Healthcare Price Transparency

Healthcare Price Transparancy

Have you ever tried to figure out what a healthcare procedure is going to cost you before you have the procedure? Almost no one can give you a straight answer, and it takes a long time to get a number at all because the doctor’s office has to check with your insurance to see what their agreement is, what you still have left with your deductible, and where you stand relative to your out of pocket maximum. The result is that consumers have very little insight into what they are actually going to pay or owe when they go to a check-up, when they need a new prescription drug, or when they have a knee operation at a local hospital.

 

In his book The Opioid Crisis Wake-Up Call, Dave Chase addresses the lack of transparency in healthcare pricing. Specifically looking at the ways that insurance companies hide claims data from employers, Chase writes, “They want to maintain the status quo. This means protecting pricing opacity at all costs. If you could see the prices you actually pay, you might begin to wonder why a hospital with a large market share but mediocre quality outcomes is paid exponentially more than a smaller, high quality provider in the same network.”

 

Healthcare price transparency reveals disparities in our healthcare system and shows that healthcare costs are often not connected with quality or health outcomes. Cost is somewhat arbitrary and usually negotiated without the person who will actually be receiving the service. If we could see the costs, then we would be more likely to shop around, either for different insurance or for different healthcare providers with more reasonably prices for services and treatments. I think our health spending is generally rather inelastic, but nevertheless, if we better understood pharmacy pricing, basic medical services, and major surgery costs, we could start to move toward options that offered higher value.
Health Insurance Company Games

Health Insurance Company Games

Dave Chase’s book The Opioid Crisis Wake-Up Call was an interesting read because Chase highlights many of the health insurance company games that add to the cost of healthcare in the United States without providing additional value. I’m skeptical of health insurance companies, and Chase’s book discusses some of the nitty-gritty details of misaligned incentives that lead to unending increases in healthcare premiums and costs.

 

An example that Chase highlights is early renewal discounts for companies that chose to stay with their current health insurance company or plan administrator. Throughout the book, Chase discusses how businesses are letting their employees down and allowing healthcare costs to skyrocket by accepting increasing healthcare costs from health insurance companies each year. Many companies don’t have someone who really understands healthcare or health insurance in charge of their benefits programs, and as a result those individuals are often more focused on not being yelled at by employees than on reducing costs and providing a valuable health insurance package. Insurance companies take advantage of this by pressuring businesses to accept increases in the cost of healthcare administration each year at rates far above inflation.

 

Insurance companies know that businesses don’t actually want to shop around for health insurance and they know that employees don’t want to have a change in insurance each year. Insurance companies will offer benefits for early renewals from companies, and as Chase writes, “Often these early renewals come with no-shop clauses. So, a 20 percent rate increase may only be a 15 percent if you sign today and agree not to shop the competition. This should be viewed as a red-flag, not a great deal on a premium reduction.”

 

Insurance companies position themselves as offering a good deal, but they are increasing the cost of the insurance plan by 15%. Busy employers with small HR staff often see this as a win because it reduces their effort and while employees see costs rise they don’t have to hassle with changing insurance and unknown insurance processes. This is part of why premiums in the United States are rising so fast. Insurance companies hide information and data, and make it difficult for overwhelmed staff to pick benefits that will truly help employees.
Pay and Chase

Pay and Chase

If you were working to set up a healthcare plan for your employers, you would want to make sure that payments by the insurance plan were quick so that your employees were not constantly bombarded by letters and phone calls from doctors offices asking when they would be paid by the insurance plan. You also would want the plan to have a system in place for catching fraudulent claims or errors in charges from hospitals and doctors offices. Both of these desires are reasonable, but in the real world, they have created a system of perverse incentives that Dave Chase calls “Pay and Chase” in his book The Opioid Crisis Wake-Up Call. Here is how Chase describes it in his book:

 

“Another fee opportunity is so-called pay and chase programs, in which the insurance carrier doing your claims administration gets paid 30-40 percent for recovering fraudulent or duplicative claims. Thus, there is a perverse incentive to tacitly allow fraudulent and duplicative claims to be paid, get paid as the plan administrator, then get paid a second time for recovering the originally paid claim.”

 

Insurance companies administering health insurance don’t actually have an incentive to create tools to proactively stop fraud. They actually benefit when there is fraud, because they get a bonus when they spot the fraud and recoup the already paid fraudulent amount. As an employer partnered with the insurance company, you might be happy that claims are paid quickly so that your employees don’t have negative interactions with doctors about payment, but the way that many plans currently operate, you will end up paying a lot more overall when your plan pays for fraudulent claims and billing errors. You will pay for the fraud itself, and if you get any money back, it won’t be for the full amount that your claim administrator originally paid in the fraud or error – they will keep a cut.

 

Chase continues, “Many of the fraud prevention tools used by claims administrators are laughably outdated and weak compared to what they are up against. Modern payment integrity solutions can stop fraud and duplicate claims, but aren’t being used by most self-insured companies’ claims administrators.”

 

Poor incentives and confusing systems have allowed this to occur. This is one example of how the systems around healthcare in the United States are not aligned with what we would all agree should be the number one focus: improving the health of Americans. Employers don’t want their employees to be angry, and plan administrators want to maximize profits. In the end, we all pay more as fraudsters find ways to get past the outdated fraud prevention systems of insurance companies and as those companies turn around and charge fees for catching the fraud and payment errors they didn’t prevent in the first place.
GoFundMe For Healthcare

GoFundMe for Healthcare

We all complain about our personal healthcare costs and we know that healthcare spending in the US is a huge percentage of GDP, but what isn’t clear is that the vast majority of spending and healthcare costs come from a small minority of patients. Cancer care, treatment for severe trauma, and therapy for rare diseases can be incredibly costly and unpredictable. For many people who face such substantial challenges, GoFundMe ends up being a huge support, and I think it is worth asking ourselves if that is a reasonable way for people to be able to afford medical care in the United States.

 

As Dave Chase writes in The Opioid Crisis Wake-Up Call, “In 2013, more than 1.5 million Americans lived in households that experienced a health-related bankruptcy. More than three-quarters of those people had insurance. Some say medical bills may also be the top cause of homelessness. Nearly half of all GoFundMe crowdfunding campaigns are to pay for medical-related expenses.”

 

Our health insurance, what we pay for and what our employers offer us to help ensure that if necessary, we can afford medical care, does not actually help us afford medical care in the case of an emergency or major diagnosis. Medical related bankruptcies are not a rare occurrence, even for those who have insurance, and if Chase’s quote is accurate that a large cause of homelessness is medical bills, then the cost of care that is supposed to help someone be healthy, likely pushes people into incredibly unhealthy living circumstances. The fact that people have to turn to crowdfunding moonshots for treatment is a clear indication that the healthcare system in America is failing those who need it most.

 

I would argue that much of the social unrest in our country is related to stagnated wages. Chase argues that wages have stagnated as businesses cope with increasing costs for providing healthcare to employees. Americans don’t see their wages increase, but do see the cost of healthcare rising, and many face bankruptcy and must turn to GoFundMe for healthcare related expenses. It is not hard to imagine how healthcare costs contribute to an unhappy populace that doesn’t trust public officials and elected leaders who have not been able to remedy the situation, or business leaders who have not provided real value in the health benefits they offer employees.
Healthcare Pricing Failures and Overtreatment

A Story of Healthcare Pricing Failures and Overtreatment

I don’t know anyone who would not agree if I said that there was a pricing failure with the way that healthcare operates in the United States. My personal favorite example of this was a story about a person who wanted some type of medical care, but couldn’t get it due to complications with payment between what he would pay and what his insurance provider would pay the provider. The individual one way or another found out what the charge was for someone who was uninsured, and asked if he could just pay that amount instead, but the provider couldn’t offer him the same rate because of the complications involving the private insurance, contracts, and all the confusing legal structures involved. The price of healthcare in the United States is not just high, it is completely opaque to even the people on the inside, it is apparently arbitrary in some instances. It is a pricing failure that is detached from the costs that anyone involved actually seems to face.

 

One of the worst parts of the pricing failure of healthcare, however, is that it isn’t even connected with the services we receive. Because no one knows what anything costs at a pure base level, consumers can’t easily shop around, and providers have no incentive to make sure they are actually providing value for the service they provide. I’ll use an example from my own life:

 

I had been getting vision checks and contact prescriptions done at Costco for several years, but thought I ought to actually get in for a full eye exam at an office a couple years back. Costco was cheap, it was easy, the service was quick, and the optometrist was a good communicator. In other words, the service and the value of the care I received were excellent. At the other office I paid substantially more for an eye exam, did a bunch of tests that seemed unnecessary and needed to be repeated, never got a great answer about why I was doing the tests, why I failed them, and if it was a problem with my eyes or the machine in use. The optometrist was less friendly, didn’t communicate as well, offered me fewer contacts to try on and conducted what felt like an unnecessary contact fit exam rather than letting me try out the contacts for a couple weeks before making a purchase. Where Costco gave me my prescription and sent me out the door, the office I went to had no intention of letting me have my actual prescription, in an effort to force me to purchase contacts through their office rather than someplace cheaper.

 

Dave Chase in his book The Opioid Crisis Wake-Up Call writes, “Broadly speaking, the two biggest problems in the U.S. healthcare system are pricing failure (no correlation between price and health outcomes) and overtreatment.”

 

I experienced both of these in the example above. I (and my insurer) were billed for unnecessary services at the more expensive office. The services provided were worse, less convenient, and didn’t seem to be related to my actual eye health outcomes.

 

There are a ton of challenges to addressing these problems. Policies to reward good health outcomes often end up rewarding providers who serve more affluent populations, who tend to just be more healthy in general. Equating patient satisfaction and quality of services also are not always related to actual health outcomes, so measuring the quality of services from a patient standpoint is not always helpful and often full of bias. Nevertheless, it is clear we need more transparency, and more market mechanisms in the U.S. healthcare system so that quality, outcomes, and price can be taken into consideration and more directly linked to the services and products that medical providers offer.
Medical Technologies

The Problem with Healthcare Technology

In my last post I wrote about hidden costs of the healthcare system in America. I wrote about tax breaks for employers who offer health benefits, and I wrote about third party insurance preventing the healthcare system from working like a pure market. This post introduces one consequence of the hidden costs of our system and the ways in which our system fails to act like a market: the high cost of medical technologies.

 

In The Opioid Crisis Wake-Up Call, Dave Chase writes, “We ended up focusing on a certain type of high-technology, acute medical care – which we financially reward far more than lower-level preventive and chronic care – without regard for the quality of the outcomes or value of the care.”

 

When I took a healthcare policy and administration class along with a healthcare economics class for my graduate studies, I was surprised to see a critique of advancing medical technologies as part of the problem of American healthcare costs. I live in Reno, under the sphere of influence of the Bay Area, where technological solutions to global problems are hailed as the cure-all, deus ex machina that we need for a peaceful and prosperous world. I always thought that better medical technology saved lives, made us healthier, and ultimately reduced cost by being more efficient and precise than older technologies.

 

As it turns out, new medical technologies are incredibly expensive, and often times the benefits that patients receive are only marginally better than what existing technology offers. In some instances those marginal improvements make the difference between life and death, but in many instances, the new technologies might only add a few months of life to a terminal diagnosis, a few additional months lived in pain and fear. In other instances, the new technologies might add a little more comfort or certainty in a patient’s procedure or diagnosis, but it is fair to question whether its really necessary and worth the additional cost.

 

The quote from Chase reveals that when we are shielded from the costs of care, and when we remove market aspects from the healthcare system, we adopte a mindset that healthcare equals expensive interventions with high cost technology. I had clearly bought into this narrative prior to my graduate studies. The alternative that Chase highlights in his book, which we have underdeveloped in the United States, is to move upstream, and take care of people at a preventative level before they are sick and before they need expensive technological interventions. Developing systems, structures, and norms for healthy lifestyles will do more to reduce costs than the development of new magical cures and technological fixes. Our priorities and the focus of our system is flawed, and a as a result we focus on high cost interventions within a system no one is happy with. Rather than develop a system that actually supports healthy living, we have fished around for quick, high-cost technological solutions to our health woes.
Hiding the Cost of Healthcare

Hiding the Cost of Healthcare

In the United States, our current system of healthcare coverage is hiding the cost of healthcare. Anyone who has to go to physical therapy, get an MRI, has a child that needs treatment for a disability, or ends up in an ER knows firsthand that healthcare is expensive, but many of them probably don’t realize just how costly our healthcare system truly is. For the most part, in our country we have a system that pulls a third party into every payment scenario for healthcare, and as a result, the cost of healthcare is not reflective of a true market.

 

Many argue that our current system creates too much of a moral hazard, with people living unhealthy lifestyles because they know they won’t face the full cost of care if they need it. Some argue that the current arrangement leads to unnecessary care or over-treatment because people don’t pay the full cost of care, so they seek more of it. At the same time, groups argue that insurance and healthcare coverage are still prohibitively expensive, and that the stress of possibly having to go to a doctor and spend thousands of dollars (even if one is insured) genuinely harms people’s health.

 

I think all of these are true in their own way, and I think they are relatable because they are things that people have seen first hand or can easily imagine, but there is still a deeper level of healthcare costs in America that we don’t discuss. Our system of taxes is also hiding the cost of healthcare. As Dave Chase writes in The Opioid Crisis Wake-Up Call, “Today, the tax break for employer-paid benefits is estimated at over $600 billion, making it the largest tax break in the tax code, the nation’s second largest entitlement after Medicare, and the primary wage suppression driver.”

 

During World War II, wages to employees were frozen to prevent rapid inflation in the United States during the war. To attract and retain qualified employees, businesses turned to employer-paid benefits, and congress created a law which would allow those benefits to be tax-deductible for employers. This was a way to effectively give employees a bonus without paying them more, keeping inflation down, but still giving them something that economically and socially benefited them. Today of course, you are taxed on anything of value you receive from your employer as if it was straight cash, so your healthcare benefit basically still counts as wages, but that tax break for the employers is still in place for the health benefits they provide.

 

This is where we are hiding the cost of healthcare in America when it comes to private insurance. Most Americans receive healthcare through their employer, and the US government loses out on $600 billion in taxes to allow employers to offer health insurance. So the plan you are on that you might lose if you are fired, the plan you have this year that might not be offered again next year if the insurer changes, the plan that still has a $1,500 deductible and $4,000 out of pocket annual max, costs you and U.S. tax payers $600 billion per year.

 

Because this is a hidden cost, it is not something we discuss very often. We are afraid of the cost of a nationwide healthcare system, but we don’t discuss how much money is not being collected in taxes and being sheltered by a tax break that maintains a system that very few people are actually happy about. We face high costs ourselves, even if we are covered by a plan that fits within this $600 billion tax break system, and the system has warped the way that care is payed for and provided to the point where we don’t even know what knobs and levers to try to pull to get the who thing to be more transparent, provide real value, and to be less costly. We need to be honest about the ways that our current system is hiding the cost of healthcare in America, or we will never be able to make real changes to improve the system.
Employers, Employees, and Opioids

Employers, Employees, and Opioids

One of the frustrations I have with modern day America is how frequently employers say that their greatest asset is their employees, but don’t back that statement up with actual action that helps improve the lives of their employees. Many of us work 40 hours when our work could reasonably be completed in fewer hours, alternatively many of us have incredible demands and insufficient help or time to complete our work. On the benefits side, many of us have health plans that don’t make preventative care affordable and have high deductibles and copays which place basic medical care beyond our reach. These frustrations, incursions into our non-work-lives, and a lack of support for living healthy lives are examples where employers are failing to live up to the claim that so many of them make about the care and value they have for their employees.

 

In the end, a failure to take care of employees and a willingness to let workers languish hurts the employers as much as the employees. In his book, The Opioid Crisis Wake-Up Call Dave Chase writes, “Ohio attorney general Mike DeWine estimated that 40 percent of job applicants in the state either failed or refused a drug test. The result: In certain places, solid middle-class jobs can’t be filled.”

 

On a first read, the problem sounds like it is on the job applicants. Why are so many job applicants using drugs, refusing drug tests, and unable to be hired for work? Shouldn’t they stop using drugs, get their lives together, and do the sensible things to be responsible humans and find employment? From the outside, as someone with a job who doesn’t have an opioid addiction, this is easy to say and think, but it’s also shortsighted.

 

Many of us have incredibly lengthy commutes, decimated social lives, no meaningful civic or religious organizations to give us purpose outside of work, and lack access to supportive mental health and general healthcare services. When we fall on hard times and need assistance, we don’t have a social safety net that we can fall back upon with encouragement and understanding. We feel isolated, can barely afford healthcare, don’t have much time outside of work and commutes for social or civic engagement, and if we do need welfare, the system is designed to make us feel like abject failures for turning to public support programs for help.

 

The blame can’t fall entirely on the individual. Businesses have to be held accountable as well, after all, employers count on a strong labor market to stay afloat and be productive. If they truly value their employees, they should prioritize a happy, healthy, and effective workplace by pushing back against institutions and structures in our lives that make us miserable, depressed, unhealthy, and uncommitted to the work we do. Chase’s book shows how employers are beginning to do this, by providing more services (in healthcare) to their employees and actually saving money while doing so. Employers can let their actions speak louder than their HR slogans, and can help their employees actually live healthy lives. In the end, the workforce that they rely upon will indeed be more reliable.
pharmaceutical advertisements

Thoughts on Pharmaceutical Advertisements

“The reality is that most people hear more from pharmaceutical companies (16 to 18 hours of pharma ads per year) than from their doctor (typically under 2 hours per year).” writes Dave Chase in his book The Opioid Crisis Wake-Up Call. Chase is critical of American’s looking for a quick fix and expecting a pill to solve their problems. He says that short doctors appointments and a bombardment of pharmaceutical advertisements on TV contribute to the mindset that any disorder or illness can be fixed in a matter of minutes with a quick pill. With how much we hear from drug companies, and how little time we spend with someone who is trying to work with us in depth to correct behaviors, change our thoughts, improve muscle imbalances, or make adjustments to help us live a more healthy lifestyle, it isn’t hard to understand why most people think of medical care in the form of a pill.

 

I am wary of pharmaceutical advertisements. I don’t really understand if I am the target audience or if medical professionals are the target audience. I’m not sure if the goal is to just normalize taking pills, or if the goal is to educate patients about a potential solution for a potential problem. I’m not sure if the idea is to get people away from taking generic medication in favor of brand name drugs, or if it is to get people to try a medication and see if it helps them.

 

However, I also remember seeing a study which suggested that drug advertisements did help improve people’s health literacy, and did lead to patients being more likely to ask about medications which would help them, without finding an increase in patients asking about medications that wouldn’t be helpful for them. `When primary care providers are stressed, have limited time with patients, and are likely to miss important details, having patients with goals and specific questions about beneficial medication is important for overall health gains and an improved doctor-patient relationship. Additionally, advertisements approved by the FDA and at least somewhat regulated are better places for people to gain medical information about a drug than a Reddit or Facebook post from a random person.

 

Ultimately, I think I fall on the side of banning direct pharmaceutical advertisements. I find they are overly broad, dangerously support the idea that all one needs is a pill to solve all health problems, and ultimately are more about pharmaceutical companies than about improving health in general. I’m not 100% sure this is the best course, but I’d put my confidence around 75% sure this is the best path to pursue. I don’t think it would hurt America to be a little less focused on pills as cures rather than focused on lifestyle changes, especially if we start to favor policy changes that would support more healthy lives.
Opioids and Mental Health Disorders

Opioids and Mental Health Disorders

Opioids and mental health disorders probably do not seem like a good mix in anyone’s mind. I’m sure most of the general public would find it problematic to prescribe opioids to someone with a mental health disorder, but every day, physicians across the country prescribe large numbers of opioid prescriptions to these patients.

 

Dave Chase, in his book The Opioid Crisis Wake-Up Call, writes, “According to a recent study, more than half of all opioid prescriptions in the United States annually go to adults with a mental illness, who represent just 16 percent of the U.S. population.”

 

Why do we over-prescribe so many opioids to people with mental health illnesses? I can think of three potential causal models that lead to our over prescription of opioids for people with mental health disorders. 1: our system was never set up to treat health broadly speaking, 2: mental health has always been stigmatized and hidden in America, and 3: we have sabotaged ideas of community in the United States as we pursue our own self-interests and spend unreasonable amounts of time working and commuting.

 

1: The history of the American medical system was focused on interventions and solving health problems after the problem had popped up. Insurance companies were created to help people access different parts of the medical system, and over time private insurance has become more or less the only way to reasonably access affordable medical care in the United States. Our reliance on third party payers allowed prices to profligate, and it feels as though we are at a point where we can’t turn the ship around. If you have a mental health disorder, you are less likely to have stable employment, which means you are less likely to have quality health insurance provided through your job, and less likely to establish the mental health care that you need. As a result, you probably see your primary care provider and end up with an opioid prescription during your 10 minute appointment because your doctor doesn’t have time to really work with you on addressing your mental health challenges.

 

2: There are many examples throughout history of people hiding children with intellectual disabilities. Generations before us warehoused children in mental health institutions that did little to help improve health. We are mostly beyond that today, but nevertheless, we hide anxiety, depression, learning disabilities, and other mental health challenges from our friends, families, and coworkers. We still don’t do a good job of accepting that mental health disorders are not something that people should be ashamed of, and many people do not seek appropriate care but instead life lives that are less than healthy, where ending up with an opioid prescription, or self-medicating with something worse, is a less public alternative to dealing with mental health challenges.

 

3: Tying both points one and  two together, our lack of community makes mental health management almost impossible. We don’t have a lot of friends and family members that we can truly rely on for help with physical, mental, and emotional challenges. It may take a village to raise a kid, but we have run away from our villages to hide in our suburbs. We have dis-invested in the communities where we live and as a result, people with mental health disorders lack the social support systems necessary to truly address their needs. Even if people with mental health issues have some family and friends close by, those who they rely on probably lack the support they need to care for someone with mental health challenges. We spend too much time at work, spend too much time commuting to work, and don’t have time to help those who are more vulnerable. As a result, we simply shut people with mental health disorders out of our lives and out of society, and numb their lives with opioids.

 

Our country has not set up a system that truly takes care of our health, from before we are sick or have significant health challenges through to a successful recovery. We have overloaded the system that we built which was designed for people with the means to afford care after they were ill. We have ignored mental health and pretended we didn’t know it was an issue, until now, when it is too late and we don’t have the supports we need. Our communities are non-existent, and taking the steps to care for our community feels impossible.

 

The path forward involves a shift in how we provide, pay for, and think about healthcare. The systems we turn to for health need to move up-stream, where we focus on health before people are sick. To do that, we have to be honest about things like mental health, we have to be willing to provide spaces and community so that people can engage with healthy lifestyles and behaviors. We have to break out of our 40 hour work-weeks, and find ways to work closer to where we live, to end the soul sucking commutes that so many of us have. We have to give people time, and develop communities of support so that we can take care of our health and the health of those most vulnerable people in our communities. Without making these transformational changes, we will be stuck in our default of opioid prescriptions, unable to give people what they need to live healthy and meaningful lives.