Kansans are struggling with the high costs of healthcare, at least in part because of a lack of understanding about how much a procedure may actually cost. This lack of understanding makes it very hard for patients to seek out the most cost-effective options. Let alone for insurance plans to support policyholders trying to “shop around a bit.”
The Problems
Over the past 20 years, the price of hospital services has increased by 200%; similarly, the cost of medical services has grown by 120%. Between 2016 and 2021, annual premiums for employer based-insurance increased on average by 22%. At the same time, the cost of things like technology, clothing, and cars, for instance, have all gone down. While modern medical innovation is a part of the cost increase, the main culprit is the administrative mess that is the American healthcare system. Just as in education, the more regulation on a product – in 2020, national education spending was 6.05% and healthcare was 19.05% of the US’s $21.04 trillion GDP — the harder it is to contain price increases.
The structure of most health insurance plans disincentives care from “non-network” providers, even if these providers have lower costs. A 2015 study of knee replacements in 64 markets across the country found that costs varied by 313%. In Tennessee, for instance, the cost of a knee replacement varied by a whopping 1600%. With some nuance, a knee replacement at one surgeon is likely very similar to the same surgery at another office – and statistically, there is no correlation between more expensive care and its quality.
Though trying to centralize care, networks limit customer choices and put them into predicaments where each treatment eats up the deductible regardless of how much the insurer pays. Speaking of which, patients have no way of knowing the true cost of their procedures and how much their insurer will foot the bill, and will make choices without regard for whether their insurer is covering $100 or $1,000. The two options of narrow networks with low options or wide networks with higher premiums and out-of-pocket costs are unideal.
Doctors face the blowback of this poor system too, with primary care physicians spending $100,000 each year just to do paperwork to get paid. That itself creates another incentive for care providers to promote out-of-pocket payments to avoid the billions of dollars spent annually dealing with insurers.
Patient Right to Save
One idea to get at the lack of transparency is a Patient Right to Save bill in Kansas, which would require insurers to estimate a patient’s out-of-pocket cost for treatments from in-network providers. Similarly, all providers would be required to publish cash prices for care, which would then be collected and posted to a database online where patients could “shop” for services. This would be similar to existing CMS hospital cash disclosure rules.
Insurers would also be required to give full credit to out-of-network care if it was patients could find options below the lowest in-network option. In particular, this would work as an in-network credit equal to the amount of money that the patient spends out-of-network.
These two components that require simple disclosure and matching lower costs could create incentives and accessible opportunities for patients to shop more for their treatments and for insurance companies to support them along the way. Out-of-network options is incredibly helpful for people who need regular injections to treat conditions like Crohn’s disease, whose costs may differ by the tens of thousands. On the other hand, small businesses trying to provide health coverage would have more cost estimates available to create a plan that financially works for them and their employees. Transparency could lead to patients choosing less expensive treatment options, which in turn create a less intensive administrative burden on doctors to manage with insurance companies.
Patient Right to Save isn’t an immediate fix, though. The way that the deductibles would work would have to be specially tailored so as to not add to the existing regulatory burden in the market. Healthcare providers spend $39 billion a year on administrative activities related to regulatory compliance: that’s about $1,200 every time someone enters a hospital. The average hospital dedicates 59 employees to comply with the over 600 regulatory requirements they face. Right to Save policy would need to be implemented in a way that ultimately reduces the burden, not add to it.
While some may look at the current situation as a reason for socialized healthcare, that system has its own issues, including, but not limited to:
– Trillions of dollars in government spending and debt annually
– Less disposable income
– Potentially longer wait times for surgeries or basic care
– Poor control of total healthcare costs
– Unclear results towards improving healthcare outcomes over other systems in the long-run
The gaps in information in healthcare create a system that obfuscates prices and leads to inefficiencies as patients aren’t able to make the right choices for their health and their wallet. Policies like a Right to Save could help alleviate this issue, but shouldn’t become new regulatory burdens themselves.
