The Affordable Care Act and state laws like NC 843 include requirements for medical providers to make prices transparent. At both the Federal and state level, however, there has been very little if any enforcement. Many of the medical providers that have published a list of prices, like the one you may have seen on the hospital waiting room wall, know that the actual costs won’t resemble any on that list. The two most common reasons given by providers for the wide cost variances are: case mix, severity of disease state and comorbidities require individual treatment plans that are patient specific and therefore vary from normative published prices. Secondly, providers say that your insurance company/health plan administrator pays negotiated fees most of which are hopefully less than the published prices.
At the consumer level, those of us that would like to shop for competitive medical pricing and good medical encounter outcomes do have some transparency tools like Health Care Blue Book and MediBid, for example, which can cut through some of the provider pricing fog. These tools are for certain elective procedures only and may require travel. With a narrow application and an appeal to a limited group of shopping mavens, changing consumer behavior with these transparency tools is producing modest results.
Employers are implementing strategies to help employees become better health care consumers through education and consumer engagement programs. As almost everyone knows changing behavior is not only challenging but may be counter intuitive. During an employee engagement meeting, one employee famously asked “you expect me to ask what it costs when I’m bent over double”.
Unlike any other product or service that we purchase, we may not learn the cost of a health care encounter like a hospital stay, until two or three weeks after the transaction. The cost opacity of health care in our country is defeating our best efforts to be good consumers. Last and worst of all is that the powerful influencers engaged in the commerce of health care oppose transparency. Hospitals, legacy insurance companies including Blue Cross and national consulting firms command the status quo for the benefit of their bottom lines.
So, what can we do? A group of early adopters, independent benefit administrators like Corporate Benefits Service, began paying medical providers at a rate higher than 67% of their other payers. The payments are based on a universally well known schedule- Medicare. Two thirds of a hospital’s revenues come from the Centers for Medicare and Medicaid. The early adopters are exploding the myth that hospitals can not breakeven or earn a surplus on Medicare payments alone. The hospital executive’s mantra that we have to cost shift, charging much much more to the private sector because payments from the government are too low is just not true for most hospital systems.
It is a win win. We get transparency because everyone can have access to a Medicare pricing schedule and we achieve competitive, affordable consumer pricing. The hospitals get paid 140% of Medicare. 40% more than they get from 67% of their payments.
The head wind from the custodians of the status quo is quite strong. The early adopters need grass root support, an Arab Spring for transparency and cost competitiveness through Medicare cost plus pricing. Please give us your thoughts.