Tuesday, August 4, 2015

You probably have no idea what your health care costs

Has your doctor ever said you need a medical procedure? If so, you were probably told what hospital or clinic to use, which specialist or surgeon to select and numerous other key details. But did the doctor say what it would cost? Did you even think to ask?

You probably have no idea what your health care costs


Has your doctor ever said you need a medical procedure? If so, you were probably told what hospital or clinic to use, which specialist or surgeon to select and numerous other key details. But did the doctor say what it would cost? Did you even think to ask?

If you had thought to ask, would your doctor have known? Probably not.

The cost of medical care in the United States is as transparent as the fog at Philadelphia Airport. It probably never occurred to you to ask about price because your insurance plan will pay the bill. The doctor doesn’t know because he or she won’t have to pay it, either.

How about the hospital or clinic that provides the care? Shouldn’t it know what price it will charge? Chances are, even it has no idea.

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The prices for medical services vary wildly according to who is paying. Private insurance companies negotiate their own sets of rates with each provider. Government programs like Medicare and Medicaid dictateprices according to formulas. And if you pay out of your own pocket, the price is anyone’s guess.

A new study published this week in the prestigious journal JAMA Internal Medicine showed just how bizarre the pricing for self-paid medical care really is. Researchers asked hospitals in every state what a hip replacement would cost for a 62-year-old woman. Only about 10% could give them a firm answer. Top-ranked hospitals did better than others, but even among them, only 45% provided clear price quotes.

The researchers were able to calculate a price estimate on their own for several facilities by contacting the hospital and physician separately. And a few more gave them partial price data. But for 16% of non-top-ranked hospitals and 15% of top-ranked hospitals, they could get no price information at all.

That’s astounding. For what other good or service do sellers have no idea what they charge? Imagine a car dealer telling customers there is no way to know whata new vehicle will cost.

But the lack of price transparency was not the only finding. For those hospitals that could provide information, prices varied by a factor of more than 10. The cheapest hip replacement cost $11,000 and the most expensive $125,798.  And lest you think that differences in quality account for the spread, many of the highest price quotes were for hospitals that are not top-ranked. (For comparison, Medicare and larger insurers generally pay between $10,000 and $25,000.)

Undoubtedly, many of the hospitals had trouble calculating prices because so few of their patients pay on their own. They are used to receiving payments that are set by insurance plans. But the number of patients whopayout of their own pockets is growing, and more will do so as annual deductibles for coverage continue to grow.

In fact, one widely touted approach to controlling costs is to encourage patients to comparison shop. Several website now offer price data for some services. (See Clear Health Costs and Healthcare Blue Book.) But how effective can comparison-shopping be if the providers themselves don’t even know what they charge?

The wide variation also indicates that prices at many hospitals bear little relation to the actual cost of rendering care. They seem more like random numbers. Clearly, the pricing system for health care is dysfunctional.

However, one thing is clear. Ifwe areever to control spiraling health care costs, promoting price transparency would be a very good place to start.

-          By Robert I. Field

Professor, School of Law & Drexel School of Public Health
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The Field Clinic reports and analyzes health care laws, government policies, and political trends that are transforming the care we receive and the way we pay for it. Read more about our panel of bloggers here.

This blog is produced in partnership with Kaiser Health News, an editorially independent program of the Henry J. Kaiser Family Foundation, a nonprofit, nonpartisan health-policy research and communication organization not affiliated with Kaiser Permanente. Portions of this blog may also be found on Inquirer.com and in the Inquirer's Sunday Health Section.

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Robert I. Field, Ph.D., J.D., M.P.H. Professor, School of Law & Drexel School of Public Health
Jeffrey Brenner, MD Founder of the Camden Coalition of Healthcare Providers, Medical Director of the Urban Health Institute at Cooper University Healthcare
Andy Carter President & CEO, The Hospital & Healthsystem Assoc. of Pa.
Robert B. Doherty Senior Vice President of Governmental Affairs & Public Policy American College of Physicians
David Grande, MD, MPA Assistant Professor of Medicine at the University of Pennsylvania
Tine Hansen-Turton Chief Strategy Officer of Public Health Management Corporation
Drew A. Harris, DPM, MPH Director of Health Policy Program at the Jefferson School of Population Health
Antoinette Kraus Director of the Pennsylvania Health Access Network
Laval Miller-Wilson Executive Director of the Pennsylvania Health Law Project
David B. Nash, MD, MBA Founding Dean of the Jefferson School of Population Health
Mark V. Pauly, Ph.D. Professor of Health Care Management, Business Economics and Public Policy at The Wharton School
Howard J. Peterson, MHA Managing Partner of TRG Healthcare, a national healthcare consulting firm
Paula L. Stillman, MD, MBA Healthcare consultant with special expertise in population health and disease management
Elizabeth A. W. Williams Senior Vice President & Chief Communications Officer for Independence Blue Cross
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