Out-of-pocket spending

Payers and Providers Focused on Engagement, But Consumers’ Interest in Price Information Still Not Addressed

By M2|2018-02-07T21:24:42+00:00February 7th, 2018|Health Care Trends, Health Plans, Out-of-pocket spending, Physician-patient communication, Uncategorized|

Payers and Providers Focused on Engagement, But Consumers’ Interest in Price Information Still Not Addressed

With the rise in consumer engagement, health plans and providers are making investments in technology and services in order to provide patients with more useful and timely information. The ultimate goal is to help facilitate patient decision making, in an era of increased financial responsibility on the part of consumers. What are the results so far?

A recent white paper provided the results from a survey of nearly 90 payers, 250 providers (hospitals), and 800 consumers. The paper reveals “concerning gaps between what payers and providers think they’re achieving and what consumers are actually experiencing.”

80% of payers and 72% of providers said “investment in consumer engagement was a top priority” for them. Drivers of change included the transition to value-based care, competitive pressures, and “consumer demand for a more retail-like experience.”

However, while payers and providers are spending as much as a third of their health care information technology dollars on consumer engagement, nearly three-quarters of consumers polled told interviewers, “their experience with providers and health plans hasn’t improved—or has worsened—over the last two years.” Only 21% of consumers indicated their care experience had improved in the previous year.

Cost Information a Top Priority for Patients

Providers are focusing their investments in departments and functions that have a “high degree of personal interaction with patients,” such as ambulatory/outpatient services and inpatient services. Providers said the majority of their consumer-centric investments went toward software solutions (28%), followed by in-person and website investments (both 18%).

Payers, similarly, are focusing on customer service, member education, and marketing departments, with primary investments made in websites, call centers, software, and mobile apps.

Notably, cost information is a “top priority for patients, because they’re increasingly responsible for the cost of their medical care.” However, less than 20% of providers have developed cost-of-care education programs or post prices publicly. And among payers, 80% do not yet provide cost transparency tools.

This paper shines a spotlight on the continuing inability of patients to access the information they want most – pricing and cost data. Consumers are telling their providers and payers what they want; technology alone will not solve the problem. What will it take for the system to respond? Providers and payers are increasing their consumer engagement related to care management, especially with websites, apps and other technology. But as consumers have increased financial responsibility for their care, they will need better information on what their care will cost, ideally before they incur the care.

In general, there is an “alarming engagement gap between consumers, providers, and payers.” But the gap “can be closed if providers and payers would tailor experiences to what consumers want, promote adoption of services and technologies, and solicit feedback.”

While Most Consumers Want to Discuss Costs Before Receiving Treatment, Most Providers Do Not Bring Up Financing Options with Patients

By M2|2018-01-24T21:41:19+00:00January 24th, 2018|Health care spending, Health Care Trends, Insurance, Out-of-pocket spending, Physician-patient communication, Uncategorized|

While Most Consumers Want to Discuss Costs Before Receiving Treatment, Most Providers Do Not Bring Up Financing Options with Patients

Seventy-seven percent of health care consumers say it’s “important” or “very important” to know their costs before treatment; however, most providers are not satisfying these demands, according to a recent article in Healthcare Finance.

Only 18% of health care consumers said that “any of their providers had spoken to them, at any time, about patient financing options in the past two years.” The article summarizes the results of a survey conducted by ORC International and commissioned by patient financing company HealthFirst Financial.

The survey highlights consumers’ interest in financing options for health care services: 53% of the 1,011 U.S. adults surveyed would like to discuss financing options before they receive care, and 57% consider it important or very important that their provider offer ways to extend payments over time with no interest.

However, only 8% received zero- or low-interest financing from a provider. “These findings highlight a huge gap in what patients want and what hospitals, medical groups and other healthcare providers are delivering,” KaLynn Gates, HealthFirst Financial president and corporate counsel, says in the article. “Providers that care for the financial as well as clinical needs of their communities are much more likely to thrive in this era of rising out-of-pockets costs and growing competition for patients among traditional and non-traditional providers.”

Furthermore, “a full 40% of millennials 18 to 36 years old said they’d be very likely or likely to switch providers if a competitor offered low- or zero- interest financing for medical bills.” And among survey participants overall, 29% “said they’d move to different providers that offer attractive payment programs.”

Concerns about covering the cost of care exist in all income brackets; 42% are very concerned or concerned about their ability to pay out-of-pocket medical bills in the next two years, and the number increases to 54% for those with incomes of less than $35,000 a year. Among those with incomes of $100,000 or more annually, the number drops, but still, 24% in this bracket are very concerned or concerned.

Consumers are worried about their ability to pay for unexpected medical expenses; 53% of those surveyed expressed concern about the ability to pay a medical bill of less than $1,000; 35% worry about the ability to pay a bill of less than $500, and 16% are concerned about the ability to pay a bill of less than $250.

The survey was commissioned in order to “learn more about how consumers are coping with their medical expenses,” Gates says in the article. “Without providing and communicating these viable financing options, they are likely to delay care or switch providers to find financial help. In either case, providers will be hurt by those choices, and they need to develop a strategy to meet these consumers’ needs.”

Despite these findings, however, another survey, published recently in Health Affairs, finds that while most U.S. consumers support price shopping for health care services, most do not actually seek out information on pricing.

The findings also come at a time when states are taking various measures to improve price transparency for consumers. For example, Ohio has enacted a law aimed at informing patients what health care procedures will cost prior to receiving care. However, the law is currently in limbo, after criticism from hospital and physician groups, who claim the law would slow down access to care.

This HealthFirst survey reinforces what we’ve said in the past and what other studies have shown; for example, we blogged earlier this year about a study published in Health Affairs showing that physicians are missing opportunities for communication to help reduce patient costs. We’ve also written about employers sending patients to high-quality, bargain-priced providers; sometimes these providers are out of town, or out of state, yet employers are still able to save money with this approach, which points to inefficiencies in the health care system.

Clearly consumers need price options, and talking with physicians beforehand about costs would help inform patient decision-making. However, it’s noteworthy that this new survey emphasizes consumers’ desire for financing options; thus, consumers appear to be seeking to base their costs decisions not on actual total costs of services, but on monthly payment options. They are therefore not necessarily taking a savvy approach to overall costs.

One area of cost concern that the survey did not cover, but which is coming up soon for most patients, is the annual deductible that most health plan enrollees must meet. Each year, consumers must consider the re-setting of the deductible on January 1, and factor that into health care choices. This is a particular concern for patients with chronic illness, and it points all the more to the need for consumers to know their costs upfront, before services are provided.

Insurer Bargaining Power: Markets With High Insurer Concentration and High Provider Concentration Show Decreased Hospital, Physician Fees – Health Affairs Study

By M2|2017-12-14T02:47:07+00:00December 13th, 2017|Health care spending, Hospitals, Insurance, Out-of-pocket spending, Uncategorized|

**Insurer Bargaining Power: Markets With High Insurer Concentration and High Provider Concentration Show Decreased Hospital, Physician Fees – Health Affairs Study**

In a recently published study in Health Affairs, the authors set out to determine whether insurers had the bargaining power to reduce prices for hospital admissions and physician visits (among five types of physicians).

The results confirm what the authors, had anticipated – that insurer bargaining power is strongest in markets with both high provider concentration and high insurer concentration.

The authors found that in markets where both insurers and providers were highly concentrated, insurers were able to reduce hospital admissions prices by 5%, and were able to reduce physician visit prices as well – e.g., cardiologist, radiologist and hematologist/oncologist visit prices were reduced by 4%, 7%, and 19%, respectively.

However, the study did not find evidence of insurer bargaining power on prices of visits to primary care physicians or orthopedists. This lack of effect is “likely because prices for those specialties are not far out of line, so it’s very hard for payers to negotiate from a price that is not far out of competitive range,” according to comments made by study one of the study’s authors, Richard Scheffler, University of California, Berkeley, in a Medscape Medical News article (Scheffler co-authored the study with fellow UC-Berkeley health economist Daniel Arnold).

Conversely, the authors found that insurer bargaining power in markets with low provider concentration was not significant, because providers in those markets are already near the competitive level, thus leaving very little room for downward negotiation of prices.

The study examined the association between provider and insurer market concentration and provider prices, calculated from the Health Care Cost Institute’s medical claims database, from 2010 to 2014. Measures of market concentration were computed using the Herfindahl-Hirschman Index (HHI), a common measure of market competitiveness used in the Horizontal Merger Guidelines of the Department of Justice (DOJ) and Federal Trade Commission (FTC).

The authors note the rapid pace of consolidation of hospitals; from 1998 to 2015, there were over 1,400 hospital mergers in the U.S., 40% of which occurred between 2010 and 2015. Similarly, physician markets are also becoming concentrated “at an accelerated pace, with primary care physicians making the move from smaller to larger group practices faster than specialists.”

“The increased consolidation of provider (hospital and physician) markets and health insurance markets has garnered significant attention and led to calls for policy action to maintain and enhance the competitiveness of health care markets,” they note.

“Our results…suggest that insurers can bargain the prices down in highly concentrated provider markets,” the authors conclude.

However, “what is missing is a market mechanism that will pass these reduced prices on to consumers in the form of lower insurance premiums,” the authors note.

“Given the extreme concentration of the health insurer market, it is hard to imagine that many markets will be contestable and that competition will work to reduce premiums. Significant premium increases and the profits of the health insurance industry in recent years suggest that little if any of the benefits of insurer bargaining power are being passed along to consumers,” Scheffler and Arnold say. Nonetheless, “in the ACA Marketplaces, there is evidence that active-purchaser states are able to keep premiums down and stabilize their markets,” they note.

Overall, aside from insurers in some of the Affordable Care Act exchanges, insurers “are making a huge amount of money,” Scheffler says in the Medscape article. With market concentration, “medicine doesn’t improve, the quality doesn’t get any better, consumers don’t benefit, but the insurance companies’ stock prices go up.”

Thus, “it would seem to be only a matter of time before further intervention in and regulation of the health insurance market by state and federal legislatures, as well as private market innovation will accelerate.”

In the Medscape article, Scheffler proposes three potential avenues for change: First, the Federal Trade Commission should get more involved in investigating the pricing practices of highly concentrated markets. Second, states should more aggressively regulate premiums that insurance companies charge and ensure that savings are passed on to consumers. Third, large companies could bypass insurers and self-insure.

Hoping for increased competition in the insurance market is unlikely to be a fruitful option here, in light of increasing consolidation; as the authors rightly point out, other measures will be needed in order to bring relief to consumers. In particular, states should follow the lead of those that have moved to more aggressively regulate insurance premiums and ensure that savings resulting from increased bargaining power are passed on to consumers. Sky-high premiums continue to burden consumers; it’s time to hold insurers’ feet to the fire and make sure consumers aren’t the only ones still paying inflated prices.

What would it take to shop for health care the way we shop for cell phones?

By M2|2017-10-08T11:40:29+00:00June 14th, 2017|Health care spending, Out-of-pocket spending, Uncategorized|

What would it take to shop for health care the way we shop for cell phones?

The “vast majority” of Americans – 95% – now own a cell phone of some type, as the Pew Research Center noted earlier this year.

Shopping for a cell phone is a pretty ordinary experience. We compare prices and features, evaluating phones in terms of the newest, biggest, fastest or the least likely to break; we have preferences, and we shop based on those preferences.

However, this is not the way most of us shop for health care. Why is that? Partly because it’s difficult to get one of the most important pieces of information: price.

Notably, if you’re shopping based on quality, you can find at least some information on quality at sites like Health Grades – but price information is harder to come by.

More than half of states have laws requiring at least some health care entities to publish prices for at least some health care procedures. For example, Florida has a website allowing people to compare hospital rates. Patients in California can use a site that provides information on average prices for common inpatient procedures. In New Jersey, consumers can check quality and prices at hospitals.

What is still missing, though, is a patient’s ability to know his or her cost specifically.

However, some health care organizations are now realizing it can be a competitive advantage to provide more accurate information to patients about their cost-sharing.

For example, Integris Health System in Oklahoma City, OK has created a tool that provides about 240,000 price estimates for outpatient procedures per year, according to a recent PwC report. Price quotes are highly accurate, coming in at +/- 3-5% of the final charge. The tool steers patients to lower-cost providers that are still within Integris’ system, and the net result is that Integris went from $1 million in point-of-service collections in 2008 to $18 million in 2015.

In another example, St. Clair Hospital in Pittsburgh, PA noted an increase in high-deductible insurance plans among its patients. The hospital was “hearing from consumers about how important it is to them to know how much they will owe in advance of a procedure,” the report notes. After conducing listening sessions with former patients and their families, St. Clair created an online tool that provides estimates for 105 procedures. With the new tool, the hospital receives about 100 estimates each week, as opposed to the six they had been receiving previously.

What’s interesting about this tool is that rather than providing an estimate of the overall cost of a procedure, the St. Clair tool creates customized estimates, for example factoring in a patient’s insurance coverage. Thus, patients receive a true estimate of their particular out of pocket costs.

In yet another example, Geisinger Health System, Danville, PA, offers consumers price quotes, a one-stop web portal for patient information and a single, easy-to-understand hospital bill under its “Proven Experience” program, the report says. Furthermore, if a patient is not satisfied with their care, the system will refund a portion of the cost to the patient.

So what would it take to enable patients to shop for health care the way we shop for other goods and services? Fixing it on the supply side is one approach, as these examples show. Hospitals can use their ability to “be more retail” in order to win customers. The bottom line is: Patients need very specific information about what their particular costs will be. Fixing it on the demand side comes next. Patients need to demand more cost information is made available by their health plans and providers, and then they have to vote with their feet.

Light Health Care Users: Most Americans Use Few Health Care Resources and Have Low Out-of-Pocket Spending

By M2|2017-10-09T01:49:05+00:00May 23rd, 2017|Health care spending, Health Care Trends, Insurance, Out-of-pocket spending, Uncategorized, What do we pay for and why|

Light Health Care Users: Most Americans Use Few Health Care Resources and Have Low Out-of-Pocket Spending

Every day we read news coverage focused on rapidly rising health care costs, but a seldom-reported part of the story is how very few people are responsible for those costs.

A study of health care costs from 1977 to 2014 shows that over the length of the study period, the top 1 percent of the health care using population consistently cost the system more than the bottom 75 percent. Just 1 percent of the population, in fact, accounts for nearly a third of medical spending.

The study, published in the April 2017 issue of Health Affairs, finds that “most Americans use few health care resources and have low out-of-pocket spending.”

In addition, more than 93 percent of these light spenders (those in the bottom half of the population) believe they have received “all needed care in a timely manner,” and the light spending by the majority of the population “has remained almost unchanged during the thirty-seven-year period.”

This light spending has also remained “unchanged since the inception of the Affordable Care Act (ACA),” as a Medscape article on the study notes.

These findings matter because most health care policy discussions focus on spending at the population level – in other words, on the 1 to 5% of the U.S. population that incurs significant medical costs. That isn’t how individuals think of health spending, however. Most of us think of what we as individuals, or perhaps our family, spends on health care.

Insurance, by design, must include many non-users, so to speak, in order to work. Most of us buy home insurance or car insurance and never use it. That is, we make payments to an insurer in the form of premiums, but we typically don’t have car accidents and don’t have house break-ins or fires. Similarly, most people don’t have much in the way of medical spending.

But if too many light spenders don’t buy insurance, the price of insurance increases for everyone. And in fact, that is what happens.

This chart from the April 2017 Health Affairs article shows that the highest spenders are the most likely to be on public insurance – think Medicaid for the severely disabled – and light spenders are the most likely to be uninsured – they don’t think they need it, and they probably don’t for years and years – until something catastrophic happens.

In terms of out-of-pocket spending, for light spenders in 2014 this figure was just $75 on average, which is less than the $94 (in adjusted 2014 dollars) spent in 1977, the authors find. On the other hand, high spenders averaged $1,096 in out-of-pocket costs. And 50% of light spenders had no spending at all (not including health insurance premiums, if they were insured), whereas only 6.1% of high spenders had none.

As we continue to think about how to improve or change health care insurance, delivery, and payment in the U.S., it is important to remember how few people actually interact with the health care system every year. Even for people buying health insurance, a large proportion of people spend little on actual health care services, and that has remained stable for decades.

This makes some complaints about the Affordable Care Act a little easier to understand. As the study explains, light spenders “as a group are unlikely to receive substantial short term benefits from the Affordable Care Act.”

The question is, what is insurance for? We probably shouldn’t design the entire U.S. health care system for people who don’t need care. But the subtle lines of who pays more, the sick or the well, the old or the young, are something we still need to work out.

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