Welcome to "From the Archives," an occasional Health Affairs Blog series, where we take a timely topic and delve into the literature and history, from a Health Affairs angle, of course.
The American Health Care Act and the proposed Better Care Reconciliation Act would both result in higher premiums and deductibles for many individuals in the private nongroup market according to the Congressional Budget Office. While the path forward for health reform is now somewhat unclear, the trend of higher consumer cost sharing will likely continue. Higher deductibles and cost sharing are often touted as ways for individuals to have "skin in the game" in health care costs and to help consumers be better shoppers. But what does the research say about the ability to truly shop for health care services? Is it possible? Does it save money? And do consumers even want to do it? Here's what we know based on research published in the pages of Health Affairs.
Health Care Prices Vary a Lot – And Not Because of Quality
Health care prices are notoriously opaque and vary widely depending on where you live. Consumers are aware of their copay or coinsurance but the true price is often masked because it is billed to the insurance company and the balance is collected later. There's also the issue of list prices versus the price paid by insurance companies and consumers. This post won't focus much on that except to say that consumers without insurance pay more than insurance companies. There is also the quality dimension to consider — if consumers are given more control over the services they select, do they have the information and tools to evaluate whether they are getting good care for their money?
We know that US health care costs are some of the highest in the developed world (it's the prices, stupid) and that up to one-third of our health care spending might be waste. But what is behind the wide variation in costs (both in Medicare and private insurance) across the country? Research is continuing to find variation within smaller and smaller areas — suggesting a high level of practice variation even within regions. Atul Gawande famously examined the town of McAllen, Texas, for evidence as to why their Medicare costs were some of the highest in the country. The short answer is we don't know all the reasons.
But these cost differences are not necessarily due to quality differences. Evidence shows that there is not much difference in quality and efficiency between high-cost and low-cost providers. A paper published earlier this year compared physician practices across 18 domains from the Consumer Assessment of Healthcare Providers and Systems (CAHPS) survey. Other than care coordination and management, high-price physician practices did not score better on experience, care use, or overall care ratings. Surveys also show that consumers don't believe there is much difference in quality between high-cost and low-cost providers.
Shopping for Health Care Has Serious Limitations
As Paul Ginsberg points out, there is a distinction between choosing the provider of the services and the services. There are many factors that impact the "shoppability" of services — how complex the service is, how urgent it is, if the patient knows what they need versus if they need a recommendation from a doctor. Physicians have a growing role in the price conversation, but evidence suggests they are not engaging in the discussion of price as much as they could be. Furthermore, doctors may have a wider influence on costs, extending beyond the prices they charge their patients. Patients who visit doctors with lower-cost office visits have lower spending, on average, than those who visit high-cost doctors.
Because of how our current health care system is constructed, shopping for health care services is difficult. Need for health care services can be unpredictable and patients can be in a vulnerable position and unable to negotiate. There's also the question of if it even saves money. A recent post on Health Affairs Blog estimated that only about 7 percent of health care spending is on services that are "shoppable," suggesting that other policies are needed to save money and reduce health care costs. Consumers cannot do it themselves.
Reference pricing is one policy that has shown promise in terms of getting consumers to shop for services (and in turn lowering prices charged for those services). The policy is focused on specific services that consumers can compare and shop for in advance, such as joint replacements. Consumers are given a range of prices but are allowed their choice of provider. If the cost of their procedure exceeds the reference price, they are responsible for the difference. Studies have found significant savings when reference pricing is used on these services. But it does have its limitations. The model would not apply well to an unexpected use of health services like a heart attack or stroke.
Consumers Don't Really Use Price Tools
With the growth of health technology apps and rating apps like Yelp, it seems a given that this greater connectedness would make shopping and comparing health care services easier. But, alas we continue our wait for "Uber, but for health care." Evidence suggests that consumers are not widely adopting use of price comparison and other rating tools despite increasing interest in them. A study of a consumer tool created by health insurer Aetna showed that only about 3 percent of consumers used the tool over the study period. It's not clear why take up of tools is so low — it could be the relationship-driven nature of health care, lack of incentives for people to save money (if their copay is set there's less incentive), or other factors. But so far, evidence suggests just supplying consumers with more and more tools may not result in more savvy consumer behavior.
In fact, in the case of hospital ratings systems, more tools just lead to confusion. A Health Affairs paper compared four national hospital rating systems, finding that they rarely agreed on what was a "good" hospital. No hospital was rated as a high performer by all four national rating systems and only 10 percent of those rated as a high performer by one rating system were rated as a high performer by any of the other rating systems. It's hard to imagine consumers finding this a useful way to select the best hospital for them.
The takeaway here is that health care is complex and shopping for a knee replacement is not the same as choosing which vendor on Amazon offers the lowest price for your preferred brand of coffee beans. Health care is complex, relationship-based and consumer preferences vary widely.
The trend of increased consumer cost sharing along with increased expectations that those consumers should engage in price shopping is not going away. But it's naïve to believe that just increasing the cost burden on consumers and providing them with online tools to compare doctors is going to fix the serious cost problem we have in the US health care system. It will take dedicated action by a number of actors, including consumers, but also insurers, employers, and providers.
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