Category Archives: Commentary

Healthcare Transparency Forges Ahead

Healthcare transparency took a quantum leap forward with the report from economists at the Health Care Pricing Project.  The report analyzed the costs of healthcare from claims data for 88.7 million Americans from 2007-11 with employee-sponsored insurance from Aetna, Humana, and United Healthcare.   An outstanding summary of the findings by Quealy and Sanger-Katz appeared recently in the NY Times.

The data highlight information that the health insurance industry has previously wanted to keep from public scrutiny – namely that the fees paid for healthcare vary widely from one region to another, and from one provider to another.  Prices for routine medical services can vary 10 fold or more within a single community.  A CT scan can be $210 or $1900, an MRI can be $425 or $4800 within the same community, just depending on where the service is provided.  No one would buy gasoline for $30 per gallon when it is widely available for less than $3 per gallon, but we have been purchasing healthcare this way for many years.

While healthcare consumers have been oblivious to price variation, third party payers have made little effort to close this information gap.  The absence of price transparency has been a major factor leading to annual increases in healthcare costs and health insurance premiums.

Perhaps this release of claims data from 3 of the 5 largest private health insurers signals the beginning of a new era when consumers will have access to healthcare prices before, or at the time of service.   Transparency for healthcare consumers cannot come soon enough as millions began struggling with high deductibles on January 1.


Dramatic rise in health insurance premiums, 2016

Robert Pear, “Health Insurance Companies Seek Big Rate Increases for 2016”. New York Times, July 3, 2015

The high cost of healthcare hits a raw nerve that has long been the cause of significant pain.   The proposed increases in health insurance premiums for 2016 portend more suffering for all, individuals and institutions alike. We need some relief now.

A single payer is an obvious, but non-viable solution unless the country elects 60 senators and 218 representatives who think like Bernie Sanders.  Realistic alternatives must reshape the incentives for healthcare consumers.  In recent years, health insurers have used high deductibles and narrow provider networks to reduce healthcare utilization and mitigate premium increases.  These tools have frustrated patients, reduced their access to care, and lowered the overall quality of our healthcare system.

It is time for health insurers to get serious about cost control by disclosing their fee schedules.  If  healthcare consumers with high deductibles understood the variation in fees that insurers pay to different providers, then they could navigate the healthcare marketplace to reduce their own costs.  The fact that fees can vary 10 fold or more for the same service, in the same community, is information that consumers of healthcare, and their providers, need to know. The complete lack of transparency in healthcare is one of the primary reasons we are hitting the glass ceiling.

Consumer defense against high deductible insurance: Embrace Transparency

Re: “Unable to Meet the Deductible or the Doctor” by Abby Goodnough and Robert Pear, the NY Times, Oct 17, 2014

Consumers of healthcare are being pushed to the limit.   High deductibles, co-insurance, and narrow networks are the leading strategies of third party payers to control the rate of spending by consumers.  Unfortunately, these obstacles result in reduced access to care  – already a shameful deficiency of the American healthcare system.  What benefit do patients derive from coverage that is unusable?

Patients deserve basic consumer protections before deciding on a course of care.  This includes an understanding of the risks and the benefits, knowledge of the costs and the alternatives, and having some measure of quality about the providers.  Armed with such information, consumers with high deductibles can select low cost care rather than no care at all.  They can even select providers based on high value rather than on convenience.

Several insurance companies will be sharing their fees through the Health Care Cost Institute in early 2015.  Consumers need to embrace transparency and begin shopping for healthcare the way they do everything else.

Part of this letter was published in the NY Times

Strategies to Reduce Low-Value Care

In response to article by Carrie H Colla, PhD, N Engl J Med. 2014; 371:1280-1283, October 2, 2014.  “Swimming against the Current – What Might Work to Reduce Low-Value Care?”

Controlling healthcare spending in our broken fee for service model is certainly comparable to swimming upstream.  Fee for service is not the primary force behind that current.  Until recently, patients have not been concerned about costs, and providers as well as third party payers have had incentive for higher spending.  How could we expect anything other than out of control spending?

Dr Colla concludes that the best solution for our broken system lies in educating the patients with tools such as “Choosing Wisely”, and putting providers on the hook with risk sharing models such as accountable care.  In this construct, costs are not open for discussion, and patients are left out of the decision making process.   From the consumer standpoint, ACO is “prix fixe” healthcare.

Alternatively, educating patients and doctors about cost (since neither one knows much about this now), putting the patient on the hook for some of the costs (this is already happening with cost sharing insurance policies such as high deductible and co-insurance), educating patients with “Choosing Wisely”, and rigorously measuring quality, is a more patient-centered strategy.  Consumers will learn to distinguish between providers that guide them toward high value, and away from low value care versus those that do not.  Quality  scores of wasteful providers will tell the story.

Transparency of cost is coming and will be needed to define low vs high value.  An MRI may be a high value for a given condition at $400 but low value at $4000.  An honest assessment of value cannot be made without full disclosure of costs. Let’s start swimming with open eyes.

Learning from the UK on Pay for Performance

“Success and Failures of Pay for Performance in the UK”,  Martin Roland and Stephen Campbell.  NEJM,  May 15, 2014.

Paying for performance tinkers with quality of care by selecting areas of focus by healthcare providers.  Incentives improve some areas of care but hinder others.  The unintended consequences created by shifting provider attention need to be better understood.   There was no mention in this article about the impact of P4P on cost of care.  Not an issue in UK as it is in the US.

UK spends 8.4% of its GDP on healthcare.  Per capita costs of care are about $3000.

US spends 18% of its GDP on healthcare.   Per capita costs of care are about $7300.

Perhaps the US needs to look elsewhere to address its pressing problems of extremely high costs and low quality.  Transparency of cost and quality in a competitive marketplace where consumers pay a fraction at the time of service…..or a single payer system.  In the US, we do not have the luxury to tinker.

The $100,000 Remicade Infusion…how is this possible?

On April 5, 2014, the NY Times published another article by Elisabeth Rosenthal on the extremely high costs of healthcare in this country.   This article focused on the escalating costs of type 1 diabetes care – now in the range of $26,000 per year for medication and equipment.  She also told the story of a science teacher who had been getting Remicade infusions for psoriatic arthritis every 6 weeks at NYU – he stopped going when he discovered that his insurance company was paying almost $100,000 for each infusion.  As long as the fees paid for virtually all healthcare services remain a secret, this kind of misguided use of insurance premiums will continue.  Consumers need access to the fees paid for healthcare services before they receive care.  This is particularly important now that 40% of consumers have a high deductible.

Here is the article.

Here are the letters to the editor.

Doctors are migrating to salaried positions

On February 13, 2014, the NY Times published an article by Elisabeth Rosenthal entitled “Apprehensive. Many Doctors Shift To Jobs With Salaries”.   She describes how healthcare providers are joining larger medical practices and often take salaried positions.   Physicians join hospital-based practices primarily for two reasons.  First, because the complexity of running a cutting edge healthcare practice, with all of the technologic and regulatory challenges, requires tremendous effort and expense.  The second reason is that hospital-based practices are paid substantially higher fees than smaller independent practices.

When fees for healthcare become transparent, it will be clear that the rapid consolidation of healthcare providers that has been occurring over the past decade, has come at a hefty price. Until we understand the impact that consolidation has had on costs of care, we cannot do a meaningful analysis to determine if the benefits justify the costs.

Many of the contracts that salaried physicians are signing include incentives to those that give cost-effective care.  If doctors spend less on patient care than a fixed benchmark (set by the organization), they are eligible for a bonus.  In theory, this will reduce the wasteful spending estimated at 30% of current healthcare costs.    Accountable Care Organizations (ACOs) are also designed to work this way to reduce healthcare spending.   However, it has not yet been shown that such incentives can bend the cost curve.   In fact, after a five year pilot study, and one full year in practice, the most enthusiastic medical centers that signed up for the ACO program in year one have managed to reduce spending by less than 1%.

The current trends in our healthcare system appear to be exacerbating the cost conundrum.  At the very least, we need an assessment of the costs of consolidation and an honest review of the flaws inherent in the ACO model.  A better solution lies in a competitive marketplace where transparency of cost and quality allow consumers to drive down the costs of care.