When Lisa Rosenbaum fell and landed on her shoulder a few months ago, her first concern was the unsightly angle at which her clavicle was now jutting beneath the skin. But a secondary concern, following the broken clavicle diagnosis, was: How much will this cost?
And then, her third thought: Do I really want to know?
Among the many things ailing America’s health care system, one of the most-cited conditions is an absence of transparency when it comes to pricing. Doctors don’t know the costs of tests. Patients don’t know before a procedure or service what they'll owe in terms of deductibles and co-insurance, or if they’re getting a good value. Insurers negotiate wildly different prices from hospital to hospital.
The natural antidote for that condition is pricing transparency. If people know what they’re going to owe, they'll spend their money more wisely.
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The calls for price transparency in health care go back more than a decade.
President George W. Bush called for more of it in his 2007 State of the Union address.
Insurers and hospitals need to drop the “shroud of secrecy (that keeps) information on the prices charged for health care and the quality of that care opaque from public view,” Uwe Reinhardt, of the Wilson School of Public and International Affairs at Princeton University, wrote last year.
“It’s very reasonable (to argue that) people have a right to know how much things cost,” Rosenbaum said. But, “We just have to be careful about how we disseminate that information, and be careful that (people) don’t make decisions that are bad for their health.”
Rosenbaum, a cardiologist, is a fellow at the Philadelphia Veteran Affairs Medical Center, and a Robert Wood Johnson Foundation clinical scholar at the University of Pennsylvania.
She has health care coverage.
But with her high-deductible health-savings-account insurance plan – and with her intimate knowledge of the cost of hospital care – she knows that costs can add up quickly, and she wanted to make sure she wasn’t overpaying.
She calls it a “cognitive glitch” – once money is introduced to an equation, people have a hard time fixating on anything else. That’s particularly true among people who don’t have much money to begin with.
“It’s very hard to think about long-term (health) consequences” when you’re instead worried about what’s in your checking account, Rosenbaum said. “Asking patients to weigh price at the point of decision” could, in some cases, be counterproductive, with people making decisions based on cost rather than health outcomes.
But many in health care, and many more outside the industry, think consumers need information to make good decisions.
In Massachusetts, for example, physicians and hospitals are now required, as of Jan. 1, to provide the cost of procedures and services to patients who request it. They must also, if asked, turn over billing codes and other data that might be helpful in determining a patient’s ultimate cost.
Health insurers are required to provide cost estimates, too, as of October 2013. Early on, few consumers have taken advantage of the new Massachusetts law.
And Rosenbaum said in an interview that she wouldn’t be surprised if that trend continued, making an analogy to the calorie totals that many restaurants now publish on their menus.
The assumption, of course, is that if people know that the burger has 1,200 calories, they may order a salad instead. And yet, “There is no evidence to suggest that these labels have decreased calorie consumption,” she wrote in a piece for the New Yorker.
“Another failed transparency effort (involved) using ‘report cards’ to publish cardiac surgeons’ performance so that consumers would have better information. In this case, it was physician behavior that changed: The sickest patients – more likely to die and thus reflect poorly on the physicians’ performance – were increasingly turned away” in New York.
One of Rosenbaum’s philosophical sparring partners is colleague Peter A. Ubel, a physician and a professor of marketing and public policy at Duke University. Pricing transparency “is not a cure-all for our health care cost problems,” he said.
But as more Americans are being steered toward less comprehensive plans – limited networks, higher deductibles, higher co-insurance rates – those people deserve to know what, exactly, they’re going to owe when they visit a specialist or a primary care doctor.
And he’s not sold on the argument that people with less money might panic into making bad decisions because of looming medical bills. If anything, people with less money need more information.
“If you’re financially strapped, do you just want to go in and get some care (when you’re) not sure what it’s going to cost you?” he asked.
But the cost transparency data need to be paired with other data, in order for people to make good decisions – both for their own health, and the health of the entire industry.
“Price transparency means nothing without price incentive,” Ubel said. “Right now, there’s not much incentive to shop.” That will change as patients become more sensitive to price by way of health plan design.
Rosenbaum said there are clearly instances when price transparency is beneficial. For elective surgeries, it could be helpful to compare cost and quality metrics ahead of time. There’s evidence that when all providers publish their fee schedules, transparency creates downward pressure on prices, bringing regional market forces to bear in a sector that has long evaded them.
She pointed to a case study in Oklahoma City, where one surgery center has been publishing its procedure prices for four years.
“In order to compete, other hospitals in Oklahoma began listing surgical prices; patients were able to comparison-shop and hospitals lowered their prices” to match, Rosenbaum wrote in her magazine piece.