It’s a new year, and you know what that means: Your health insurance deductible just reset. Which for many of us means looking forward to paying a significant amount out of pocket for health care until we’ve spent enough for our insurance payments to kick in. According to the Henry J. Kaiser Family Foundation, in 2016, the average deductible for an American with employer-based insurance was $1,221. People covered through the Affordable Care Act exchange will likely pay more than that. Close to 90 percent of those enrolled will select a plan with an individual deductible of at least $1,300, or $2,600 for a family.
Can’t afford it? Feel squeezed? No worries. Your employer or insurer probably offers an online price-comparison information tool for you to find the best deal on everything from blood work to birth control. “Be a smart health care consumer,” reads the landing page for my insurance company’s price-comparison site. “Use our tools and information to help you save money.” But will it?
Less than five years ago, online price-transparency tools, with which patients can compare the costs of nonemergency procedures in advance of booking them, were heralded as miracle cures that would finally get health care costs under control. No longer would the cost of medical procedures be a mystery. It made sense. Online, we can compare prices for books and hotel rooms and TV sets. Why not doctors? “Life inside the fortress will increasingly be disrupted,” noted health care economist Uwe Reinhardt said of the concept in a 2013 Journal of the American Medical Association article.
The rush was on. A 2015 survey by human resources consultancy Mercer found that more than three-quarters of U.S. employers said they offer employees access to such tools. Numerous states jumped into the fray, passing legislation that mandated some form of transparent pricing.*
Yet this past spring, JAMA re-emerged with a less rosy diagnosis. In a study of how employees at two corporations actually made use of the health care cost-measurement tools made available to them, researchers at Harvard Medical School discovered that not only did few use them, their spending actually increased after the tools designed to encourage comparison-shopping were introduced. “There was no evidence that health spending declined in the settings where transparency tools were offered,” a JAMA editorial noted.
What went wrong? Comparison tools work by allowing people seeking nonemergency health care like hip and knee replacements, MRIs, physicals, and lab work—and even more mundane services like earwax removal—to compare the cost of the care at different practitioners and determine what their co-payment will likely total based on their insurance and whether they’ve met their deductible.
That should be easy enough. But do you really pick your doctors the way you bargain shop for electronics on the web? Of course not. A 2008 survey by the (now-defunct) Center for Studying Health System Change found that about half of us turned to friends and relatives for recommendations when seeking a new primary care doctor. And when it comes to specialists, almost everyone relied on the advice of other medical professionals, with less than 10 percent turning to online information to make a choice. Things haven’t changed much since then. A 2014 poll from the Associated Press and the NORC Center for Public Affairs Research found barely 1 in 4 identifying excellent ratings on sites like Yelp or Healthgrades.com as a decisive factor in deciding on a particular doctor.
Moreover, one man’s frivolity is another woman’s necessity. With health care, many of us are willing to pay extra for everything from convenience to communication skills. When the AP–NORC poll asked people what traits made for a high-quality doctor, “affordable” and “accepts my insurance” were the two least important qualities, outranked by more than a dozen other traits including attentiveness, office environment, and bedside manner. Yet another survey, this one by Healthgrades, found many patients prioritizing location over co-pay and quality ratings when they needed a hospital.
And when consumers do make cost-conscious decisions, their ability to make good ones is limited. A recent study released by the National Bureau of Economic Research makes the point. The researchers looked at a company that moved all its employees into a high-deductible health insurance plan. Yes, the workers spent about 15 percent less on health care. Unfortunately, they appeared to cut their medical consumption willy-nilly, making little distinction between needed treatments and ones they could forgo. They didn’t actually spend less on the services they sought out. “We show that consumers did not price-shop after the switch—that is, they did not move toward cheaper providers, for example, when they were going to undergo a specific procedure,” wrote Benjamin Handel, one of the authors of the study.
As for the JAMA paper on health care comparison tools, the researchers speculated that if consumers did attempt to price services, it’s quite possible they ended up paying more money. That’s actually not that surprising. Behavioral finance studies repeatedly find we use cost as a measure of quality. The more expensive an item, the better we think it is.
Yet even if consumers did use comparison tools as they were supposed to, it’s questionable how much they could actually impact prices. The medical system in the United States is a complex beast. The recipients of the services, even if they are the best shoppers around, have little actual control on the overall costs. For example, the Health Care Cost Institute determined the average knee replacements cost more almost $17,000 more in Palm Bay, Florida, than in Miami, which is 180 miles away. But few consumers, even if they do the research, are likely to sign up for a surgery that far from their home. How will they get there? Who will pay transport and house their families? What happens if there’s a complication after they return home?
That’s not even the big picture, because these tools aren’t actually taking on the American medical health care system itself. They’re simply offering customers some room to maneuver within their insurer’s fortress, to borrow Reinhardt’s phrase. When many of us use an insurer’s price-comparison tool, we’re receiving the prices the medical providers have agreed to charge people using that company. “A hospital can charge one person $500 for a cholesterol test and $10 for another,” says Steven Weissman, a former health care executive turned industry critic. “The problem with health care transparency tools is they do nothing to make health care providers compete the way other businesses compete.”
And how much does it really matter? It’s not, after all, the nonemergency MRIs and lab bills that are breaking the bank. Less than half of all medical services can even be priced in advance, according to the Health Care Cost Institute. Hip and knee replacements, which are an example frequently cited by price-transparency promoters, are a mere fraction of our annual tab. And getting an advance estimate for everything from emergency-room visits to strep tests at the doctor’s office is all but impossible—if an ill patient is even capable of that.
In many situations, the power remains with the providers. Pharmaceutical giants set the prices of their drugs. As long as the law permits a hospital that chooses to be in network with a particular insurer to service patients with out-of-network providers, consumers will remain at risk of receiving a surprise medical bill if they need to visit an emergency room.
Yet cheerleaders remain undeterred. Dr. Adam Bernstein, the chief medical officer of Rally Health, speculated that the problem the 2016 JAMA study revealed is that consumers need a “financial reward” in return for using the online price-comparison site, such as making the insured pay a greater share of the bill if they choose a provider charging more than a pre-determined amount for a particular medical service. Others say that as tools are able to include more information about pricing from providers, more people will use them. “Transparency hasn’t even started,” Dr. Giovanni Collela, a founder of Castlight Health, a publicly traded company that markets yet another online price guide, told the New York Times last year. Supporters say they hope that over time patients can be coached into using the tools more often.
Maybe. Maybe not. I’m all for transparent pricing of medical services, but I suspect that even at their most successful, price tools will only make a marginal difference in what we pay the doctor. Once again, we’re seeking an individual solution to an economic and political problem that our politicians not only don’t have the will to solve themselves, but which they might actively make worse by repealing the Affordable Care Act.
Health care isn’t a large-screen television that’s the same whether it comes from Amazon or Best Buy. It’s something that deeply impacts how we live our lives—or if, for that matter, if we continue to live one at all. No wonder these online sites don’t work. We don’t want to put a price on our own health.
*Correction, Jan. 10, 2017: The article originally misstated that the company PokitDok is offering an online price-comparison tool. It is not. (Return.)