Tag Archives: price transparency

Health Alerts

Surprise Medical Bills A Growing Problem Requiring Price Transparency

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Doctors Rushing Patient down Hall(A version of this Health Alert was published by Forbes.)

Donald Trump’s health reform proposal during the presidential campaign promised to deliver price transparency to health care:

Require price transparency from all healthcare providers, especially doctors and healthcare organizations like clinics and hospitals. Individuals should be able to shop to find the best prices for procedures, exams or any other medical-related procedure.

Doctors and hospitals are infamously terrible at sharing price information with patients. It is a problem for both scheduled procedures and visits to emergency rooms. The root problem is not that providers are unwilling to share prices, but that prices are not formed through a normal market process. Instead they are administratively determined between government, insurers, and providers.

I have spoken with doctors who believe it would be illegal for them to disclose the price of a procedure to a patient before the insurer or government approved the claim! On the other hand, insurers’ and employers’ price transparency tools are not useful to most patients, and go largely unused.

A recent Consumers Union survey found nearly one third of Americans who had hospital visits or surgery in the past two years were charged an out-of-network fee when they thought all care was in-network. Other research from the Brookings Institution suggests this problem is getting worse. Continue reading Surprise Medical Bills A Growing Problem Requiring Price Transparency →

Health Care Costs

The “Right to Shop” For Health Care

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credit-card-2Anyone who has undergone a medical procedure knows it is very difficult to figure out how much an insured patient will pay out-of-pocket. It is often not clarified for months after the procedure, after a flurry of incomprehensible paperwork from insurers, doctors, labs, et cetera, has landed in the patient’s mailbox.

(Personal aside: A couple of years ago, my health insurer encouraged me to go paperless, and I signed up for electronic messages about claims. It was so confusing, I went back to paper after a few months. At least you can scrunch up a letter and throw it across the room with an anguished scream, which you don’t want to do with your computer.)

This problem has led to a bunch of state laws attempting to impose “price transparency” on medical providers. As discussed previously, they do not work, because relationships between insurers and providers inhibit transparency. Medical providers “customers” are insurers, which pay most of their claims, not patients. Further, the real problem with medical prices is not that they are opaque, but that they are not formed in a normal market process. Instead, they are negotiated by third-party bureaucracies. Continue reading The “Right to Shop” For Health Care →

Health Alerts

Will You Ever Understand Your Medical Bill?

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stress(A version of this Health Alert was published by Forbes.)

It is hard to exaggerate how painful the medical billing process is for patients. Steven Brill, an entrepreneurial lawyer turned journalist, became one of the most famous critics of American health care when Time magazine published a long article by him in 2013. It was a wide ranging criticism of pretty much everything in U.S. health care, which grabs and keeps our attention because it uses the absurd hospital bill as the fulcrum for his case:

The first of the 344 lines printed out across eight pages of his hospital bill — filled with indecipherable numerical codes and acronyms — seemed innocuous. But it set the tone for all that followed. It read, “1 ACETAMINOPHE TABS 325 MG.” The charge was only $1.50, but it was for a generic version of a Tylenol pill. You can buy 100 of them on Amazon for $1.49 even without a hospital’s purchasing power. Dozens of midpriced items were embedded with similarly aggressive markups, like $283.00 for a “CHEST, PA AND LAT 71020.” That’s a simple chest X-ray, for which MD Anderson is routinely paid $20.44 when it treats a patient on Medicare, the government health care program for the elderly.

(Steve Brill, “Bitter Pill: Why Medical Bills Are Killing Us,” Time, February 20, 2013)

It is hard not to get carried away on a wave of outrage when reading stories of patients faced with ridiculous bills, which (even if they can understand them) they might never be prepared to pay. A new crop of entrepreneurs is hoping to solve this problem. Continue reading Will You Ever Understand Your Medical Bill? →

Health Care Costs

Another Hit On Price Transparency

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HSAJAMA, the Journal of the American Medical Association, has published a research article challenging the doctrine that price transparency leads to lower health costs. Sunita Desai, et al., found:

Two large employers represented in multiple market areas across the United States offered an online health care price transparency tool to their employees. One introduced it on April 1, 2011, and the other on January 1, 2012. The tool provided users information about what they would pay out of pocket for services from different physicians, hospitals, or other clinical sites.

Mean outpatient spending among employees offered the tool was $2021 in the year before the tool was introduced and $2233 in the year after. In comparison, among controls, mean outpatient spending changed from $1985 to $2138. After adjusting for demographic and health characteristics, being offered the tool was associated with a mean $59 (95% CI, $25-$93) increase in outpatient spending.

Ouch! Let me make a couple of points. First, higher out-of-pocket spending might not be associated with higher health spending overall. If the price-transparency tools give patients confidence they understand their potential financial liability when going to doctors, that might encourage them to go rather than wait. If that increases timeliness of care, total health costs might go down while out-of-pocket costs go up. This is supported by previous research. Continue reading Another Hit On Price Transparency →

Health Care Costs

Chicken & Egg in Consumer-Driven Health Care

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debtAn advocate of consumer-driven health care will often be challenged by this question: “So, when I am hit by a bus, or have a heart attack or stroke, or am suffering from dementia, you want me to go shopping around for medical care?”

Obviously not. Nevertheless, this is a serious challenge and invites the question: How much of our health spending can be meaningfully controlled by discriminating patients? Researchers at the Health Care Cost Institute (HCCI) recently addressed this. The HCCI has a unique advantage in producing such research, because has access to a database of claims for employer-based plans run by a number of insurers.

The research categorized “shoppable” versus “non-shoppable” services. It found:

  • At most, 43 percent of the $524.2 billion spent on health care by individuals with employer-sponsored insurance in 2011 was spent on shoppable services.
  • About 15 percent of total spending in 2011 was spent by consumers out-of-pocket.
  • $37.7 billion (7 percent of total spending) of the out-of-pocket spending in 2011 was on shoppable services.

So, it looks like only 7 percent of health spending is subject to price-conscious patients spending their dollars wisely. The researchers concluded that “Overall, the potential gains from the consumer price shopping aspect of price transparency efforts are modest.” That would be true if we were talking about just forcing price transparency on the current benefit design. However, that is a distraction. Continue reading Chicken & Egg in Consumer-Driven Health Care →

Health Care Costs

All-Payer Claims Databases And Price Transparency

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Hand Holding CashMost observers agree that it is very, very difficult for patients to choose health services wisely based on prices, because prices in U.S. health care are generally not transparent. The primary reason for this is that it has been many decades since health providers have relied on patients to pay their bills directly.

Instead, their business models rely on submitting claims to health insurers. Of course, there are convenient clinics and a few doctors and ambulatory clinics which post prices up front. However, the patient who enters the hospital – where most health costs are incurred – enters a maze of opaque and incomprehensible prices.

Some people believe price transparency can be commanded by government: Enter the “all-payer claims database,” which an increasing number of states are embracing. Every payer in the state reports its claims to this government-run database and the government can then publicly disclose what actual health prices are.

The momentum for all-payer claims databases just hit a road-block at the U.S. Supreme Court, in the case Gobeille v. Liberty Mutual. This concerned a new Vermont law that compels payers to report their claims to the state’s all-payer claims database. The Supreme Court struck down the mandate, based on the doctrine of ERISA pre-emption. Whether that finding is right or not, I’ll leave to others to decide. This post challenges the very idea of all-payer claims databases. Continue reading All-Payer Claims Databases And Price Transparency →

Health Care Costs

Castlight Health: Pricing for Medical Services Is All Over The Map

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CastlightCastlight Health has published its second annual U.S. Costliest Cities Analysis, which shows astonishing variation for prices of medical procedures. This year’s report focuses on women’s preventive health:

Mammogram. Nationwide for a mammogram, a woman could pay anywhere from $43 to $1,898 for the test, a 44x difference. With some of the country’s largest cities, the clear indication is that women in larger metropolitan areas are being charged wildly varying amounts for a critical preventative test. For example:

  • In Dallas, which has the nation’s widest range, a woman could pay anywhere from $50 to $1045, roughly a 21x difference.
  • In New York City, the price can vary between $130 to $1,898, roughly a 15x difference. New York also has the most expensive mammograms in the entire country.
  • In Los Angeles, a simple mammogram could cost anywhere from $86 to $954, an 11x price variance.
  • The San Francisco Bay Area ranged from $129 to $860, a 6x difference.

OB/GYN Follow-Up Visit. Minneapolis and Seattle were the most expensive cities for an OB/GYN follow-up visit, and Phoenix and Las Vegas were the cheapest.

Preventative Gynecological Exam. The San Francisco Bay Area was the priciest for both a preventative gynecological exam and an HPV test, where it was on average 6x more expensive than Charlotte, NC for both.

HPV Test. In Philadelphia, the price of an HPV test ranged from $32 to $626, a 19x difference.

Continue reading Castlight Health: Pricing for Medical Services Is All Over The Map →

Health Care Costs

Price Transparency Laws Don’t Work

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HSAIn a functioning market, you know what you owe before you buy a good or service. That is not the case in health care, as we know. Because of increasing deductibles, the failure of price transparency is becoming increasingly irritating to patients.

Some believe a solution can be legislated. This has occurred in New York and Massachusetts; and one of my favorite state legislators, Senator Nancy Barto, has tried to legislate it in Arizona.

Effective January 2014, Massachusetts law requires health providers to provide a maximum price for a procedure within 48-hours of a prospective patient asking. Well, it has not worked, according to a ”secret shopper” survey of professionals conducted by the Pioneer Institute: Continue reading Price Transparency Laws Don’t Work →

Health Care Costs

Negotiate Your Doctors’ Bills!

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The idea that patients should take control of what they pay for medical care is taking hold among personal finance columnists. Noting “employer-provided health plan deductibles have risen 47 percent since 2009,” Mandi Woodruff of Yahoo! Finance has some good, common sense, advice on figuring out how much to pay for medical care. Here’s the first tip:

Figure out your medical billing code. Every procedure has a unique billing code (a unique five-number code you’d find on your doctor’s or hospital bill next to the service). Once you’ve got the right code, that makes it easier to call around to compare rates. Just be sure to describe exactly what you’re looking for; for example, an MRI of your lower back will have a different billing code than an MRI of your abdomen.

I agree absolutely. Nevertheless, this shows how far we have to go. Whatever good or service you buy as a consumer has some sort of inventory or billing code in the provider’s system, whether it’s a hardware store or a law office.

As a customer, have you ever had to figure that out?

Hospitals

More Price Transparency Problems

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Writing in Health Affairs, Ge Bai and Gerard F. Anderson have highlighted the fifty U.S. hospitals with the most “extreme markups” from what Medicare pays to their list prices (from the hospital chargemaster). The paper, available by subscription, is written up by Olga Khazan in The Atlantic (which you can read online for free):

The study found that, on average, the 50 hospitals with the highest markups charged people 10 times more than what it cost them to provide the treatments in 2012.

Markup

Bai and Anderson call for more government interference in hospital pricing: Continue reading More Price Transparency Problems →