Archives for May 2016

The Journal of the American Medical Association**  has an interesting article on the utilization of patient centered consumer driven decision support tools that are supposed to allow for people to choose cost-effiecient and effective treatments that they pay for with their deductible dollars.

Results  ….After adjusting for demographic and health characteristics, being offered the tool was associated with a mean $59 (95% CI, $25-$93) increase in outpatient spending. Mean outpatient out-of-pocket spending among those offered the tool was $507 in the year before introduction of the tool and $555 in the year after….. Being offered the price transparency tool was associated with a mean $18 (95% CI, $12-$25) increase in out-of-pocket spending after adjusting for relevant factors. In the first 12 months, 10% of employees who were offered the tool used it at least once.

Conclusions and Relevance  Among employees at 2 large companies, offering a price transparency tool was not associated with lower health care spending. The tool was used by only a small percentage of eligible employees.

This is an interesting study, but I think it is a limited study.  The two employer groups that were studied had deductibles ranging from $500 to $2,500.  Not all of the those deductible dollars would have been used for outpatient care (the measure being used.)  Furthermore, for most people, outpatient care is only a fraction of total medical spending.  This leads to a problem of the analysis.

Deductibles put 100% of the burden of a procedure’s cost on the patient until that patient hits the specified deductible level.  When a patient is below that level, they may or may not care that Provider A is less expensive but somewhat further away than Provider B.  We would expect to see some shopping behavior when people are below their deductible.  However once the deductible has been met, the patient has no reason to care (absent co-insurance) that Provider A is less convenient but cheaper than Provider B.  At that point, the tool fails.

What are the policy implications.  The simplistic one is that ever increasing deductibles will eventually make people good shoppers.  That has not yet been the case and it should not be the preferred policy solution.  There are two other solutions that are possible.  The first is to switch deductible cost sharing to co-insurance cost-sharing.  People will respond to a 30% cost-share far longer than they will to a satisfied deductible even if the actuarial value of the plan is the same, more services are exposed to cost sharing.

The second plausible solution is to remove some of the smart shopping expectations from that patient and put it back on the insurance companies and other expert support systems.  This means insurers should be tiering their networks, this means insurers should be engaged in value based insurance design where high value procedures are subject to no cost-sharing and low value procedures are subject to high cost sharing, insurers should be paying their members to go to efficient and cost effective providers with physical checks to create loss aversion strategies.

But the patient as a shopper is not working well, and this study is indicative of that.

** Desai, S., Hatfield, L. A., Hicks, A. L., Chernew, M. E., & Mehrotra, A. (2016). Association Between Availability of a Price Transparency Tool and Outpatient Spending. Jama, 315(17), 1874. doi:10.1001/jama.2016.4288

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