Patients in Michigan lack the necessary information to make informed decisions about their health care.
The state earned a grade of “F” for its lack of cost transparency for medical procedures, according to a report card issued in March by the San Francisco-based Catalyst for Payment Reform (CPR) and Health Care Incentives Improvement Institute in Newtown, Conn. The report card graded each state on price transparency regulations, price transparency websites, and whether they have a database that gathers information on what all insurance companies and HMOs pay providers for members’ care.
Transparency advocates say Michigan’s failing grade proves that more needs to be done to put information into the hands of the state’s health care consumers.
“The truth hurts,” said Paul Brand, president of the Alliance for Health in Grand Rapids and a long-time advocate of pricing transparency in health care. “How can you have consumers paying more and more of the costs of health care and have zero information on health care costs or how health care providers differ in outcomes and quality? That’s a broken market.”
However, Michigan wasn’t alone in flunking health care transparency as 44 other states also earned an “F.” Just five states earned passing grades, including Colorado, Vermont and Virginia, which were given “C” grades, and Maine and Massachusetts, which each received a “B.”
“We’re doing a very lousy job on transparency — that’s the bad news,” Brand said. “The good news is that it’s starting to get some significant focus now.”
Brand and other advocates say that providing patients the ability to research what they can expect to pay for a diagnostic test or a medical procedure brings much-needed consumerism to the industry that could help to control costs. A lack of readily accessible data blocks consumerism and hurts the ability of consumers to make better use of the health care system, they say. For employers, that means gaining a little more control of rising medical claims if employees opt to use lower-cost, high-quality providers.
Quite often, pricing within a given market can vary greatly for the same procedure. Prices for knee arthroscopy in the west and southwest Michigan markets range from a low of $1,279 to a high of $11,131, according to Grand Rapids-based Priority Health. A colonoscopy costs anywhere from $579 to $3,061.
“We’re asking people to make decisions in the absence of data,” said John Fox, associate vice president of medical affairs at Priority Health who notes that evidence suggests no clear connection between cost and quality.
The Grand Rapids-based health plan is in the process of ramping up efforts to make its pricing data more available to its 570,000 members. Priority Health last year partnered with Brentwood, Tenn.-based Healthcare Blue Book to allow members to look up price and quality data for more than 200 of the most common elective medical procedures and diagnostic tests.
Members can visit the Priority Health website, link to the Healthcare Blue Book page, and log in to look up the prices of tests and elective procedures at care providers in their area under contract with Priority Health. The site combines that information with quality data from the provider and shows users what they can expect to pay out of their own pockets based on the copays and deductibles of their health policies.
Expanding access to information
However, Priority Health intends to “to do a lot more” in the next six months “to empower people to be consumers” of health care, said CEO Mike Freed.
In particular, the insurer wants to expand the scope of available data in the Healthcare Blue Book to include more elective and non-elective procedures, Fox said.
Brand is complimentary of the Priority Health initiative with Healthcare Blue Book, calling it “leadership in the market on this issue.”
“It’s not enough or fast enough, but it’s definitely movement in the right direction,” he said.
Brand’s solution for Michigan is an all-claims database with standardized reporting by all health plans that offers consumers the ability to look up price and quality data. However, creating that system would require legislative action, he added.
“To do it on a voluntary basis and let a thousand flowers bloom creates a very fragmented approach,” said Brand, who believes it’s “past time” for a legislative push in Michigan for transparency in health care prices.
He attributes the lack of pricing transparency in the health care industry to an entrenched business model where the discounted rates that insurers negotiate with hospitals and doctors are generally a closely guarded secret and considered proprietary information by both sides. The deeper the discounts an insurer is able to negotiate in contracts with providers, the larger the competitive advantage it can gain and the more unwilling it is to part with the information, he said.
“This is a very intractable problem to solve,” Brand said. “You are running into the current business model between plans and providers.”
Pushing data to consumers
To address the problem, the national report card says more steps toward transparency in health care — particularly laws on price transparency — are needed in Michigan.
But even in states that have “robust” transparency laws and regulations that require the online databases for price information based on “real claims paid,” consumers still have trouble finding it “because the website is poorly designed or poorly functioning,” the report card states.
In the first few months of Priority Health’s partnership with Healthcare Blue Book, only a “very low” number of plan members used the service, although the early results suggest that many of the people who looked up price data opted for a lower-cost provider, Fox said.
“If you show this information to them, they change their minds, and they will be more aggressive about changing their minds if you show them their out-of-pocket costs,” Fox said.
Priority Health is also looking to launch new products for employer-sponsored health coverage that will include incentives designed to encourage employees to use lower-cost, higher-quality care providers. The incentives, likely fashioned similarly to what many health policies use to encourage employee participation in workplace wellness programs, will “raise the bar” on transparency efforts in health care, Fox said.
“We’re working on benefit designs that will create for people the inducement to want to know what health care services cost,” Fox told MiBiz following a presentation on transparency at a recent seminar held by Advantage Benefits Group Inc. in Grand Rapids. “Ultimately, this will work better when employers get in the game and actively promote cost-consciousness among their employees.”
Nationally, San Francisco-based Castlight Health has partnered with a number of insurers — including Blue Cross Blue Shield plans in New York, Indiana and Kentucky — to provide a transparency platform for employers. Blue Cross Blue Shield of Michigan did not respond as of press time whether it planned to adopt the system or a similar system in the state.
High-deductible plans could drive transparency
The push for greater transparency in health care costs could come out of a movement toward more high-deductible insurance plans. That’s because as U.S. employers increasingly migrate to the lower-cost health plans, consumers are paying a larger share of the cost of their care.
For example, about 40 percent of Priority Health policies are high-deductible plans with an annual deductible of $1,250 or more, Fox said.
Nationwide, 39 percent of employers offer a high-deductible plan as a benefit option to employees, up from 20 percent four years earlier, according to an annual survey by global benefits firm Mercer. The survey also indicated the use of high-deductible plans should continue to spread to about 64 percent of employers nationally by 2016.
The projections are backed up by an annual health care outlook by Plante Moran, which indicated high-deductible plans could account for 80 percent of health policies in the U.S. by 2020. The widespread use of such plans could drive greater demand among patients for easy access to price and quality data on care providers, according to the report.
“An appealing consequence of this consumerism will be momentum toward pricing transparency for the majority, if not all, health care services,” states Plante Moran’s 2013-14 Health Care Outlook.
In an address at the Advantage Benefits Group seminar, Priority Health’s Freed counted greater price transparency in health care as among the key principles driving the health plan. Despite all of the turmoil and changes for health care in an era of reform, “I have never been more excited about the possibilities,” Freed said at the seminar.
“This is a very transformative time to create something different that has never been created before,” he said.