A phenomenal post from Devon Herrick over at NCPA. The entire post is worth reading. Here is a portion:
Lack of transparency is everywhere. Most of the health care stakeholders do not stand to benefit from transparency and cost-conscious patients. I spoke with a consultant who had a personal story about a family member who had recently undergone surgery. Rather than a low-cost ultrasound, the patient was wheeled in for a CT scan or MRI without a discussion of price or need. The more advanced diagnostic procedure was around $4,000 – even though MRIs/CT scans can be obtained for $400 elsewhere by paying cash. By the way, paying cash for an MRI when the insurers’ negotiated allowable price is, say, $3,000 results in the entire $400 not being counted towards the health plan deductible.
Someone posed the question: why do large insurers not take a harder line on hospital prices? One consultant claimed it’s because the status quo makes them so much money they don’t want to rock the boat. Another consultant posited it’s because the health insurer charges employers more for claims than it reimburses hospitals for the service. His theory was: the higher the price; the bigger the opportunity to profit off the spread.
One consult relayed how he had reviewed claims data and found self-insured employers are paying up to 250 percent of what Medicare pays for the same service. By direct contracting he has helped his clients get rates of 150 percent of Medicare’s price. Yet, it’s like pulling teeth to get TPAs to work with providers directly. Nowadays hospital list prices are double to triple what insurers ultimately pay for the service. Of course, list price are not real; they are a fiction to make it sound like insurers and employers are getting a bargain. The actual market price is more or less what health plans reimburse. But pity the poor soul who gets stuck paying the fictitious list price.
Consumers are also the problem. For that matter, research has found workers do not comparison shop. When a decision support tool is available, research has found from two-thirds to three-fourths of workers either do not log in ever; log in only once or only twice. Other research has found when workers do use transparency tools, they use them to make decisions about whether they can afford the medical service — not to find better prices. Consumer use the price as a take it or leave it proposition.
By the end of the evening it became clear there is plenty that can be done to lower the cost of medical care and get providers to compete on the basis of price, quality and other amenities. The problem is: nobody wants to. Workers think their employee health plan is a free perk that precludes them from having to shop. Employers are too busy pursuing their own business interests to upset the status quo. Doctors, hospitals and insurers make too much money off the current system to allow any disruption or creative destruction to threaten the gravy train. Increasingly, the gravy train is employers, who pay huge premiums for employer plans and then pass the cost on to workers in the form of lower take-home pay. Workers naïvely believe their employee contributions are their total cost and the employer contributions are free gifts. They aren’t; health benefits reduces take-home pay and future pay raises....