Dr. Austin Frakt and Gilbert Benevidez, MPH, present their research on the intersection of economics and medicine, namely prices, in an article at news@JAMA:
Price transparency has been touted as a way to reduce health care spending, but there’s one big problem: it has rarely worked. That may have more to do with how it has been implemented in the past rather than a fundamental problem with the concept itself.
The idea behind price transparency is that informed consumers can price shop for medical services that have widely varying prices, like elective surgeries or magnetic resonance imaging (MRI). The concept is very popular, both in the United States and abroad.
But do they work?
A study published in the American Journal of Managed Care surveyed more than 140 million health plan members across 31 different commercial plans who had access to price transparency tools. Only 2% used them. Many members did not know the tools existed at all.
Sunita Desai, PhD, and colleagues at Harvard Medical School in Boston set out to measure the association between employer-provided price information and outpatient spending. In a 2016 article in JAMA, they reported that they found that employees rarely used the information, nor was it associated with lower spending. Aetna offers a website with real-time, personalized price estimates that is used by only 3.5% of its members. Perhaps these tools can be effective in reducing health care spending, but evidence shows that low overall use is a significant bottleneck to achieving that goal.
One can argue, however, that the tools are not good enough, or that augmentation is required. That gets us to the meat:
… a recent article in the American Journal of Health Economics by Christopher Whaley, PhD, and colleagues at the University of California, Berkeley, examined pairing price transparency with reference pricing for Safeway employees. Here’s how it works: payers set a maximum reimbursement threshold for shoppable health care services, which is the reference price. Patients who use providers with prices above the reference price pay the difference out of pocket. Under properly designed programs, members are given price transparency tools that help them find lower-priced care.
The study watched for employee health care behavior changes over 2 years, looking at laboratory and imaging test prices. After the first year, during which only price transparency tools were offered, the authors confirmed the findings of previous studies: health plan members rarely shopped.
But when the reference pricing information was added in the second year things changed. Shopping picked up and prices decreased. Specifically, laboratory test prices dropped 27% and imaging test prices decreased 13%. The authors concluded that price tools will capture the attention of consumers only if the consumers have strong financial incentives to shop in the first place.
But disappointingly they mention, but do not expand, on one of the most important, but difficult to measure, obstacles to lowering health costs in a free market setting:
… quality is crucial in health care—where bad quality could cause serious harm. Although quality is important for other products, bad quality is typically just an inconvenience. But judging the quality of care is much harder than sizing up other products or services. Because of this, patients may use price as a proxy, assuming higher prices mean better quality. Consequently, even if patients have price information, they may not choose the lowest price available.
And it’s difficult to get quality information on doctors and facilities. Who wants to go to a second-rate facility when a mistake can worsen your condition, or even kill you[1]? But finding that information out can be difficult, and when it’s a medical emergency, between the time requirements of the situation and the aggregation of disparate medical groups, the entire concept of price shopping recedes into irrelevancy.
The quality issue implicitly brings another issue to the fore: medicine is not a commodity. Price shopping is at its best in commodity situations, which can exist either for an entire market, or within a price point of a market.
But that doesn’t apply when your life is on the line.
I’m not saying there are bad doctors and good doctors, or bad hospitals and good hospitals. Although there are. I’m just saying that experienced doctors may bring more tools to a problem than inexperienced doctors, while fresh out of school doctors may be more informed on the tools and medicines becoming generally available than the experienced doctors, and they’re all working in one of the most complex subjects humanity has ever studied: biology.
My gut feeling is that studies such as this one are somewhat beside the point, as interesting as reference prices and that sort of thing may be.
1 Known as iatrogenic medicine.
