New Health Care Cost Institute analysis examines the value that can be derived from providing cost and quality information for non-emergency healthcare services.
While consumers are entitled to price and quality data for medical services they could conceivably plan for in advance, the healthcare industry needs to be realistic about the power of consumer shopping to rein in excess healthcare spending, a new report suggests.
The report from the Health Care Cost Institute (HCCI), “Spending on Shoppable Services in Health Care,” examined 2011 claims data for people under age 65 years with employer-sponsored health insurance. Researchers looked at total spending on shoppable healthcare services.
For purposes of the analysis, these were defined as a set of healthcare services that are non-emergency services that are schedule by a consumer in advance of receiving care. Examples include: flu shots, non-emergency hip or knee replacement, colonoscopies, urinalysis, and blood and strep tests. Prescription drugs and devices were not considered shoppable in this analysis.
Although a large portion (43%) of annual healthcare spending is for services in which consumers could shop for based on price, less than 7% ($37.7 billion) of total spending is actually paid out-of-pocket by consumers for shoppable services, according to the analysis. Additionally, About 15% (nearly $81 billion) of total spending in 2011 was spent by consumers out-of-pocket.
“That means for the vast majority of healthcare spending, providing incentives or information to steer consumer behavior will have limited effects on improving the value of the healthcare dollar,” says Amanda Frost, senior researcher at HCCI.
Knee and hip replacements, which are inpatient services that are often pointed to as services to shop for, had less price variation than other services. The researchers say shopping for knee and hip replacements is not a bad idea but its value depends on geography. A knee replacement in Palm Bay, Florida, for example, costs $16,822 more than the same surgery 180 miles away in Miami. There was much greater price variation for hip and knee replacement in Kentucky, Texas and Georgia than in Montana or Hawaii.
“We need to accompany consumer shopping tools with interventions that bypass the consumer,” says David Newman, HCCI’s executive director. “On the quality front, providers and payers will need to be engaged to ensure that the services provided meet an acceptable threshold. Efforts to reduce healthcare costs need to directly engage providers, who are setting the prices, and payers-whether insurers or employers-because they are in the best position to exert downward market pressure on prices.”