Price Transparency Gives Employers and Insurers Control Over Health Costs
News Health care shopping tools for consumers can help save money, but price transparency alone will not fix our nation’s health care system.
Some health care “reformers” have a vision of a health care system where consumers can have an Amazon-like experience by going to the internet and shopping for health services based on the quality of care offered and prices charged.
While some consumers also aspire for that day, there are significant barriers to this approach. Designing a reformed health care system assuming that most consumers want to shop for health care the way they shop for cars is likely to fall short.
There is a more than $20,000 price difference between a knee replacement surgery in Palm Bay and Miami, FL, which are 180 miles apart. Transparency can shine light on such price differences. One vision of transparency is that consumers will ”march with their feet” and drive to Miami for their surgery.
“While consumers should have access to quality and price information...less than half of all health care dollars are actually spent on shoppable services...”
Helping employers save
While such action is individually rational, many consumers will not shop this way. The real goal of transparency is to have those who pay the bulk of the health care bill — insurers and employers — question the prices in Palm Bay. When successful, payers can drive down the price in the area benefiting everyone regardless of whether they shop.
Targeting consumer interventions to services that are shoppable makes sense when there are price differences in a location and services are schedulable and discrete with little variation in quality. Encouraging consumers to shop for some tests, imaging and screening, such as colonoscopies, may save money. Shopping for services that undermine the doctor-patient relationship or that are at odds with models of integrated care is likely to undermine quality.
While consumers should have access to quality and price information (even if few have demonstrated a strong desire to use this information), less than half of all health care dollars are actually spent on shoppable services and consumers spending on them only amounts to 7.5 percent of total health care spending.
Therefore, while consumers have some “skin–in–the–game,” payers, whether employers or insurers, bear the vast majority of the financial burden and hence have an incentive and ability to improve quality and control costs. They need to step up their game.