Do Transparency Tools Work in Health Care?
Laptop and Stethoscope — Image by © Royalty-Free/Corbis
A new report by economist Jon Gabel and his colleagues at NORC, a research center affiliated with the University of Chicago, looked at the use of transparency tools in an employer health plan. The analysis found the use of price transparency tools to be spotty. For instance, 75 percent of households either did not log into the transparency tool or did so only one time in the 18-month period of study. Fifteen percent did so twice; but only 1 percent logged in 6 times or more. The study concluded:
It could very well be that we are asking too much of a single tool, no matter how well-designed. Consumer information for other goods and services on price and quality are seldom dependent upon information gained mainly, if not solely, through a digital tool. Rather, information on relative value is spread far and wide through advertising and other kinds of promotion using conventional, digital, and social media communication channels.
An earlier Harvard study on transparency tools found patients did not tend to use the tools to comparison shop for lower prices (in fact, spending rose slightly). Yet another study concluded that when transparency tools do lower spending, it is because consumers used to tools to identify prices and use the information to decide whether they can afford the service and skip it if they cannot.
The transparency tool in the current study also emailed “Ways to Save” suggestions on how consumers could reduce medical spending. The authors made one important observation:
It is also possible that the message on the “Ways to Save” e-mail turned off many households. While the emails did highlight opportunities to save a specific amount of money, a vast majority of the savings were for the employer and a much smaller amount of savings applied to the employee. It is possible that many employees viewed the transparency initiative as simply a means for the employer to save money.
That is a very good point. Encouraging workers to reduce unnecessary spending is all about creating the appropriate incentives. Before they will take the time to comparison shop, consumers must benefit from their efforts. They must also become accustomed to comparison shopping. In this analysis, the firm studied had a deductible for individuals of $1,400 and $2,800 for a family of four. The out-of-pocket limit was $2,800 per individual and $4,800 per family. The employer provided an additional $400 in health care benefits per year in the form of a health reimbursement arrangement (HRA) deposit. It would be interesting to tease out who was shopping and why. A healthy, single person with a $400 HRA and only a $1,400 deductible is not likely to worry about the cost of a physician visit. The most they can be out before their health coverage begins to pay significant benefits is $1,000 ($1,400 – $400). Moreover, they may not need a service that is easily shopped. An MRI is a commodity procedure whose price could be compared. But a physician visit or a routine blood test ordered during a physician visit is unlikely to be shopped.
I have shopped for blood tests, MRIs, CT scans and cheaper drug prices on many occasions. But, then again, my deductible is $5,000 and I’m a health economist with years of experience.
Another thing I noticed about the study was one of the cost-saving features was selecting a provider. Although I might choose a provider partly based on cost if I have advanced knowledge, I’m less likely to change providers once I have one unless I am likely to save significant amounts. California-based Castlight Health discovered convincing patients to change their behaviors when selecting providers was more difficult than they anticipated.
One impediment to comparison shopping for health care is that many consumers are not regular consumers of health care. They may see their doctor once a year, take a generic drug, or occasionally be referred to a specialist. Many do not need enough regular services sufficient to learn the process. Maybe that is a good thing. If 20 percent of patients consume 80 percent of all health care dollars, maybe it makes sense to concentrate efforts on the 20 percent.
I wonder if the results would be different if performed today on people with a $5,000 deductible health plan? Would it be any different using “high touch” transparency tools where enrollees are assigned to account executives to help them navigate providers and procedures? How about if consumers have a patient-centered medical home, where a doctor collaborates with their patients to seek out cost-effective medical care? It’s been my experience that patients are quite willing to save $1,000 on an MRI or switch to generic drugs with nominal copays when they can save a buck.
I think the major problem is that providers do not look to patients as primary payers. A very small proportion of providers’ incomes comes from patients, rather than third parties (insurers or governments). So, the providers are largely unconcerned with how difficult it is for patients to effectively “shop.”
Even if people are not regular consumers of a good or service, providers in normal markets make it easy to shop. We only buy a care or refrigerator every few years, yet it is not a struggle to discuss prices of those items with the vendors.
One thing that I have found is that many doctors are very willing to help you save money if you tell them you have a high deductible plan. I’ve had doctors ask me about my insurance and whether my insurer paid for drugs, for instance. The problem with some doctors is probably one of convenience. They are used to referring to specific other providers and don’t take into account the fact you may want to ask about prices before making a decision.
The condition that I especially want done away with is when a doctor you don’t expect to need on a regular basis (such as a surgeon) calls a colleague to perform anesthesia without giving the patient an opportunity to ask about network affiliation.
Many anesthesiologists deliberately don’t join any insurance networks because they know patients generally have no role in choosing them. The same is the case with radiologists, pathologists, and ER doctors. Their ludicrously high charges shouldn’t be enforceable unless there is a meeting of the minds on price between the doctor and patient.
Barry, I’ve found the most memorable acronym includes Radiologists, Anesthesiologists, Pathologists, and Emergency Room Specialists.
You are of course correct that these hospital-based specialists don’t work in a true market, so feel no need to join a network – or, for that matter, to ensure their fees are competitive.
Transparency tools will not work because people do not have incentives to use them.
Our current system is not insurance it is a bill paying service. people do not want insurance they want someone to pay bills
Pneumonia – kills many old women who are Hillary’s age. This is really dangerous because this problem can last for months.
Hillary has one foot on a banana peel and the other in the grave. Hillary needs a lot of rest if she wants to live.
Imagine, putting someone with pneumonia in all of that heat in NYC. Pneumonia Transparency — Hillary’s handlers should be fired because pneumonia kills old people. Hillary lost her shoe just like Cinderella.
Vote for Trump because he is not ready to die.
The NHS.UK reports on pneumonia: It’s usually caused by an infection – most commonly, bacteria and viruses, which are contagious.
Hillary was close to a child after coming out of her daughters home in NYC on 9/11. Why would Hillary try and spread her disease to young helpless children?
Hillary is putting children in danger!
Hillary is not sick.
She just accidentally drank from the bottle of holy water
OH I see. “So never mind the Hillary and her “Second Stage Dementia,” consistently coughing up a Category 4 Atlantic hurricane, or a few minor Grand Mal seizures here and there, a lost email or two, or the Clinton Fraudation Charity.
Really. At this point, what difference does it make?
Oh, and by the way, this collapsing on 9/11 before getting into the van? Ridiculous! Hillary was merely rehearsing her stand-up comedy routine imitation of WTC7.”
https://www.lewrockwell.com/2016/09/mike-in-tokyo-rogers/im-hillary/
The fact that the loss ratio of Obamacare is 80% means that the average insured patient pays a 25% premium over fair value for the use of insurance. If we bought our food using insurance we’d likely be paying a 25% premium too.
And that’s just the average patient. The young, single, healthy, male nerd who participates in Obamacare is paying a much higher premium. It’s seems to me self-evident that Obamacare would be put into an immediate death spiral if such exploited patients were able to check the prices on all drugs and procedures, and even then prices would fall further if foreign providers in Mexico, Costa Rica and Brazil could bid on provision of health care on an even basis.
Jimbino says, “The fact that the loss ratio of Obamacare is 80% means that the average insured patient pays a 25% premium over fair value for the use of insurance.”
Really? I’d say you continually demonstrate you don’t understand insurance. You do like to complain when your insurance is not available to you for less than it costs.
My advice? Stay south of the border, where everything is provided for you for less than it costs to produce. You have a good deal. Hang on to it.
John Fembup, you must be an insurance salesman, for instead of presenting a cogent argument disputing my analysis that insurance is always and everywhere a bad deal for the average insured and for society, you continue to rely on ad hominem attack.
Why don’t you try your hand at disputing the analysis at http://www.blackjackonline.com/strategy/insurance/
that buying Blackjack insurance is foolish behavior?
Jimbino, you present no “analysis”. You make assertions you don’t support, then disparage everyone who happens to disagree. btw, your assumption about my profession is comically wrong.
I still say, your best deal is to stay below the border where everything you want is free or priced below cost. That’s paradise. At least, one kind of paradise.
You can play blackjack all day if you like – I won’t mind.
One of these days I may finally get that dental implant in Costa Rica at one-fourth the cost of one here. The last quote I received in Dallas was $5,500 to extract, regrown bone and install a titanium post. I would then have to go to another dentist to install the actual crown on the post.