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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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