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The Healthcare ‘Consumer’ and Eye of a Needle

Camel and Eye of NeedleAgain I tell you, it is easier for a camel to go through the eye of a needle than for a rich man to enter the kingdom of God.
Matthew 19:24

Recent research from the Health Care Cost Institute (HCCI) suggests that savvy shoppers in healthcare may only have limited market power to drive costs downward. Coming from 2011 health claims data provided by a handful of national commercial carriers, HCCI examined medical claims for people under age 65 who were covered by employer-sponsored health insurance.1

Researchers looked at total spending for ‘shoppable’ health services, which consists of care scheduled in advance – such as flu shots, non-emergency hip or knee replacement, colonoscopies, urinalysis and other non-emergency services.

Only seven percent of total healthcare spending in 2011 was paid by ‘consumers’ for shoppable services. This out-of-pocket spending total includes deductibles, copayments and coinsurance required by health plans. Many health plans use copayments for doctor visits – such as $20 per visit – which offers little, if any, incentive to price shop when seeking care. In 2011, about a quarter of the total paid out-of-pocket was from copayments. Deductibles accounted for almost half of the dollars spent by consumers for shoppable services, while 27 percent was tied to coinsurance payments. HCCI analysts summarized this report as follows: “Overall, we come to the conclusion that the potential gains from the consumer price shopping aspect of price transparency are modest.”

Dovetailing this assessment, in July 2015, the Catalyst for Payment Reform issued a ‘Report Card on State Price Transparency Laws’ that shows only three states garner a letter grade of ‘A’ or ‘B’ for price transparency – New Hampshire, Colorado and Maine – while all other states receive failing grades (Iowa included). Just recently, the U.S. Supreme Court rendered a decision on the Gobeille v. Liberty Mutual case making it difficult for states to include ERISA-based self-insured medical claims in ‘all-payer claims databases.’ From this decision, it appears that price transparency for medical costs will need to discover alternative paths to eventually reach the healthcare ‘consumer.’

As deductibles and other cost-sharing arrangements continue to move upward due to increased health costs, carriers and self-insured employers use cost-relief measures to keep coverage affordable – one of which is limiting the number of providers within networks. Fewer providers in a network may allow for competitive price breaks, but a potential problem can erupt for the unsuspecting patient – surprise medical bills from out-of-network providers who contract with in-network facilities. This happens when an in-network hospital contracts with out-of-network medical staff, including emergency-room doctors, anesthesiologists, surgical assistants or lab technicians. Hospitals are typically not obligated to tell the patient BEFORE surgery that certain services will be performed by out-of-network providers – who are allowed to charge above and beyond the patient’s in-network financial responsibilities.  According to a 2015 survey by Consumer Reports, this situation happens to an estimated 1 in 3 American adults every two years. Sometime AFTER the service was provided, usually when the invoice(s) arrive, the patient is shocked to learn of this practice.

So much for allowing the patient to become a more proficient healthcare ‘consumer.’

Driving costs downward in the future will require all payers (government, employers and insurers) to find innovative solutions to deliberately incent the provider community to deliver higher-quality outcomes at affordable costs and eliminate nonsensical surprises. But doing this is much easier said than done. Finding and implementing appropriate financial incentives to elicit the right behaviors without causing perverse consequences is akin to fitting the camel through the eye of the needle. From the provider (and carrier) perspective, there must be a good business case to hold costs down while those insured are reasonably protected from unintentional financial harm.

Market-driven healthcare enthusiasts will view the HCCI report as a somber message about the progress made since the dawn of ‘consumer-driven healthcare’ earlier this century. Price and quality transparency is a moral obligation to the American public, and it all begins with having the right payment incentives that drive a new, intentional culture of care delivery.

From today’s perspective, the eye of that needle looks awfully minuscule.

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1A five-year lag on claims data is a testament to the archaic tools we have at our disposal when analyzing healthcare usage. Unfortunately, we continue to live in a tapestry world of siloed, fragmented data, that attempts to solve a complicated jigsaw puzzle with missing puzzle pieces.

What’s Behind our Health Price Curtain?

Healthcare Cost CurtainWhy don’t we know the true cost of the ever-increasing healthcare that we’re required to pay? Who’s responsible? In 2014, we decided to ask the key payer themselves – Iowa employers.

It’s no secret – health plan deductibles continue to increase annually, thanks largely to consumer-driven health plans (CDHPs). Through CDHPs, employees and their family members now share a greater burden of health costs, a trend that we have been tracking for the last 16 years in Iowa.

Similar to the CBS game show, Let’s Make a Deal, where game contestants have opportunities to choose between prizes of unknown value (usually found behind curtains or large panels painted to look like boxes), patients are being asked to find their best ‘deal’ throughout the complex healthcare marketplace that is laden with curtains not meant to be opened. In healthcare, not even Carol Merrill, the iconic model for this popular game show, can navigate patients into making informed choices.

With ever-increasing financial exposure to healthcare costs, most insurance and healthcare experts agree that price transparency will become even more important to patients as they spend additional money on their own care. This makes sense.

Partly due to the Affordable Care Act, payment for healthcare services is morphing from fee-for-service arrangements (the more services provided, the more we pay for those services) to bundled payments or value-based arrangements that often includes added risk for those providing care.

Accountable Care Organizations (ACOs) are increasingly becoming more common around the country, and in Iowa. ACOs are payment and care delivery models that attempt to tie provider reimbursements to quality metrics for a given population of patients. The ACO is an organization of healthcare providers who agree to be held accountable to patients and third-party payers for the appropriateness and efficiency of delivering high-value care at reasonable costs. Since the passage of the ACA in 2010, a great deal of change continues to evolve in the healthcare and insurance industries.

For patients to make the most appropriate and efficient choices for themselves and family members, easily understandable cost and quality metrics are critical pieces to this healthcare puzzle. But can this really happen? Choosing between healthcare providers (comparison shopping) for any given procedure is very confusing and almost impossible. Outcomes are variable because different therapeutic procedures have dissimilar outcomes for dissimilar populations of patients. On top of that, we have inadequate information about the cost of these procedures, making our healthcare ‘markets’ nothing more than a price tag-less shopping adventure. In fact, according to the Healthcare Incentives Improvement Institute, only two states received an ‘A’ grade in quality, while 48 states receive ‘little to no transparency,’ by receiving ‘D’ or ‘F’ grades.  Iowa received an ‘F’ grade for both quality and price transparency information.

It was within this context that we asked Iowa employers this past summer a very simple question:

Who is responsible for lack of healthcare cost transparency in Iowa – hospitals/physicians or health insurance companies?

The response appears to be a justifiably confused tug-of-war battle.

Using a 10-point scale, with 10 being ‘Very Responsible,’ Iowa employers gave hospitals and physicians an overall score of 8.0. Employers obviously believe that our healthcare providers are a big reason that we do not have transparent costs. However, employers scored health insurers only an eyelash less, at 7.9. In short, employers believe that BOTH parties are responsible for lack of price transparency.

The results are found below. Due to the scale of this graph, it may appear that health providers have a much greater responsibility, but in reality, the scores are virtually identical to one another.

Lack of Price Transparency

Health providers and insurance companies’ scores are statistically similar.

What can we learn from this? The price transparency problem is perceived to have not one, but two, responsible parties. However, finger pointing is futile and counterproductive, and certainly not the purpose of this survey question or blog. Instead, new approaches must emerge that reflect true costs that are ultimately linked to quality of care.

For value to be determined, meaningful price and quality metrics are needed. One without the other will only leave us scratching our heads about which curtain to choose.

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Trust, but Verify

David P. Lind Benchmark“Fair and balanced.”

You hear this phrase from many different sources. It conjures up something within us that we all desire to have when making critical decisions. Understanding the pros and cons on any given issue is important to most of us. But do we really receive the “truth” or the “transparency” that will allow us to draw our own conclusions on the subject matter at hand? It really depends on the source of the information…so I believe.

The reason for this particular blog stems from a presentation that I recently gave at the “2012 Iowa Employment Conference” in Altoona. Much of my presentation focused on the health insurance trends in Iowa based on our annual studies. The trends by the way, are dismal at best, unsustainable at worst (another blog for later). When discussing potential solutions for employers, a few topics were breached such as consumer-driven health plans, wellness initiatives, and health reform measures. I mentioned that each topic will usually have many arguments (both pro and con), in addition to having both intended and unintended consequences. To know the subject matter well, I suggested to the audience to have a comfort level with their SOURCE of information (publications, media outlets, research organizations, etc.).

Much to my surprise, a hand was raised that followed with this question: “Which sources do YOU trust?” This question came out of the blue for me, but was asked in a thoughtful manner. I don’t quite remember my response that day, but since that presentation, I have had time to further reflect on this question. The word ‘Trust’ is defined in the Merriam-Webster dictionary as “assured reliance on the character, ability, strength, or truth of someone or something.” Another definition is “one in which confidence is placed.” I like both.

Regarding health care related stuff (including health insurance programs offered by employers), I TRUST a few particular sources. Each source has earned my trust over the years due to consistent research that attempts to factor out biases that typically are inherent in any type of research. Also, the authors of such research will generally disclose any potential outside influences that may mitigate the truthfulness of the results.

In no particular order, my short list of trusted sources is found below:

  • Health Affairs Journal – Many authors (national and international experts) write thought-provoking articles on highly researched thematic topics each month.  This is the gold standard because the information is fresh and relevant at all times. I also download their free podcasts and listen to them while I run in the morning. A subscription is necessary for this journal…but it is well worth the investment.
  • RAND Corporation – RAND provides objective research on many issues, including healthcare. Rand provides very innovative material…much of it can be found on their website at no cost!
  • Kaiser Family Foundation – Most information is at no cost…and there is a ton of information on many different health topics. A great go-to source!
  • Dartmouth Atlas of Health Care – The pioneer on the disparity of health care delivery in the U.S.

There are other sources that I highly value, but those sources (at least in my view) tend to be a level below the four mentioned above. Just know that the SOURCE of information is just as important as the content of the information being conveyed.

President Reagan adopted a signature phrase and made famous when discussing U.S. relations with the Soviet Union:  “Trust, but verify.” This phrase can also be applied to healthcare information and many other topics!