Have you personally embraced federal health care reform? Are you an ObamaCare basher? It doesn’t matter. We all want to stop the run away cost of health care. Here are some simple steps we can take to do just that.
We must provide or improve transparency throughout the health care delivery and finance system. Let’s focus first on the health care providers. Austin Frakt, a health economist and assistant professor at Boston University’s School of Public Health notes: “In each of the past 50 years payment to health care providers has accounted for more than 85 percent of health insurance premiums.” Frakt blogs at The Incidental Economist. We are kidding ourselves if we think we can address health care costs without directly engaging and meaningfully affecting provider payment practices. I’ll deal with the health insurers in a minute.
Did you know that prices actually charged by doctors and hospitals vary greatly based on who is paying the bill? Medicaid (low income) and Medicare (seniors) pay less than an insurer for the same service. Insurer A will pay less than insurer B for the same service in the same hospital. This is usually due simply to the greater number of consumers covered by Insurer A compared to other insurers in the marketplace. If you are a person of substantial resources and choose to be uninsured, you will probably be charged the highest price of all! This systemic subsidization and cost shifting phenomenon were not widely known outside the circle of “health care delivery and finance players” until recently. We all need to know more. And, we need to know it now.
Transparency in pricing for medical services is not a new idea. In fact, New Hampshire has been working hard to bring transparency to pricing in the hospital services context. The SB505 Commission on Health Care Cost Containment is regrouping and fine-tuning its focus. The most recent meeting suggests it will carefully examine transparency issues.
Widespread consumer knowledge of pricing alone will not control health care costs. If we are to rely on an educated consumer to make reasonable health care decisions, she also needs transparency in medical outcomes – quality of care data to make an informed decision. The public needs access to a standard way of comparing the degree of success one will likely enjoy from a given procedure. This outcomes data needs to be available by professional and facility. In short, we need the tools to know what a given medical procedure will cost and what are the likely outcomes – by professional and facility.
When both pricing and outcomes data are readily accessible, we can make informed decisions. Without this data, we cannot evaluate who should perform a given procedure and where that procedure should be performed.
In addition to transparency of pricing and outcomes, we need a construct in which the ultimate consumer – patient – has a direct financial risk associated with the purchasing decision. If someone else is paying the bill, how much will transparency of pricing and outcomes data influence the purchasing decision? Probably, not much! How will pricing and outcomes data affect costs after a consumer has met all out of pocket expenses under even a high deductible plan? Not clear.
While roughly only 15 percent of our insurance premium is consumed by the financing side of health care – or the “insurance process” transparency here would also help. How much profit is being taken out of the system by for profit insurers? Why are insurance broker compensation arrangements designed to reward keeping the business with the incumbent insurer? What really is loaded into the administrative overhead portion of the premium? How do insurer contracting arrangements with the providers and their varying price structures affect costs and competition in the marketplace? Are there similar questions we should be asking about the government payors?
Answers to these questions would enable the policymaker to attack spiraling health care costs with weapons not widely available. You wouldn’t purchase a new or used vehicle without pricing, quality, and insurance data to inform your purchasing decision. Why should we purchase something as vital and personal as healthcare without pricing, outcomes, and insurance data?
If you have any questions about insurance law, please contact Donald Pfundstein at (800) 528-1181 or by email.
*Donald Pfundstein is admitted in New Hampshire.