The Journal of the American Medical Association** has an interesting article on the utilization of patient centered consumer driven decision support tools that are supposed to allow for people to choose cost-effiecient and effective treatments that they pay for with their deductible dollars.
Results ….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. Mean outpatient out-of-pocket spending among those offered the tool was $507 in the year before introduction of the tool and $555 in the year after….. Being offered the price transparency tool was associated with a mean $18 (95% CI, $12-$25) increase in out-of-pocket spending after adjusting for relevant factors. In the first 12 months, 10% of employees who were offered the tool used it at least once.
Conclusions and Relevance Among employees at 2 large companies, offering a price transparency tool was not associated with lower health care spending. The tool was used by only a small percentage of eligible employees.
This is an interesting study, but I think it is a limited study. The two employer groups that were studied had deductibles ranging from $500 to $2,500. Not all of the those deductible dollars would have been used for outpatient care (the measure being used.) Furthermore, for most people, outpatient care is only a fraction of total medical spending. This leads to a problem of the analysis.
Deductibles put 100% of the burden of a procedure’s cost on the patient until that patient hits the specified deductible level. When a patient is below that level, they may or may not care that Provider A is less expensive but somewhat further away than Provider B. We would expect to see some shopping behavior when people are below their deductible. However once the deductible has been met, the patient has no reason to care (absent co-insurance) that Provider A is less convenient but cheaper than Provider B. At that point, the tool fails.
What are the policy implications. The simplistic one is that ever increasing deductibles will eventually make people good shoppers. That has not yet been the case and it should not be the preferred policy solution. There are two other solutions that are possible. The first is to switch deductible cost sharing to co-insurance cost-sharing. People will respond to a 30% cost-share far longer than they will to a satisfied deductible even if the actuarial value of the plan is the same, more services are exposed to cost sharing.
The second plausible solution is to remove some of the smart shopping expectations from that patient and put it back on the insurance companies and other expert support systems. This means insurers should be tiering their networks, this means insurers should be engaged in value based insurance design where high value procedures are subject to no cost-sharing and low value procedures are subject to high cost sharing, insurers should be paying their members to go to efficient and cost effective providers with physical checks to create loss aversion strategies.
But the patient as a shopper is not working well, and this study is indicative of that.
** Desai, S., Hatfield, L. A., Hicks, A. L., Chernew, M. E., & Mehrotra, A. (2016). Association Between Availability of a Price Transparency Tool and Outpatient Spending. Jama, 315(17), 1874. doi:10.1001/jama.2016.4288
dr. bloor
I suspect for at least some, the deductible isn’t big enough. We set a record in our house this year–made it all the way to April 7th before we killed the deductible. There was never any question it was going to happen.
Also, too, remind me to tell you sometime about how I lose a handful or two of referrals every year because I don’t charge enough. Getting the public to rationally analyze what they’re getting for their money, for those who actually should be doing so, is a generational project that’s not going to be furthered by putting a cost widget on the insurance company’s home page.
sherparick
My wife and I both had orthopedic operations in the last 6 months following some unexpected trauma (in my case a tendon snapped in my left arm and in her case her she tore her meniscus cartilage. Are primary concern was finding a doctor who would do a competent operation and quickly; 2) was relatively convenient to our home and 3) that our Employer Benefit Insurance coverage had as part of the preferred provider plan. The last of course was economic, but we did not worry to much about the deductible since I knew we soon exceed that expense with these procedures, including the pre-operatoin MRIs. Again, my own personal point of view is that when one is sick or injured, one is not inclined to haggle price and I doubt the conservative economists who advocate this “consumer based” model actually haggle prices themselves when they our an immediate family member is sick or injured.
Betty Cracker
@sherparick:
This, this, a thousand times this. It’s not like buying a goddamned car or laptop.
Poopyman
Seeing the title, I’d assumed this was another post about the Republican primaries. I’m not sure I should be relieved or not.
satby
@Betty Cracker: Exactly. People want details about how good their care will be, not where their provider is in the cost rankings.
Applejinx
This is not surprising given that SHOPPER as shopper doesn’t work terribly well.
The idea that markets produce intelligently-self-interested rational actors is a striking bit of ideology, but it’s funny how every time you look at the results the opposite is true. Seems like more of a Men In Black situation: ‘a person can be intelligent and self-interested but shoppers are dumb panicky animals with herd instincts and you know it’.
Therefore, I wholeheartedly agree with the AMA’s painfully arrived at conclusion, and your endorsement of it.
And now, I’m off to peck at an unnaturally large red spot on a paper-mache beak, in hopes of food ;)
Capri
There is a similar price comparison tool offered where I work, although it’s going to be dropped because nobody is using it. My experience with it was this: When I signed up for health care and picked my plan, options, etc. there was a page that came up that said I could use the price comparison tool because it was included with the insurance. It was not really explained, it was not placed in context, and there were no examples given as to when a patient might want to use it (i.e. in an ambulance after a car crash – no, planning a future back surgery -yes). So unless someone who understands medicine (and in my experience none of the insurance types do, their faith in an M.D., any M.D., is absolute) takes the time to educate patients on how to best use this tool, I’d be suspicious it wasn’t really given a fair shake.
greennotGreen
There is a hospital about two minutes away from my mother’s house. I was convalescing at her home after my cancer surgery in 2012. After a couple of overnights at that hospital for complications, we decided to drive 45 minutes to the hospital where I’d had the surgery for any further care.
All the convenience and cost savings in the world don’t matter if you’re dead.
Mark k
Richard, how do we email you? I have a question I’d like you to explain to us all regarding the insurance market and something from an old old post I think maybe by Kay?
the email question is basically this: if the post office is constantly in peril because of health insurance pre-pay requirements, why didn’t the ACA with government employee use requirements help solve the problem yet? with the exchanges, assistance, medicaid expansions, and federal employee rules, shouldn’t the post office books now read several tens of billions of dollars in the black? what’s going on here?
thanks for any write up or posts on the matter.
greennotGreen
OTOH, sometimes when a person is really sick, a “convenient” location becomes a “possible” location. This is why, after my diagnosis, I sold my beautiful country property and bought a place 35 minutes from the hospital, not 1.5 hours from the hospital.
I wonder if it’s ever pointed out that a lot of the farmers who grow the food we eat make a serious sacrifice in terms of their health because of the distance to quality health medical care?
Schlemazel Khan
@Mark k:
I am not sure if I understand your question. Postal employees are not required to do anything because of ACA, they have their own health insurance plans & the pre-pay scam is over the benefit for retirees.
Richard Mayhew
@Mark k: There is a drop-down box with contact an author information….
Gelfling545
There are going to be so many other factors that price when it comes to medical care. Can you get scheduled relatively soon? Do you know people who have used this provider? Is this someone your pcp recommends? Those are factors just off the top of my head & I am sure there are others. Where I live & the Catholic Health System is huge, even religion might be a factor if you don’t want to be subject to the restrictions on a Catholic hospital/practitioner.
Jack the Second
Did the analysis cover the health of employees who did and didn’t choose to use the tool? I could posthoc it either way (sicker patients expect to spend more and use the tool to save more; sicker patients expect to hit the deductible and therefore don’t bother with the tool) so I’m curious if there was a difference.
dww44
I had one thought when I read this:
And that thought wasn’t about healthcare and insurance companies, but was rather that they are simply just like the rest of the service delivery individuals and companies across the greater economy. They are all, no matter the industry, shifting a lot of customer service functions they used to provide onto the backs of consumers. Go paperless and print your own bank statements. Sign up for autopay and never worry about missing a payment again!. Appointments and reminders sent by email, replacing a simple non time consuming phone call by an actual person.
I’m not technology averse but I am not too old or stupid to figure out that it’s my time and my money and my paper that are being used to provide the customer service I used to receive. All this just so they can eliminate a few more humans and increase their bottom line and to save them time ( a few more humans lose a job).
jo6pac
Well it looks like health care for all in Colo. is under a full attack. Sad
https://theintercept.com/2016/05/03/single-payer-dems-colo/
CONGRATULATIONS!
All the way until this year, a 30% cost-share would not have been a big deal.
This year, it would have lost me my house and put me into bankruptcy.
Gotta be a better solution than that.
Shygetz
I don’t think your solutions touch upon the core problem: patients trust their doctors, and the profit incentives for doctors (at least short-term) are not to give the most efficient effective care. Increasing co-insurance costs will keep the poor from care they need, and will not keep those who can afford it from inefficient care they are TOLD they need. The second solution, having insurance companies as shoppers, won’t work because people do not trust their insurance companies. Again, for good reason–the historical incentive for insurance companies has not been to ensure efficient, effective care. The only solution I can see is to change the incentive structure for the health care providers.
amygdala
@Jack the Second:
The paper, alas, is paywalled, but as noted in the abstract, the authors adjusted for demographics and, it seems, health status (although it would be nice to see how, in the actual paper). The first page of the editorial that accompanied the paper offers some other potential limitations of the study.
The editorial mentions a point alluded to by Doc Bloor at #1, specifically that patients may equate higher cost with higher quality care. That squares with studies on pharmacy benefits, in which patients seem to favor pricey brand name meds over generics.
Timbo
@CONGRATULATIONS!:
There is usually an out of pocket maximum associated with any plan you sign up with.
Richard Mayhew
@CONGRATULATIONS!: The 30% cost share would still be capped (a $500 deductible is roughly equal to a 30% cost-share with a cap of $650 in total out of pocket). The cap would be higher than the deductible total, but the ACA caps it at ~$6,800 this year.
Steeplejack (phone)
@Richard Mayhew:
American Medical Association, not Society. (In your original post.)
Betty
The free market fallacy that will never die that health care is a consumer good with price being a driving factor for consumers. Ugh, ugh and ugh! In the meantime, where the government has market power and could try innovative approaches, little has changed over the years since health care costs first became a big political issue. Hard to be optimistic that this broken system will be fixed in my lifetime.
MomSense
Isn’t one of the problems with the patients as smart shoppers model, that we are getting our information mainly from providers?
Richard Mayhew
@MomSense: Bingo! Massive information asymmetry, massive search costs, and massive bullshit detection costs
CONGRATULATIONS!
@Richard Mayhew: Better. But seven grand would be a murderous hit to most people. My wife and I could deal with it for one year, perhaps two, but it wouldn’t be pretty.
pseudonymous in nc
Who could have predicted this? Oh, pretty much everybody who realises that ‘skin in the game’ is mostly bullshit. What will happen if deductibles go up any further is that people will irrationally ration themselves and eventually need something expensive that blows out their deductible in one go.
And ‘smart shopping’, especially with multiple providers, turns the patient or patient’s advocate into the communications network and administrative staff, ensuring that the paperwork gets from one provider to another and everything is scheduled appropriately. As others have said, a chunk of the burden has been outsourced onto those paying through the nose already.
tinare
I have a high-deducible, HSA account plan through my employer. The only good side to it is that I am healthy and preventive care is covered, so my out of pocket is, as of right now, low and my employer does make a contribution to my HSA annually.
However, I have a family history of aneurysm and so my doctor wanted me to have an ultrasound of my aorta just to make sure there were no indications. Part of the issue that i had with shopping is that the tests were described in technical terms that I did not know, so when I went shopping for a place to do my ultrasound, I had no idea what flavor of ultrasound I needed nor was I able to distinguish why the costs varied so. Part of the problem with shopping for healthcare is that I don’t speak healthcare and I don’t necessarily know what all is needed to get the results my doctor wanted. So, I basically ended up going to the place closest to me in the end. And it luckily wasn’t bank-breaker.
But, shopping for medical tests isn’t like buying a dress. Or even a car. I don’t have the knowledge necessary to REALLY make an informed decision and I don’t have the time to learn. Nor do I really want to.
? Martin
Health policy experts need to work closely with retail experts to understand how consumers respond to pricing – because it is vastly more complicated than people realize. One example of decoy pricing (TED talk, apologies, but it does illustrate the point well).
There is almost no aspect of modern retail expertise being applied to health care pricing and availability and as a result the outcomes are not going to be met. Its routine to mock these things, but they really are very effective – open customer reviews (Amazon), easy availability/shipping (again Amazon), pricing psychology (Apple, auto industry), retail experience (Apple, most successful small retailers). Complicating this is a set of regulations that make retail extremely difficult to do properly and a scaling issue that also makes it hard – a lot of healthcare isn’t common enough to get local efficiencies and is either of a type or is regulated in a way (prescriptions) to make wider efficiencies impossible. And because healthcare is both expensive and high risk of getting wrong, consumers typically don’t have price as their first priority – they have security.
Example: my mom is on medical vacation. She’ll be here for 2 weeks for an eye procedure that she struggled to find a doctor in her state that she had confidence in. It was WAY more expensive for her to fly across country and have the procedure done here, but CA has a large enough concentration of people to have a lot of local expertise. It’s possible her doctor at home would have done a fine job of it, but there was almost know way for her to get information to convince her of that – no feedback from other people that have had the procedure done, no outside ratings, none of the things that a consumer would seek out to know if the product they are buying is good/reliable/value, etc.
Any expectation that consumers will take responsibility for their spending has to be matched with a retail environment that meets the consumer needs – and by and large that doesn’t happen. It does for band aids and maybe goods like canes and walkers, but it doesn’t to anything FDA approved, to drugs, to procedures, etc. HHS could help build some of these things, they could partner with others (like Amazon) to do some parts of it, but it must get done or else that expectation should be dropped as unrealistic.
Poopyman
@greennotGreen:
My father would tell you that, if he hadn’t been the victim of compassionate incompetence.
Gretchen
The problem with the shopping model is that it’s impossible to find out prices ahead of time. The office will tell you that they’ll run it through their insurance and get back to you later. Who has time to do that with 2 or 3 providers every time you need something, assuming the offices are willing to tell you. Which they are often not. It’s not like you can ask for a price list from three different providers and go home and study them.
BruceJ
@? Martin:
Not a single one of those things are crucial to my ongoing status as a living human being. Not a single one of those things applies to getting an appointment with an appropriate specialist to take care of my needs.
Healthcare isn’t shopping for a new goddamn iPhone or some gewgaw from Amazon. (and who the HELL would believe or trust Amazon-style reviews of doctors? Seriously? Random Internet Guys sez Doctor Bonecrusher is the GREATEST. Yah rigggghtttt.)
Gretchen
Another thing: It’s not a pure shopping model. It’s not like the surgery is going to cost me $1000 at one doctor and $1200 at another. There’s the anaesthesiologist, the fee for use of the surgery room, the doctor fee, the hospital fee, some of those things are in- and out- of network, and if you go to two practices and ask them to give you a price on all those things ahead of time, they simply won’t. They’ll tell you they’ll run it through their insurance after you’ve had the surgery with them and that’s how you’ll know.
And I’m a reasonably intelligent person, but I don’t understand how my deductibles work. Some things apply to it, some things don’t, and after it’s been met there are still some things I have to pay for, and there are different levels of meeting the deductible for each individual in the family, or the total family deductible. Really, it makes me really, really angry that people making policy asserting that I should just be a smart shopper. I can be a smart shopper knowing that gas is $2 a gallon at one gas station and $2.10 at another. There’s no way that someone like me can make sense of this mess and be a smart shopper when I need multiple procedures from multiple providers, and so do others in my family.
Gretchen
I would love to see this price-transparency tool, but I suspect I would be as impatient with it as I am the assertions that I should be a smart shopper. It’s probably transparent to someone in the insurance industry who understands how these things work, but I doubt that it’s transparent to someone who isn’t entirely clear on what a deductible is and what happens before and after you meet it. I’m guessing it assumes a level of sophistication on the part of the user that isn’t there.