Higher prices, not so much use of services, driving health care cost growth. #BTN2017 https://t.co/5fs4iOBmNX pic.twitter.com/0BjbxlhB1m
— PwC Health (@PwCHealth) August 8, 2016
The graph shows that the big cost problem in US healthcare is not the number of units of service used but the price per unit of service. I only have a couple of minutes as I am supposed to be on vacation right now, but this is a good discussion point for what types of controls an insurer can use for these two types of problems.
Utilization control is straightforward. Insurers use deductibles, co-insurance, co-payments as well as pre-authorization to limit the number of services used. Cost-sharing is the primary obvious to the patient tool. It is the theory behind high deductible health plans that a $3,000 deductible will make people very reluctant to have low value care done to them. The downside is that high deductibles also scare away high value care. Pre-authorization increases the administrative costs of a prescription for providers so they might not want to go through the hassle of getting something approved. HMO’s use primary care providers as gatekeepers to say no to excessive expensive utilization.
On the cost side, the tools are more esoteric. The big ones are network design integrated, co-insurance, step therapies and non-traditional pricing structures. Narrow networks or tiered networks offer better cost sharing if people go to low cost (and hopefully) high quality providers instead of high cost providers. Single tier networks sign up every provider who is willing to take Rate X and everyone else is out of network. Tiered networks move every provider who is willing to take X into the top tier where the deductible is reasonable while the rest of the network falls into the general tier where the deductible is two or three times the low tier deductible.
Step therapies make patients go through an approved sequence of steps before high cost therapies will be approved to see if a cheaper step is effective. Finally, non-traditional payment structures like bundled payments and reference pricing are used to again drive people to choose lower cost providers and more importantly to get providers to drop their prices.
Off to the beach now….
Kylroy
“It is the theory behind high deductible health plans that a $3,000 deductible will make people very reluctant to have low value care done to them. The downside is that high deductibles also scare away high value care.”
And the whole thing falls apart when you realize consumers have essentially no idea how to distinguish between the two.
Richard Mayhew
@Kylroy: yep. I think hdhp are acceptable for young no chronic condition individuals with savings or at least cheap access to credit and no kids. once any of those conditions are violated I do not like them.
Eric S.
Very appropriate, Richard, as I opened the bill for my echocardiogram this morning. The hospital fee listed is $3400. The insurance company “payment / adjustment” is $2700. I haven’t reached my deductible so I have a $700 bill to pay. I am fortunate to be able to absorb that with no real impact on my life but that’s still a significant bill to pay.
I did a quick search for the cost of the machine. $22k to $75k was what I found. The tech told me she had 10 scheduled patients that day. Assuming that is average, even with every other cost that machine was paid off in few months.
I was only at the hospital for an hour total and the exam was no more than 15 minutes. Assuming a doctor spent 30 reviewing the results, which seems terribly high considering the tech saw nothing wrong, it’s an exorbitant charge.
I know apples and oranges. I know it is August 2016 and not November 1972. I know Lincoln Park, Chicago is not Quincy, Illinois. Still, when I had back surgery at 18 months old, the surgery, the doc fees, and the weeks in the hospital totaled less than $500. (I have the original bill)
/off my chest
Pogonip
Does anyone know what happened to Cole? Is he trapped in the porch?
Richard Mayhew
@Pogonip: no missing Cole reports are allowed to be filed within 48 hours of a sighting
Poopyman
@Eric S.:
The doctor bills you separately, in my experience. So gird yourself for another bill in the mail.
raven
@Eric S.: The Blue Devils!
MomSense
@Eric S.:
Ever tried to call the hospital before the exam to find out how much they charge?
Good times. You realize that it is impossible to be an informed consumer of health care.
satby
@MomSense: I once tried to schedule an ultrasound that was required for the UFE I had in 2005, and it was impossible with the hospital’s scheduling department. So I called a local imaging facility, that could schedule it in a couple of days for $550 LESS than the hospital charge. And my insurance wouldn’t cover it, because out of network or some other bullshit reason. Since my deductible was going to be $500 anyway, I just had it done at the imaging place, but it really pissed me off, because it proved that all that in network bullshit about controlling costs was just that: bullshit.
Eric S.
@MomSense: It takes an immense amount of effort just to find a location that will take the insurance. I’m with Super Huge Insurance and 95% of the time I try to log on they tell me their customer portal is unavailable. It’s infuriating. I knew of two places in my area that had done my MRIs and took my insurance. One did not do echocardiograms. The other was the hospital I went to.
Eric S.
@MomSense: A follow up thought. Even IF the hospital / facility staff could quote you a price for a procedure what’s the chances they could tell you the price based on your insurance company & network combination? In theory if they could have a 1 column table of prices (Full Fare) it should be easy to have a multiple column table that includes the various insurance companies they accept. As I an IT professional the lack of availability of such (seemingly) simple data is inexcusable. It makes me think it is “a feature, not a bug.”
Barbara
Read the article on reference pricing in the New York Times today (Reference Pricing). It discusses a lot of the issues surrounding trying to impose pricing discipline on providers, including transparency.
Ol' Chicago Al
If you are persistent and get the right person on the phone, you can actually get rates for medical procedures. Here are the rates I was just quoted for a simple endoscopy at Northwestern Memorial Hospital in Chicago, a highly regarded teaching hospital with rates to match. Note that these do not include the *doctors charges* or pathology, medication, etc.
Standard rate: $2498.00
Self-pay rate: $1748.00
Insured rate: $ 874.30*
*This is the rate with the insurance company we have now; different insurers may have different contracted rates.
Who actually pays the ‘standard rate’?? Suckers, that’s who.
jl
Will be interesting to follow the link to read the story behind the graph.
Just eyeballing the graph, seems like the line that price runs everything is overly simple. Looks more like utilization driving short term variations and price having more influence on long run trends.
Anyway, this post is consistent with Uwe Reinhardt, helath economist at Princeton, who has long been saying ‘It’s the Prices, Stupid’ (which IIRC is the title of one of his most well known articles on the topic).
I'mNotSureWhoIWantToBeYet
@Ol’ Chicago Al:
The pricing system seems to be something that is most broken about the system. The people who pay the “Standard Rate” are those without insurance or without some other entity somehow helping with the payment. IOW, the people most vulnerable. It seems ripe for abuse. If we can have mandated “community rating” for qualification for insurance, why can’t we have mandated “community pricing” for the actual cost of procedures? Why do we permit huge businesses like these to continue to take advantage (or financially ruin) the most vulnerable?
If we can regulate companies pricing things at “75% Off” when nobody pays the “List” price, why can’t that be done for medical procedures?
It would be great if the CFPB would go after practices like these.
Yes, I know if the hospitals got rid of the “Standard Rate” they’d simply use some other language to give “preferred insurance companies” lower rates. But it would be a start if done sensibly.
Or am I missing something?
Cheers,
Scott.
J R in WV
Who knows what PwC means?
And for this price schedule (Thanks Al):
Standard rate: $2498.00
Self-pay rate: $1748.00
Insured rate: $ 874.30*
No one should ever pay the “Standard rate” of $2498 as we are all either self-pay or insured…
I guess that’s what they write off as a loss when a “charity” patient manages to escape without paying the full self-pay amount.
liberal
@Poopyman:
Christ, I hate that shit. Can you imagine taking your car in to get work done, and receiving four different bills instead of one?
liberal
@I’mNotSureWhoIWantToBeYet:
Huge businesses? A lot of it is individuals: doctors.