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The problem with health-care cost transparency

The Centers for Medicare and Medicaid Services (CMS) recently issued a report that unwittingly pinpoints a growing problem: the lack of actionable information that patients need to become effective health-care consumers.

Martin Barraud | OJO Images | Getty Images

While the release of data by CMS is an admirable starting point in informing patients about the cost of health-care services, the CMS data are not true indicators of what health care really costs for you, me or even our insurance carrier. Instead, they reflect the price hospitals bill prior to any negotiation with Medicare or private insurers. Of additional concern, CMS did not make available its data about quality in the same user experience — a crucial component in making informed health-care decisions.

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In order for patients to achieve what government and business have not – more affordable health services – we need to arm them with actionable information. In this way, we transform them from passive health-care users into informed health-care consumers, spurring competition in which the end result is declining costs and rising quality.

Given that individuals have more skin in the game than ever, there is plenty of motivation among patients to spur this revolution. According to the Kaiser Family Foundation, 38 percent of covered employees have a deductible of $1,000 or more for single coverage (up from 18 percent five years ago), and 15 percent have a deductible of $2,000 or more (up from 5 percent in 2008). These consumers are hungry to understand the cost and quality – or the value – of their health-care purchases.

To effectively shop for care, patients need to know the actual costs being charged by various providers, including what out-of-pocket costs they will pay based on their benefits plan. Charges for pharmacy, medical and dental services often vary by more than 300 percent even within a given network – and much of this falls on the shoulders of health-care consumers, depending on benefit design and deductible status. In the consumer world, shoppers need a powerful reason to choose a service that costs in excess of three times more than a comparable competing service – why should health care be any different?

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What patients really need is timely, actionable and personalized information so they can shop for an MRI scan in the same way they would shop for a new car – by factoring in quality, cost and accessibility. Their informed choices would create a culture of competition across the diverse landscape of health-care providers, be they physicians, hospitals or pharmacies.

The power of consumerism relies on the patient's ability to act on cost and quality information before they obtain care, not after. That means receiving relevant health pricing and quality information on their phones or in their email inbox, rather than having to seek out cost and quality information on their own.

According to a survey by the non-profit group, Catalyst for Payment Reform, 95 percent of health plans currently offer price transparency tools, yet only 2 percent of members use them. This is why actionable information – information that is automatically sent to consumers with prompts directing them to the next step in shopping for care – is so critical.

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A recent analysis by West Health Policy Institute suggests that transparency initiatives could cut $100 billion over 10 years from health spending. This may be a small step towards reducing the trillions of dollars we spend each year on health care in this country, but it is a step in the right direction. Additionally, as we improve our ability to make public provider level outcomes from a quality perspective, the patient can assess the value of health-care services, forcing providers to compete on quality as well as cost.

A robust age of health-care consumerism can create enough competition to reduce health-care costs and increase health-care quality.

Douglas Ghertner is president and CEO of Change Healthcare, a firm that provides cost and quality information to consumers through their employer or health plan. Follow him on Twitter @nashvilledmg.

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