Who Knows If the Price Is Right?

Steven Birenbaum, Senior Communications Officer, High-Value Care

June 10, 2015
Steven Birenbaum
Steven Birenbaum

Despite rosy assurances from health plans, shopping for medical care remains an exercise in futility for most consumers. There are few ways to obtain apples-to-apples comparisons of which provider offers the lowest cost for a surgical procedure or lab test before it is ordered. It's like leaving your car with a mechanic and authorizing the repair work without knowing whether it's going to cost $50 or $5,000.

Mystery pricing would never be tolerated by consumers in other areas of their life. Can you imagine going to a restaurant and ordering off a menu without prices? That's why an industry is emerging that seeks to track and provide actual prices for consumers.

Price Is Right photo courtesy of Monty Brinton/CBS
(Photo credit: Monty Brinton/CBS)

Having access to pricing information will be a boon to patients like me who are now on high-deductible health plans. When I recently sought to compare the costs of a simple lab test performed by the University of California, San Francisco, and LabCorp, it took seven phone calls and hours of my time to ferret out the answer. UCSF was 10 times more expensive than LabCorp for the same test.

Although doctors and hospitals like to claim that price variation reflects differences in clinical excellence, research has found little connection between cost and quality of care. In the case of my lab test, could the more expensive one really be 10 times more accurate?

High-deductible health plans, which are on the rise, encourage consumers to be more cost-conscious about their care. Forty-one percent of Americans with employer-sponsored insurance had a deductible of $1,000 or more last year, up from 10% in 2006, according to the Kaiser Family Foundation.

Without clear and accessible cost information, patients in these plans can end up on the hook for thousands in out-of-pocket costs — a scary prospect for anyone, but especially for those with limited income. Consumers might expect health plans to be motivated to use their knowledge of prices to steer members away from more expensive sources of care, but fee arrangements with doctors and hospitals are considered trade secrets. The situation may lead some to blame the Affordable Care Act, even though our health care system's convoluted, opaque pricing predates it by many years.

Healthcare Bluebook is one of a growing number of websites that provides a gauge of what prices are reasonable in a given market. The site analyzes negotiated rates for thousands of services by zip code and publishes what it considers a "fair" price. Another firm, Castlight Health, based in San Francisco, works with employers to educate their workers about higher-value options.

In New Hampshire, where policymakers have shown leadership in health care price transparency, the state posted median negotiated prices for about 30 services. With the help of statewide media coverage, something remarkable happened: The costliest hospital dropped its prices.

Once prices are posted, it's easier to see outliers, and that enables people to ask, "That place might be good, but is it that good?" That's a key step in making patients feel like informed consumers rather than unlucky contestants forced to choose Door No. 2 on The Price Is Right.