When choosing a restaurant for dinner, you look over their menu and scan the entrée prices – not the invoice for their produce. When buying a car, you check out its features and its cost to you – not what the manufacturer paid to put in the transmission and braking system. Shopping for health care services should be approached in a similar way. Patients care about what a procedure costs them. That is the kind of transparency that makes consumers better shoppers and creates competition.
Most hospitals, however, are beginning to post their prices through countless billing codes to comply with new transparency rules. But charges for millions of individual codes for millions of individual services do not add up to the way patients actually receive care, and they don’t help a patient understand what they will specifically pay out of their own pocket for the care they need. Unfortunately, that’s what The New York Times attempted to do in a recent article. The result spotlights a lot of numbers with little context, no clarity for patients, and no insight that helps anyone shop for care.
Every American should have the personalized information they need, so they can make better, more informed decisions about their health care. That’s why today, an overwhelming majority of health insurance providers — nearly 95% — offer tools that provide patients with a personalized view into what they may pay for “shoppable” health care services – nonemergency services over which patients have more choice and control over where, when, and how they receive them.
Those tools go far beyond billing codes, providing prices and information about quality based on a patient-centric view of care. After all, negotiating the best possible price for the highest-quality care is an essential part of the value that health insurance providers deliver to patients and consumers. But the article has very little information about what really happens when insurance providers work with hospitals, doctors and others to give customers the best price, quality and value available. And it often compares apples and oranges.
Health insurance providers have every incentive to negotiate the lowest possible costs for quality care for the people they serve. In addition to being good for customers, it is also good for business. Higher premiums and costs mean coverage is less affordable. Very quickly, a health insurance plan based on that kind of strategy becomes uncompetitive and loses clients and members. That is not a plan poised for growth to serve more customers – it is a plan that swiftly declines and likely goes out of business.
It’s also important to remember that it’s health insurance providers that pay most of the charges. Insurance providers are responsible for most costs once a member’s deductible and all costs when out-of-pocket limits are met. Depending on health condition and services needed, that could be hundreds, thousands, or even millions of dollars. That’s why it’s in everyone’s best interest for health insurance providers to negotiate the lowest possible cost for quality care. It is folly to suggest, as the article does, that people would somehow save money by going without insurance.
The Times report highlights a few select examples out of thousands of lines of price codes where plan discounts are lower than cash discounts. These price codes are the rare exception, not the rule. These cherry-picked examples ignore the near universal circumstances where health insurance providers have negotiated much lower prices for clients and members.
That is certainly true in employer-provided coverage. In fact, the National Bureau of Economic Research finds that the annual social value of employer-provided coverage is about $1.5 trillion beyond what policyholders, their employers, and taxpayers pay for it.
It’s unfortunate that The New York Times chose not to include these insights, which AHIP shared, in its final story. We spoke with The Times about how health insurance providers negotiate contracted rates based on service usage trends over time – not code by code. This kind of comparison paints a misleading picture of how contracts are actually negotiated. We shared the various incentives health insurance providers have to negotiate the lowest possible rates for the patients and consumers they serve. We also shared that health insurance providers support price transparency that gives people personalized health care information they need, so they can make more informed decisions before they seek and receive care.
We appreciate The New York Times’ desire for transparency for patients. We share that commitment. Transparency tools should help people find care at lower costs, and an overwhelming majority of health insurance providers offer tools that do just that.
We also agree that we all need to work together for lower health care costs for everyone. We can do that by promoting market competition, providing patients and consumers with personalized and useful information that helps them make health care choices, and allowing innovation to thrive. We also support greater examination of the growing trend of consolidation among health systems, hospitals, and physician groups to evaluate its impact on the prices consumers pay.
Better health outcomes and more affordable health care are our goals – and they should also be the driving purpose of every player in our system. Working together, we can achieve it.