you receive health insurance from your employer, you may already have access to useful
tools that help you understand health care costs, enable you to comparison shop for
prices, and assist you with finding the best value ----before you visit a provider. If
this does not describe how you shop for health care services, you will know what I
am talking about after you read this article.
spent $2.6 trillion on health care in 2010, a staggering 18% of GDP. Yet few of them
have the faintest idea what any treatment costs or how it compares with any other
treatment. Prices vary wildly and seemingly without reason. Insurance terms require
a dictionary. For most Americans, buying a procedure is akin to choosing a house blindfolded,
signing a mortgage in Aramaic, then discovering the price later. Slowly, however,
this is changing.
past decade has seen a shift in how people pay for medicine. Americans’ health spending
is growing at a slower pace. This is partly because of the downturn, but not entirely.
The rate of growth fell every year between 2002 and 2009, note David Knott and Rodney
Zemmel of McKinsey & Company, a consultancy. There are many reasons for this—for
example, many costly drugs have lost their patents. But spending habits also seem
to be changing.
American workers receive health insurance through their employers. They typically
shoulder the costs without realizing it. The more a company spends on health insurance,
the less is left over to pay wages. Now employers are trying to give staff an incentive
to think hard about costs.
“consumer-driven health plans”, workers must cough up part of the price of any treatment
before their insurance coverage kicks in. Most have an untaxed account to spend on
health; they think twice before depleting it. In 2006 only 10% of workers had to pay
at least $1,000 before their insurer picked up the rest of the bill. By 2010 that
share had more than tripled.
Electric (GE) shifted its salaried employees into consumer-driven plans in 2010. It
urged them to shop around for bargains, but they found this nearly impossible due
to a lack of information. “People started saying: ‘If you want me to be an active
consumer, I need to know prices,’” explains Virginia Proestakes, the head of GE’s
benefits program. When employees asked doctors for prices, the doctors were baffled.
They had no clue how much different insurers paid for the same procedure, or what
share a patient would pay. A recent study by the Government Accountability Office
(GAO), a public watchdog, reported similar problems.
Obama’s health reform requires hospitals to list standard prices each year, and more
than 30 states have either proposed or passed laws to promote price transparency,
according to the GAO. None of these measures has come close to solving the problem.
Few provide enough data to allow people to shop around.
private firms are having a go. GE, for example, hired Thomson Reuters, an information
firm, to show employees the cost of different services. Thomson Reuters analyses prices
from prior purchases—by workers at GE and other firms—to show the cost of a given
procedure at different hospitals and clinics.
company, Castlight Health of California, has made transparency its sole mission. Working
with big firms, Castlight assembles data from past transactions so that employees
can shop for doctors online and read reviews posted by patients. Castlight wants to
do for health what Travelocity did for air travel, explains Giovanni Colella, the
founder. Mr Colella’s co-founder is now the chief technology officer for Mr. Obama’s
plans face several obstacles. Health care is more complicated than flying. A traveler
knows she wants to get from A to B, and that more or less any airline will get her
there in one piece. So it is easy to rank air tickets by price. By contrast, someone
with a heart problem may be unsure whether to pop pills, operate, change his diet
or do nothing. Informed medical decisions require a ton of information.
make matters worse, health insurers are reluctant to share data about costs, says
Bobbi Coluni, who leads Thomson Reuters’s consumer-health unit. If an insurer has
a contract to pay one hospital $7,000 for a caesarean and a contract to pay another
hospital $10,000 for the same service, and this information leaks, the first hospital
will lobby for a higher price. GE’s contracts with insurers stipulate that GE owns
the data from workers’ past health purchases. But such agreements are rare.
this, greater transparency seems inevitable. Smart insurers are hawking their own
tools. Cigna uses Thomson Reuters’s technology to support its “cost of care estimator”.
Aetna, another insurer, offers a sophisticated web tool that patients use more than
67,000 times a month. Meg McCabe of Aetna hopes that consumers will soon be able to
use their smartphones to enter symptoms, find doctors, compare prices and schedule
experiments will serve insurers well. If Mr. Obama’s health law stands, millions will
soon shop for insurance on new exchanges. The easier the plan is to understand, the
more people may pick it. A fully transparent market is years away. But a bit of sunlight
is creeping in.