Health Insurance Pricing Transparency Could Save $36B Annually

About $36 billion could be shaved off the nation's healthcare tab each year if the cost for 300 common procedures covered under employer-based insurance plans were reduced to their median prices, according to research from Thomson Reuters Healthcare.

The study, Save $36 Billion in U.S. Healthcare Spending Through Pricing Transparency, says cost savings initiatives should include benefit designs that incentivize healthcare consumers to make cost-conscious decisions about their care.

To do so, however, those healthcare consumers would need ready access to provider-specific price and quality information, including summaries of costs associated with the care, such as ancillary and hospital fees, and potential out-of-pocket expenses, the report says. Right now, that ready access does not exist.

"Increasingly the cost of healthcare is shared more significantly by the consumer," Raymond Fabius, MD, CFO of Thomson Reuters Healthcare, Inc., told HealthLeaders Media.

"One of the reasons why it is so important to promote the concept of transparency, both in terms of cost and outcomes, is so that people can engage in a much more sophisticated decision-making process between not only 'should I do this or not', but also 'with whom should I do it,'" he says.

David Shapiro, MD, president of the Ambulatory Surgery Center Association, supports transparency, but says trying to compare prices for healthcare is practically impossible right now because of its inherent complexity.

"I am a physician, and if I seek to purchase healthcare … I have the same problem that a non-physician patient would have trying to determine what that cost would be," Shapiro said.

"You may or may not know what your insurer will pay. You may or may not know what you pay for insurance. Possibly your employer writes the check. So you have huge firewalls between your hard earned money and purchasing healthcare," he said.

"Healthcare is not only the most important service you buy, it is certainly the most expensive and complicated. You mix all those things up and you essentially have the perfect storm and the patient who has the most at stake really has the least input and knowledge of the system," he says.

The study used insurance claims data for employer-sponsored insurance plans to analyze variations in prices nationwide for 300 "shoppable" high-volume elective procedures, such as a mammogram, colonoscopy or MRI. The claims data showed that some prices in some markets were two or three times higher than the median price for the same procedures.

The study identified site of service as another major driver of price variation. The costs of services done in hospitals are significantly higher than in the outpatient or office setting, and the study found nothing to indicated that higher prices correlated with higher quality of care.

Fabius says health insurance plans and providers need to drop their longstanding reluctance to hide their prices from the public.

"Getting that cultural change to occur will be a challenge," he says. "There is some good reasoning behind the interest on the part of providers and payers to negotiate privately. They believe their pricing schedule at least on the payer side may provide some competitive advantage."

"Ultimately marketplaces should be responding to the needs of the purchaser. The wind is in the sails for change and ultimately it will become clear to both the providers and the payers that in order to serve the needs of their ultimate customers, the purchasers and the consumers, they need to support greater transparency."

If consumers are expected to pick up more of the cost for their own healthcare, Fabius says simple fairness demands that consumers know those costs. 

"There is the hope that because the consumer or patient has more ‘skin in the game' they may be more inclined to engage in comparative shopping," he says. "What is concerning is that without adequate price or quality transparency it is very difficult to shop even if you have skin in the game."