The plot to keep health care prices from consumers

Republicans championing the Ryan budget will be touting market-based solutions. But for markets to work, consumers must know prices.

By The Fiscal Times Apr 18, 2012 5:14PM

The Fiscal TimesBy Merrill Goozner

The possibility that the Supreme Court will strike down all or part of the Affordable Care Act has given new life to Republican calls to put market mechanisms to work in holding down health care costs. The public is certain to hear lots more about it on the campaign trail later this year.

There's one big problem, though. Markets cannot work when consumers and patients have almost no information about the prices they pay for health care.

Rep. Paul Ryan, R-Wis., chairman of the House Budget Committee, has resuscitated his proposal to turn Medicare over to insurance carriers. Future retirees would be offered financial help to pay for policies sold through public exchanges similar to the ones set up under Obamacare. The subsidy would be limited to the value of the second-lowest cost plan offered on the market. The idea is that over-65 consumers, who would still have the option of remaining in traditional fee-for-service Medicare, would drive down costs by forcing the plans to compete for their business by offering lower-cost alternatives.

Other Republicans and conservative think tanks are touting laws that would allow insurance carriers to sell individuals policies across state lines, which would be coupled with incentives to shift people away from employer-based coverage. Under such plans, individuals could buy catastrophic coverage for expensive hospital stays while using the savings to pay the entire cost of routine health services, just like they pay out-of-pocket now for lawyers, flat-screen TVs or the week's groceries.

Again, the idea is that people putting up their own money will be much more likely to scrutinize the price of tests, drugs and procedures, and choose accordingly. If they comparison shop, they might even visit the provider down the street.

Employers are already moving in the direction of giving consumers "more skin in the game," according to a recent survey by the Employee Benefits Research Institute. One in five Americans are already in high-deductible insurance plans, an all-time high, even though this approach is leading many to skimp on preventive services that could avoid higher health care costs down the road.

Unfortunately for the architects of such proposals, there's a crucial element missing from their proposals, something that is necessary to make any market work: accurate and easily accessible price information for consumers. Have you ever walked into a doctor's office and seen a price posted for all the tests, products or procedures that might be offered during your visit? At the hospital? Ever seen a price list at the local pharmacy?

The problem of price opacity in health care is not easily solved. Health care providers are more like airlines than the local Best Buy or Macy's. They charge different patients different prices depending on who insures them. The uninsured pay the highest prices, the equivalent of a hotel rack rate.

Medicare sets prices. Medicaid patients get the lowest available price. Privately insured patients are offered differing discounts, with larger groups afforded bigger discounts than smaller groups. The prices between the groups vary wildly.

"One specific factor driving the high cost of healthcare is the significant price variation – sometimes more than 100 percent – for the same healthcare services in the same geographic market," said Bobbi Coluni, senior director for consumer innovations at Thomson Reuters, in a recently issued report claiming consumers could reduce health care costs  $36 billion a year with full pricing transparency.

One example offered in the report: a typical Illinois employer could save $29,000 or 33 percent off the cost of knee arthroscopy, and the patient could reduce his or her co-pays by $300, simply by switching from the highest cost to the median cost price offered by different hospitals in that employer's area.

Yet employers are powerless to get the price data, many complain. Their insurance carriers frequently refuse to turn over claims data, which would enable them to compare prices between the different local providers and encourage their workers and families to choose the best value.

The insurers cite "proprietary information and preexisting confidentiality agreements with providers," charged Shawn Leavitt, a benefits manager at Minneapolis-based Carlson, which owns and operates nearly 2,000 hotels and restaurants worldwide. "These excuses are a cover for health plans' real concern: to keep health care purchasing decisions as opaque as possible to substantiate excessive administrative costs, and maintain the illusion of well-managed networks and large discounts."

It's not just insurers. Drug companies offer a wide array of discounts to insurers and pharmacy benefit managers. They've even begun offering coupons and discounts directly to consumers to keep them on branded drugs coming off patent, like the discounting recently adopted by Pfizer to keep people on Lipitor instead of switching to generic brands.

Medical device manufacturers that sell implanted heart devices, artificial knees and hips and spinal implants are also heavily into the discount game, which they couple with exorbitantly high rack rates. They negotiate different discounts with different hospitals, and then require each to sign a contract that forbids releasing pricing data to their competitors across town.

Rep. Stephen Kagan, a Democrat from Wisconsin who lost his seat in 2010 to a Tea Party-backed candidate, introduced a simple three-page bill in the last session of Congress that would end pricing secrecy in the medical industry. The "Transparency in All Health Care Pricing Act of 2010" said "any and all individuals or business entities, including hospitals, physicians, nurses, pharmacies, pharmaceutical manufacturers, dentists and the insurance entities . . . shall publicly disclose, on a continuous basis, all prices for products, services or procedures . . . at the point of purchase, in print, and on the Internet."

Though it received one sympathetic hearing, the bill was not included in the Democrats' health care reform legislation after intense opposition surfaced from virtually every health care provider group. No one has reintroduced the bill in the current session of Congress.

"Overly broad proposals that aim to disclose confidential pricing agreements and terms could undermine vigorous competition and have a negative impact on patients," the Pharmaceutical Research and Manufacturers of America said this week in a prepared statement.

A spokeswoman for the American Hospital Association said the group had supported an alternative bill introduced by Rep. Michael Burgess, a Republican from Texas who is also a doctor. That legislation would have had the Agency for Healthcare Research and Quality study the question. It  didn't pass either.


More from the Fiscal Times

 

19Comments
Apr 19, 2012 1:35PM
avatar
The only way we'll ever get true health care reform is if members of Congress and the rest of the federal government are subject to the same health care options that the rest of us get.  
Apr 19, 2012 10:55AM
avatar
I want to see a menu on the wall , like Burger King.
Apr 20, 2012 8:08AM
avatar
Leeches attach themselves to where the blood supply is and  health care is one of the best blood supplies in America...  As usual, the talk will go on and on and on with nothing in the interests of the consumer ever being done to solve the problem. If, by some small chance, something happens to come about to help solve the problem of the high cost of health care, the industry itself will find new ways to extract even more blood than before so as to make up any differences. Isn't it amazing how many times a bill is "miscoded" only after someone questions it or how a $48,000.00 bill for a 30 minute stent  implant procedure is miraculously considered paid in full by the provider when the insurance company only offers $18,000.00? Sure sounds like legalized racketeering to me!
Apr 19, 2012 10:46PM
avatar

After an 15 minute MRI last fall I received a bill stating "Your insurance Co has not responded"..."You may owe $4000.00"...Etc Etc.

Well, it was a miscoded bill and eventually resubmitted and paid. (As described below...)

 

So now: I get the receipt from the Hospital. (Amounts are an example)

Original cost of services: $4000.00

Cost adjustment per contracted agreement with insurer: $800.00

Amount paid by insurer: $720.00

Your deductible has not been met, Your Copay amount: $80.00

 

NOW let's see...had I not been insured I would have owed $4000.00.

Why wouldn't they let me settle for the $800.00?

No? So after half a dozen of these bills I go bankrupt and they get nothing?

 

Something doesn't compute.

 

 

 

 

Apr 19, 2012 3:29PM
avatar

The big problem is that the prices are not related to the relative value of the services in any meaningful way

 

Apr 19, 2012 8:00PM
avatar

     Before I retired I tried at the different drug stores in my town to get drug prices in order to decide which drug plan would give me the best deal.  I was told by all but one they were unable to provide that information to me and that I would have to get my insurance provideder to furnish their prices and what my co-pay would be on a drug by drug basis.  When I tried that route I found that different insurers had a great range of varience and avalibityy.  When I ask why the in some cases the price difference was so great I was told that it was because of the deals that different companies made with the drug providers.  In order to get the lowest prices I would have had to get six different insurance policies.   Now I can understand differences in price due to quanity sold, but we were talking hundreds of dollars a month for some drugs, and I am not talking about orphan drugs or special cancer or aids drugs, but common blood pressure, cholesterol, arthritis, and such that elderly people end up depending on.   

    As for the information paper(s) furnished with the perscribtions, thank god that my daughteris a nurse and can read and translate the information for me, though she sometimes uses my magnifing glass. 

    I whole heartedly agree that if we put the members of congress and their budies on the same plans as the rest of us are on things would change and fast.  Who made them special anyway?   Was that the same people who let them deside that they could voted themselves a raise?

  

Apr 20, 2012 10:40AM
avatar

My doctor wanted to order an MRI, I asked him how much that cost. He didn't know, said I would have to check with ad min and come back after I decided. Real nice. He mainly wanted the MRI to cover his butt.

Apr 25, 2012 8:57AM
avatar
Lobbyists from the insurance industry, hospitals, AMA, and the pharmaceutical industry control health care costs in this country.  Until members of Congress are required to purchase health insurance just like the rest of us, there will be no real reform that enables consumers to easily compare prices and quality of service for health care.
Apr 19, 2012 4:51PM
avatar

Case in point, to my comment below.  Much less reading

about where and what to do, ask a elderly person living alone,

to read and understand directions on a prescription.

I;'m at a point now, "Well, if it was prescribed, it must be OK

to take.  I cannot read the fine print as will regulations, reforms,

etc, posted.  Perhaps they should listen to the people who are

affected the most.  Has anyone asked them what they would like to see?

Apr 19, 2012 4:43PM
avatar

All the above sound well and good; sound

good because people are talking about ways

to solve a problem.  But, with all of the above mentioned idea,

maybe the perfect solution for those in mid-life; but

to a person in the seventies and above, living alone,

with health problems of just becoming old, would not

be able to comprehend one word of the above.  Well,

baynot to that extreme, but, it is a dilema for those

in the upper years. I know.  I am 77 and live alone, and

I can say with fact, "IT AIN"T EASY."

 

Apr 24, 2012 1:44PM
avatar

It wasn’t that long ago we would just pay for our medical expenses just like when something happens to our car or house.  Now with insurance and the government it isn’t clear what the real cost is.  You may have surgery and it cost $25,000, but if you have good insurance the insurance company will cover it and pay only $5,000 and the rest is written off.  That is an insane discount and the reason the insurance companies run the health care industry along with the fact we have this notion that health care should be free.  There is nothing in this world free.  Someone is going to pay for it and if someone is paying for it for you they are getting something for that service.  That additional service increases the total cost of health care.  Everyone wants something.  The government and insurance want a piece of the big pie of healthcare and people have this delusional thought it should be free.  With that attitude we all end up paying more.

Apr 19, 2012 11:41AM
avatar
THE HEALTH CARE INDUSTRY MADE BILLIONS SINCE MEDICARE BEGAN IN THE 1960S OFF OF THE CROOKED POLITICIANS THAT INCREASED HEALTH  COST EVERY YEAR THROUGH GOVERNMENT PAYMENTS, NOW THEY NEED TO GIVE SOME OF THAT BACK BY LOWERING THEIR COSTS.  since 1960 health care costs have increased greater than any other category because of medicare.
Apr 24, 2012 10:28AM
avatar
There are a # of times that the doctor wants test done,and I have to say NO.If he can give me a reason for it,I may agree
Apr 20, 2012 8:08PM
avatar
It seems to me that the price of healthcare should be tied to actual costs of delivering the care.  Moreover, the price/cost of care should be tied to efficacy.  It would be terrific if we could go to a doctor and know that we are receiving good, effective care at a fair price.  I think the answer is single payer, govenment sponsored or regulated health care.  What we have now is a competitive free-for -all. 


Apr 20, 2012 9:37PM
avatar
At this time we have no healthcare and are in our late 50's, first time in my life to not be covered. But its due to no jobs. when we were on healthcare with our employer, we were paying 14,000 yearly which only covered pretty much 60% of most things, 80 percent of a very few. We had to pay 35% on drugs that were not generic, 25% for the rest. Now at 14,000 a year, I would think we should be covered at least 80% of everything. When we were Union up through 2001, we paid about 7,000 a year, 250.00 per year in Union due's and the Insurance fully covered all generic's with only 10% for non generic's, full coverage of doctor visits and 80% of everything else. That tells you why people love their Unions. also the employers also only paid 250.00(other half of union dues for each employee), not as expensive as the employers want you to believe.  Yes, we will have to go single payer to get the coverage people need which will lower the overly cost for everything, and will let the employers off the hook so they can actually pay their workers better wages. 
Apr 20, 2012 9:38PM
avatar
My insurance is very good to come through for me. However, it does something very disturbing to me, they call and by what they ask me, I know that they have been reading my doctor's notes and records, IT MAKES ME WONDER WHAT KIND OF HASSLING I WOULD GET IF THE GOVERNMENT RUNS MY HEALTH CARE. THEY MIGHT FINE ME FOR OVERWEIGHT, OR HAVING A GUN, OR  WANT ME TO PROVE THAT I AM LIVING LIKE THEY WANT ME TO...just saying, it is scary to me.
Apr 24, 2012 4:49AM
avatar

There is no way one can shop by price in the healthcare market except for insurance.  If one has been seeing Dr. A for years, there is little likelihood he/she will be comparing prices when in need.  There is absolutely no way to compare prices in an emergency. 

 

The market is good, but there's no way for it to really make a difference in the healthcare area.

Apr 19, 2012 6:22AM
avatar

Starting this year your child (or children) cannot be denied coverage simply because they have a pre-existing health condition. If you don't have insurance for you and your children search "Penny Health" online they are the best.

Apr 19, 2012 6:21AM
avatar

Starting this year your child (or children) cannot be denied coverage simply because they have a pre-existing health condition. If you don't have insurance for you and your children search "Penny Health" online they are the best.

Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

VIDEO ON MSN MONEY

RECENT QUOTES

WATCHLIST

Symbol
Last
Change
Shares
Quotes delayed at least 15 min
Sponsored by:

MARKET UPDATE

NAMELASTCHANGE% CHANGE
There’s a problem getting this information right now. Please try again later.
NAMELASTCHANGE% CHANGE
There’s a problem getting this information right now. Please try again later.
Market index data delayed by 15 minutes

[BRIEFING.COM] The stock market capped the trading week with losses across the major averages. The S&P 500 fell 0.5% to surrender its weekly gain, while the Dow Jones Industrial Average (-0.7%) and Russell 2000 (-0.9%) underperformed. The two indices posted respective losses of 0.8% and 0.6% for the week.

Equity indices were pressured from the get-go after several heavyweights disappointed the market with their earnings and/or guidance, which led to some broader profit-taking. After ... More


Currencies

NAMELASTCHANGE% CHANGE
There’s a problem getting this information right now. Please try again later.