle is the lack of training for doctors, who are traditionally “cost blind” about the procedures they recommend or comparative prices between facilities.
Even when people can find health care price databases, however, they’re generally given “reference prices” that don’t calculate the actual costs based on their benefits.
Some insurers are addressing the issue. For example, Aetna developed a Member Payment Estimator that covers more than 550 common services, taking into account users’ specific plan. Members can also tally total out-of-pocket costs for bundled prices including the procedure, the facility fee and professional fees.
Will it work?
Price transparency in health care is fraught with conflict.
Some experts believe providers may play games — lowering publicized prices while increasing other prices to offset their loss. Or lower-priced facilities may narrow the gap by raising prices.
Skeptics also fear the American consumer won’t make savvy use of price information, concluding that more expensive care equals better care. (In reality, there’s little or no evidence to suggest that high health care costs correlate to higher quality.)
Time will tell. Price transparency could bring us closer to value-based health care, with its potential to fix what’s broken in our current system. And transparency is sure to resonate with employer groups that are paying ever-higher premiums for employee benefits.