When you shop for a new suit or a new car it makes good sense to compare prices and quality so you get the best value for your money. After all, it’s your money!
Healthcare prices, however, have always been hard to know. Without knowing what a treatment or procedure costs you can’t compare prices and shop for a better deal. Until recently, this wasn’t a big deal since most people expected their insurance to pick up the tab and they didn’t really care what it cost.
But with the rising cost of healthcare, especially the alarming rise of deductibles and copays, people are more concerned than ever what they will have to pay for healthcare. Since deductibles now commonly exceed $10,000 for a family plan, saving on the cost of healthcare can keep money in your pocket.
This is especially important in healthcare since the price of treatment and procedures can vary greatly in the same geographical area. The lack of transparency in healthcare pricing has allowed medical device manufacturers and providers to charge huge differences for the same products and services.
Josh Archambault and Nic Horton, writing in Forbes, document the following variations in pricing for the same services:
- Pneumonia treatment (without complications) ranging from $5,093 to $124,051
- Knee MRIs in New York City ranging from $440 to $4,500
- Specialty drug infusions ranging from $3,500 to $22,000 within miles
- An infusible drug ranges from $14,000 to $28,000 at two Maine hospitals in the same town.
As a young man I was told that you shouldn’t spend over 25% of your income on housing, the largest item in your budget. Today, many people are spending that much on healthcare. Experts project within 10 years, 30 percent of a family’s budget will be consumed by healthcare costs. Within 20 years, that number may reach 50 percent. That is unsustainable.
Yet, according to a survey by the Catalyst for Payment Reform, 98 percent of health plans around the country claim to have a cost calculator tool on their website, but only 2 percent of patient members use them. Why not?
Incentives. To change behavior most people need an incentive. That’s where a new idea called Right to Shop comes in.
Right to Shop
Right To Shop is a system of insurance incentives being tried currently in some states. Archambault and Horton explain:
“Right To Shop empowers patients with the knowledge they need to make smart choices about how and where they consume health care. They’re given tools to find the best value providers and, when they choose those options, they get a share of the savings – in cash.”
Three years ago the state of New Hampshire commissioned Anthem Blue Cross and Blue Shield to set up a Right To Shop system to give state employees shopping tools and incentives. After three years the program has produced $12 million in savings with over $1 million paid out to patients as rewards.
They have learned the following from their experience:
- Incentives drive shopping. Members are 11 times more likely to use a transparency program when incentive rewards are included.
- Incentives sustain shopping. Roughly 90% of program enrollees have shopped at least once, with two-thirds repeat shopping and earning incentives each year from 2011-2014. By contrast, most insurer transparency tools report only 2% engagement.
- Incentives drive savings. The program average approximately $650 in savings each time it is utilized.
- Incentives produce a return on investment. In 2015, New Hampshire’s program achieved a 13:1 return on investment (ROI).
The success of this program in New Hampshire has been noticed elsewhere. Similar programs are now developing in Kansas, Kentucky, and Massachusetts. Legislation to allow Right To Shop has been introduced in Florida, Maine, and South Carolina. This momentum is sure to continue as the cost of healthcare keeps rising.
A Word of Caution
I am all in favor of lowering the costs of healthcare, and transparency with incentives is a great way to do that. But consumers should understand there are differences in quality for the same services. Not all MRIs are created equally. I see numerous MRIs in my practice on a daily basis and some are high quality but some are not. Then there is the quality of the interpretation that also varies from one radiologist to another. Lastly, there is the issue of service, which affects not only the patient experience but also how quickly the results are provided to your doctor. Ask your doctor to recommend MRI centers he finds acceptable.
All of these factors should be considered when choosing where you get your next MRI. The same is also true of other healthcare procedures and treatments. However, more transparency of prices with incentivized patients to scrutinize them should lead to higher quality and lower cost healthcare for everyone. Competition has a way of raising quality and lowering costs – as long as there is a level playing field.
This trend to Right To Shop systems will have an even greater impact if ObamaCare is repealed and replaced with an alternative that encourages patients to open Health Savings Accounts and gives them more incentives to use them.