The price is right

If you needed to have an ultrasound or were prescribed an antidepressant, chances are you’d have no idea how much it would cost, nor would you know how to find the answer.

One of the criticisms of the American health care system is that consumers are shielded from the cost. When health insurance pays most of the bill, there’s really no incentive for people to know or care about the price of their care or to make cost-conscious decisions, hence the climbing expenses of the overall system – or so the argument goes.

This might have been true at one time for a significant percentage of consumers. But I don’t think this is any longer the case. Many of us have become highly aware of what we’re paying – not just in premiums but also in rising out-of-pocket expenses. One of the more recent studies, published just last month in Health Affairs, found that almost one in five of non-elderly Americans spent more than 10 percent of their pretax income on health care in 2006. Five years earlier, it was one in seven. These figures came from a survey of 28,000 people under age 65 and include both insurance premiums and direct medical costs.

Clearly a growing number of people are anything but insulated from the cost of their medical care. Just as clearly, it has made only a minimal dent in health care spending. There are some rather startling statistics contained in this report from the nonprofit Kaiser Family Foundation:

Expenditures in the United States on health care surpassed $2.3 trillion in 2008, more than three times the $714 billion spent in 1990, and over eight times the $253 billion spent in 1980… In 2008, U.S. health care spending was about $7,681 per resident  and accounted for 16.2% of the nation’s Gross Domestic Product; this is among the highest of all industrialized countries.

And hold your horses if you think Medicare and Medicaid are mostly to blame; according to the Kaiser Foundation’s report, spending by these two government programs actually has grown at a slower rate than spending by private insurance.

To be sure, we all need to be conscious of the cost of health care. And compared to even a few years ago, it has become a little easier to search out the price of a service or test. For instance, if you want to know the cost of a hospital procedure, the Minnesota Hospital Association’s price check site can tell you. The Center for Diagnostic Imaging, which operates a medical imaging center in Willmar, is working to develop a price list that tells patients up front what the cost of a CT scan or mammogram will be. A similar pricing initiative is in the works at Rice Memorial Hospital. And I recently ran across Leslie’s List, a free service that compiles information on low-cost testing, prescription drugs and medical services in the Chicago area.

It’s one thing, however, for consumers to know the cost of an office visit or a knee replacement. The real issue, it seems to me, is whether we’re able to use this information in a meaningful way – and I’m not convinced we are.

Networks, tiered pricing and group discounts have benefited insurers at the macro level, but they have obscured the true prices, making it difficult at the individual level for patients to “shop around” and accurately compare. What the provider charges is not what the consumer ultimately pays. Two people can receive the exact same service but one might pay substantially more out of pocket because he or she has a higher deductible or a lesser provider discount.

To a large extent, consumers also are captive to how care is provided. They might be able to choose a hospital or a service based on the total package, but beyond that, there’s very little room for negotiation.

Take, for instance, a knee replacement. Patients don’t get to pick the implant. They don’t get to pick the hospital’s cheapest operating room and OR team. They don’t get to cut corners by skipping the anesthesia, the pre-operative antibiotics or the post-operative rehabilitation. I suppose we could unbundle these costs and give people a menu of choices – first-class vs. coach care, perhaps – but would this be clinically wise? And are consumers equipped to make these kinds of decisions?

How many of us, really, are knowledgeable enough to know what we’re buying? More to the point, how many of us have the wherewithal to be able to define and search out the best health care buys? I frankly don’t know many people who’ll research prices at all the CT scanning facilities in a 50-mile radius and then pick the cheapest/best; most of the time they’ll simply go wherever their physician refers them. Maybe consumers behave somewhat differently in a city environment where there are more facilities to choose from; I’m not sure we can say the same for rural markets with comparatively fewer services.

It’s true that people are often more careful when they’re spending their own money. A $100 copayment to visit the emergency room tends to make us think twice about whether we really need to go to the ER. The introduction of $4 generics was a boon for many people struggling with the cost of prescription drugs.

But if we want to give consumers more control over their health care spending, we also have to accept that 1) they may not know how or be able to make the best decisions; and 2) there will inevitably be times when people can’t afford to be price-conscious. Patients have been known to forego care that’s actually necessary – skipping followup visits, not filling prescriptions – because of the cost, and then winding up sicker at greater overall cost to the system. Financial caution also can become moot when there’s a crisis that demands immediate care. Someone having a heart attack isn’t in a position to shop for the best cardiology bargain. Someone who has been diagnosed with cancer and needs an expensive chemotherapy drug that’s standard first-line treatment will probably opt for the drug, regardless of cost.

If we want to put the brakes on the escalation in health care spending, greater consumer attention to costs undoubtedly needs to be part of the solution. The operative word here, though, is “part.” People might make financial decisions based partly on cost but other things are important too: necessity, convenience, location, personal preference, value, quality, loyalty. A health care service that’s cheaper is not necessarily the better buy. Choosing on the basis of bargain pricing is not necessarily wise.

Here’s the thing: When we view health care as a consumer commodity, something to be bought and sold like a pair of shoes or a platter of ribs, we’re making a fundamental mistake. Health care isn’t a commodity like everything else in the marketplace (and I’m not sure I’d like a health care system that was); it’s a unique and vital service that stands apart. It bears no real comparison with any other industry, and it seems to me we’re misguided in trying to force a consumer model onto a service that defies easy placement in this particular box. By all means, let’s be more price-conscious – but let’s also recognize that the compare-the-costs-and-shop-around mentality has its limits. It’s only one piece in a much bigger and more complicated picture; it’s not The Answer.