Written by Judith Riess, MTM editor-in-chief

Healthcare costs in the U.S. continue to rise yearly and by the end of 2019 are projected to be as high as 20 percent of the GDP. We all know this is not sustainable. As consumers we shop to get the best price on groceries, cars, sporting equipment, you name it, but in healthcare we do not have the means to get the best price.

When it comes to healthcare we have no idea what it costs. We know what we have to pay each month not paid by our employers or as private individuals and we know what we have to pay to our insurance companies each month. But overall, you can’t go online and compare hospital costs for procedures from one hospital to the next and you can’t compare insurance costs from one carrier to the next. We would not go to a car dealership to purchase a new vehicle without having compared prices online and with several different dealers. That is, however, not available to us as healthcare consumers.

We have no idea why a patient in New York pays one price for a procedure but a patient in Florida has the same procedure and pays a totally different price. Why is it that we can go to Walmart and pay $4.99 for a bottle of 100 aspirin, and when dispensed by the hospital it costs as much as $30 for a single aspirin?

A recent study conducted by the Rand Corporation on hospital pricing made it absolutely clear that the most basic information on healthcare prices is lacking. A very creditable team of analysts worked diligently to gather data from self-insured employers, employers who are trying to understand the rising healthcare costs and the patterns and trends that determine hospital costs and policy makers and researchers who are concerned with the lack of transparency in healthcare.

These are the key findings of the report:

  • Relative prices including all hospitals and states (25) in the analysis rose from 236 percent of Medicare rates in 2015 to 241 percent of Medicare rates in 2017.
  • Prices varied twofold among states.
  • Among hospital systems, prices varied nearly threefold, ranging from 150 percent of Medicare rates at the low end to 350 to 400 percent at the high end.
  • Relative prices for outpatient services were 293 percent of Medicare rates on average, far higher than the average price for inpatient care (204 percent).

Of the 25 states analyzed, eight states – Michigan, New York, Tennessee, Massachusetts, Louisiana, New Hampshire, Montana and Maine – were exceptions with prices roughly equal for inpatient and outpatient services.

At the recent World Healthcare Congress held in Washington, D.C., Marilyn Bartlett discussed that when she took the helm of the State of Montana Employee Benefit Plan in 2014, she disrupted the status quo by implementing reference-based contracting with all Montana hospitals. This explains why Montana has equal pricing and possibly why there were similar occurrences in the other seven states.

The Rand study made the following recommendations:

  • Employers can exert pressure on their health plans and hospitals to shift from discounted charge contracts to contracts based on a multiple of Medicare or some other prospective case rates.
  • Employers can use networks and benefit designs to move patient volume away from high-priced, low-value hospitals and hospital systems.
  • Employers can encourage expanded price transparency by participating in existing state-based all-payer claims databases and promoting development of new ones.
  • Transparency by itself is likely insufficient to reduce hospital prices, and employers may need state or federal policy interventions to rebalance negotiating leverage between hospitals and employer health plans. Such interventions could include placing limits on payments for out-of-network hospital care or applying insurance benefit design innovations to target high prices paid to providers and allowing employers to buy into Medicare or another public option that pays providers prices based on Medicare rates.

We must ask why it is so difficult for us (healthcare purchasers) to find out what we are paying for with healthcare? And how do we obtain the necessary data to make informed decisions?

On May 23rd, the Senate Health, Education, Labor and Pension Committee released a bipartisan ‘draft’ of legislation to create a national database of de-identified claims data, including prices.

A recent article written by David Blumenthal, president of the Commonwealth Fund and others indicated that the Trump administration wants to make true pricing information available to patients, providers and other stakeholders. An administrative order would mandate public disclosure of prices negotiated between insurers and providers. If either legislation or an executive order is accomplished, it would help consumers of healthcare make informed decisions.