In the Dark on Medical Pricing
Think shopping for a big-screen TV is tough? Try finding the best mammogram reader in your neighborhood or the cheapest place for a checkup.
“Consumer-driven” health plans, which typically combine a high-deductible insurance plan with a savings account, are seen by many in government and industry as a way to slow the growth of healthcare costs. With their own bucks at stake, the theory goes, wise consumers will shop for the best deals, forcing providers to keep a lid on prices and improve quality.
But supporters and critics alike say a crucial ingredient is missing: the information that consumers need to comparison-shop.
“Right now, there’s no Shopzilla for an angioplasty,” said Patti Smith, head of Adobe Group, a healthcare communications firm in La Crescenta that helps large companies.
High-deductible plans do make people think more carefully about costs. A study released Thursday by the nonprofit Employee Benefit Research Institute, for example, found that more than 70% of people in consumer-driven health plans said they considered costs when deciding whether to see a doctor, compared with less than 40% of people in traditional insurance plans.
But just 12% said their high-deductible health plans provided information that would allow them to compare doctor and hospital costs. Only a slightly higher percentage said their plan provided information on doctor or hospital quality.
And a June survey of 1,400 employees in various health plans by employee benefit consulting firm Towers Perrin found that more than 80% said they needed more information on pricing for their out-of-pocket health insurance costs.
Nothing prohibits consumers from doing the research on their own, of course. But asking for prices from doctors is going to remain taboo for many consumers, said Mike Fox, managing principal specializing in healthcare with Towers Perrin in Irvine.
“You can ask about prices, but even then because of the emotion involved in healthcare, people tend not to ask -- and in an emergency situation, forget about it,” Fox said. “It’s very difficult for people to turn to a doctor and say, ‘Hey, for 50 bucks cheaper I can get this down the street.’ ”
Critics say it’s too much to ask America’s consumers to solve the problem of rising healthcare costs on their own.
“In the healthcare market, unlike the mall, not all consumers are created equal,” said Jamie Court, head of the Foundation for Taxpayer and Consumer Rights, a Santa Monica advocacy group. “Often the consumers who need services the most have the least ability to shop.”
About 4 million Americans are enrolled in consumer-directed plans, but their numbers are expected to swell to more than 20 million by 2008.
The accounts from which consumers draw money for health expenses come in three types: tax-free health savings accounts, which are largely employee funded; health reimbursement arrangements, which are funded by employers; and flexible spending accounts, which must be used up each year.
Health savings accounts must be linked to a high-deductible insurance plan, which typically carries a lower premium than does traditional coverage. The other accounts generally may be used with any kind of insurance.
But lack of “transparency,” the industry buzzword for information on pricing and quality, remains a major obstacle as healthcare shifts from being a largely wholesale market, in which insurance plans make bulk purchases, to more of a retail market, in which individuals drive purchases.
Sara Hammes, a 41-year-old Los Angeles resident who signed up for a health savings account through her company for 2006, considers herself a savvy shopper -- but isn’t sure how to use those skills when it comes to healthcare.
“I know the insurer I have now gets a good negotiated rate with my doctors, but I’m not sure what kind of rate I’ll get. Maybe my costs will go up,” Hammes said. “But on the plus side, the money I don’t spend on healthcare is in the account tax-free and gets rolled into next year.”
In general, hospitals, doctors and medical labs have been resistant to disclosing prices and often bristle at efforts to determine quality.
Some healthcare consultants, such as Smith of Adobe Group, believe that once consumers begin to demand information all that will change.
The rise of consumer-directed plans will “create [its] own momentum, kind of like what happened with the Internet,” she said. “The information will have to be made available.”
Some of the nation’s largest health insurers are trying to bridge the information gap, with websites and other price disclosure tools:
* Aetna Inc. took the most dramatic leap in August, when it became the first major health insurer to publicly disclose the fees it negotiates with physicians. It began posting on a website for members the various prices for treatments by doctors in Cincinnati. The company says the pilot project has been successful and will be expanded in 2006.
* PacifiCare Health Systems in Cypress has developed Web-based tools that provide cost ranges and information on the 200 most common diseases, conditions and medical procedures. The Healthcare Cost Estimator offers low, average and high costs for services within and outside PacifiCare’s network of contracted doctors and hospitals. Information on quality is also available. It does not, however, give prices for individual doctors.
* To help improve transparency in California, the state in July began requiring hospitals to submit annually a copy of a so-called chargemaster, which contains prices of all services, goods and procedures for which a separate charge exists. The information can be found at www.oshpd.ca.gov/HQAD/Hospital/hospchrgmstr.htm.
But the information is not available in a form that makes it easy to compare -- in part because hospitals all have different ways of defining procedures.
This week, the nonprofit California HealthCare Foundation will release a study showing the results of “mystery shopper” visits to 64 hospitals statewide. The shoppers asked for the prices of various elective procedures and found mixed results, with many hospital employees saying they’d never been asked the price of a treatment.
Asking for prices was so rare that employees got suspicious if two shoppers visited the same hospital within two months, even if they asked about different procedures, the survey found.
“Hospitals haven’t ever been retail environments, and they aren’t set up for that,” said Maribeth Shannon, the head of hospitals and nursing homes for the foundation. “Hospitals recognize, though, that change is coming and they are going to have to change.”
