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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.

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