Is this the year we finally talk about all health care costs?

While patients, families and employers have been talking about rising (and in many cases, unmanageable) health care costs for years, it appears researchers finally may be getting on board with the issue as well.

Three notable reports came out in the past few weeks comparing what the U.S. spends on health care to other countries.

The U.S. System Costs More to Administer than Other Countries

The Annals of Internal Medicine published a study on January 7, putting new numbers to an old question. How much does the U.S. spend on the administration of health care? About four times more than Canada spends, evidently. Administering care is much cheaper in Canada, for example, because there are standardized forms and processes for providers, facilities, and families to use to access and pay for care. The study authors estimate $600 billion a year is spent in the U.S. on administrative bureaucracy instead of clinical care. On a per person basis, this amounts to $844 spent per person for health insurance plan overhead in the U.S., versus $146 per person in Canada.

The U.S. System Pays Physicians More than Other Countries Do

It’s not just health plan administrative costs that drives U.S. spending higher, though as we have written , streamlining forms and processes seems like an obvious place to start cutting costs. The U.S. also pays physicians more than other countries do. Anne Case and Angus Deaton – the economists who called attention to the rising number of “deaths of despair” in 2015 (and won a Nobel prize for their work that year) made headlines this week at the annual American Economic Association’s annual meeting when they said physicians are driving U.S. health care costs:

“We have half as many physicians per head as most European countries, yet they get paid two times as much, on average…” says Deaton. “Physicians are a giant rent-seeking conspiracy that’s taking money away from the rest of us, and yet everybody loves physicians. You can’t touch them.” (source: Washington Post).

Is this a Good Thing or a Bad Thing? (I ask in jest…)

Maybe the Internet coordinated these news reports, but the same day the Case/Deaton comments came out, several news outlets reported: Health care positions top 2020 list of best (paying) jobs! Indeed, 12 of the top 20 best paying jobs for 2020 are in health care. Here is the list from US News and World Report:

Best-Paying Jobs

1. Anesthesiologist
2. Surgeon
3. Oral and Maxillofacial Surgeon
4. Obstetrician and Gynecologist
5. Orthodontist
6. Psychiatrist
7. Physician
8. Prosthodontist
9. Pediatrician
10. Dentist
11. Nurse Anesthetist
12. Petroleum Engineer
13. IT Manager
14. Podiatrist
15. Marketing Manager
16. Financial Manager
17. Pilot
18. Lawyer
19. Sales Manager
20. Business Operations Manager

It’s good to see more attention being paid to costs, and it’s especially good to see research and data behind the alarming stories. We all know that health care costs are going up but if we really want to do something about it, we have to look at ALL health care costs. This kind of data is the first step toward policy making; let’s see what happens next.

Can Price Transparency in Health Care Really Lower Costs?

Telling patients what they will pay for their health care services is a key stepping stone to more efficient use of health care dollars. Consumers, employers, payers, and the system as a whole would likely benefit if the true cost to the patient were made available before a patient receives a health care service or product.

Several states already have laws on the books requiring health care providers to make at least some price information available on at least some procedures. Some states also run centralized databases where different payers report what they get paid for different services. Additionally, the federal government requires hospitals to post a list of standard charges on the internet.

The Trump Administration wants providers to further expand the price and quality information to consumers, and issued an Executive Order (EO) on Improving Price and Quality Transparency in American Healthcare to Put Patients First in late June. The order aims to help consumers make “well-informed decisions” and expand transparency efforts that provide information “which patients can research and compare before making informed choices based on price and quality.”

More specifically, the EO directs the U.S. Department of Health and Human Services (HHS) to require hospitals to publish negotiated rates in a searchable, consumer-friendly format for 300 “shoppable” services.

You Can Shop if You Want To

Consumers are being asked to make more of these decisions on their own, as we’ve described in previous posts. My home state of Colorado has a shopping tool like the one the EO has in mind. It took me less than a minute to get the result below from the Colorado Center for Improving Value in Health Care (CIVHC) for an MRI scan of a leg joint within 15 miles of my ZIP code:

Shop for Health Care Services – MRI Scan, Leg joint (CPT 73721)

Seems pretty obvious that while the closest option, seven miles away, is Centura Health St Anthony Hospital, they would charge me $510 for the scan. If I drive another five miles, I would only have to pay $150 at Denver Health Medical Center.

“Shoppable,” but Perhaps Not “Buyable”

According to the Health Care Cost Institute (HCCI), “For a health care service to be ‘shoppable’, it must be a common health care service that can be researched (“shopped”) in advance; multiple providers of that service must be available in a market (i.e., competition); and sufficient data about the prices and quality of services must be available.” HCCI estimates that approximately half of out-of-pocket spending is spent on “shoppable ambulatory doctor services.”

The problem is, you might be able to research and compare certain services with upgraded information, thus improving your shopping experience, but you might really struggle to buy the service that is lower in cost.

Using the example of lower-limb MRIs, a 2018 study titled Are Health Care Services Shoppable? Evidence from the Consumption of Lower-Limb MRI Scans found that people typically drive by multiple lower-priced providers to get to their final treatment location. Why? Because that is where the patient’s referring provider sends them. The study shows “the influence of referring physicians is dramatically greater than the influence of patient cost-sharing or patients’ home ZIP code fixed effects.”

In particular, “physicians who are vertically integrated with hospitals are more likely to refer patients to hospitals for lower-limb MRI scans.” We’ve written previously about how costs vary dramatically by site of care. That also means patient cost-sharing varies. We are asked to pay more out-of-pocket for a service we could get elsewhere. But that would mean 1) shopping and 2) acting against the advice of a provider. Not impossible tasks, but difficult for sure.

Increased transparency means you can shop for services, but that is only half of the problem. Yes, it is important to have price and quality information. If the problem were a technical one, more information would lead to different decision making. But in fact, changing the way a consumer selects a health care service – even a “shoppable” service – is an adaptive problem. That is, it requires a change in the way people think, prioritize, and behave.

Additional information on quality and price is definitely necessary, but if I drive by two Centura Health facilities with lower cost MRIs to get to the HealthOne facility my referring provider recommended, I would also need some encouragement, at least, to go against my physician’s recommendation.

It looks like we health policy types have more work to do.

“Medicare-for-All” Understood as Lower Premiums for Me?

Proposals for Medicare-for-All, or more accurately, universal health coverage, are being introduced by both Congress and state legislatures at a rapid pace (see this useful interactive tool, The Many Varieties of Universal Coverage from The Commonwealth Fund). While policy types argue over how such a plan would be funded and how to set reimbursement rates for providers, and Wall Street frets about what single payer health coverage would do to health insurance companies, state legislators and regular people seem to have a different perspective. In my many conversations with people across the country about the idea of “Medicare-for-All,” I have found it striking how often people say they favor such an approach because they want lower health insurance premiums.

I think we may have a language problem. When health policy people hear “Medicare-for-All”, they think “change the health care delivery and insurance infrastructure from employer contributions to taxpayer contributions,” but maybe when regular people say “Medicare-for-All”, they mean “please find a way to lower my premiums”. The Kaiser Family Foundation Health Tracking Poll conducted in early January hints at the importance of lower premiums as a reason to support “Medicare-for-All” type proposals. As shown in the figure below, nearly 50% of people polled strongly favored proposals that allow people between 50 and 64 years of age to buy in to Medicare, or allow people to buy in to Medicaid, or create a plan like Medicare that is available to anyone. Getting insurance from a single government plan is strongly favored by only 34% of respondents.

These “buy-in” proposals may be gaining in popularity as people lose access to employer-sponsored insurance. Here is the math: “if the coverage rate for employer-sponsored insurance was the same in 2017 as it was in 1999 (67.3%), almost 24 million (or 23.8 million) additional people would be covered through an employer plan in 2017.”

It’s easy to understand why people would focus on lower health care premiums; rising premiums are having a big impact on household incomes. As fewer people are receiving health insurance through their employer, they are also being exposed to higher costs for health care premiums. We pulled recent information on employer and worker contributions for health insurance, the average national premium for a person earning just over 400% of FPL ($49,000) to buy a health plan on the ACA Exchange at various ages, and Medicare premiums. We then created a rough comparison chart of what premiums an individual might have to pay for health insurance based on how they accessed coverage. Below is what we found:

Notably, the average annual premium for employer-sponsored coverage of an individual was about $6,900 last year. But employees usually paid just 18% of that amount. For people who may have been covered by their employer for years, and then have to buy insurance in the ACA Exchange, the loss of that employer-sponsored contribution to their health insurance coverage could be quite a shock.

It’s a catchy phrase and easy to hashtag in social media, but is the appeal of Medicare-for-All driven largely by the hope that a person’s premiums will be lower? Is Medicare-for-All the best or only way to achieve lower premiums? As with all policy issues, we should probably start with the key question, “what problem are we trying to solve” and then go from there, always checking to see that we are, in fact, addressing the problem we are trying to solve with a workable solution.

Even Employed People with Health Insurance are Worried about Health Care Costs

Gallup published survey results in April showing health care was American’s top concern. According to the poll, 55% of Americans worried “a great deal” about “the availability and affordability of health care,” and another 25% worried a “fair amount.” Notably, only 23% worried a great deal about unemployment and 33% worried about the economy in general.

Keep in mind when Gallup asked the same questions in 2011 and 2012, 71% of people worried “a great deal” about the economy, but about the same percentage worried about health care costs a great deal as are worried today.

This implies people are feeling flush and have jobs, but still worried about affording health care. Why is that?

In part this is because across roughly the same time period, both health insurance premiums and deductibles have risen, even for people with employer-sponsored insurance (ESI). A study by the University of Pennsylvania Leonard Davis Institute of Health Economics and the United States of Care, also published in April, found that between 2010 and 2016 incomes only grew by about 20%, but premiums grew by approximately 30%, and deductibles grew by more than 55%, nationally. The study provides a state-by-state breakdown but the graphics below give a snapshot of how premiums and deductibles have jumped.

It is no wonder then, that in another Gallup survey released this month, participants said, “Given the choice between a 10% increase in income or a complete five year freeze of health care costs, 61% of people said they’d choose the latter.”

At both the federal and state levels, policymakers are being asked by constituents to come up with ways to make health care more affordable. While some might hear the phrase health care costs and think hospitals or prescription drugs, these survey results and state-by-state data show the cost of health insurance – even for those receiving coverage through their employer – is becoming unmanageable.

When the people who everyone thinks have the “best coverage” are complaining about that coverage, we would do well to broaden the debate. Policy solutions need to focus on the cost of health insurance in order to address people’s concerns. Elected officials, are you listening?

What the Midterms Mean for State Health Policy

The midterm elections have happened and all signs point to health care as a top issue in state legislatures in 2019. We have been telling our readers (and clients) this for several months, and Drew Altman, President and CEO of the Henry J. Kaiser Family Foundation, wrote in a guest post for Axios today: “most of the real action affecting people will be in the states.”

Approximately 4 in 10 voters told exit pollsters health care was the top issue for their voting choices. This isn’t surprising as health care costs are going up by about 5% a year, and consumers are being asked to pay a higher share of those costs, which is clearly putting pressure on state policymakers to do something.

States are under particular pressure because they are responsible for overseeing the individual and small group health insurance markets and Medicaid. Why does this matter? Because an increasing proportion of people are working, but don’t have access to employer-sponsored insurance, and can’t afford health insurance being offered in their state.

That is, people have jobs, but the jobs don’t offer health insurance.

In The Rise and Nature of Alternative Work Arrangements in the United States, 1995-2015, researchers at the National Bureau of Economic Research (NBER), Lawrence Katz from Harvard University and Alan Krueger of Princeton University, estimate:

…all of the net employment growth in the U.S. economy from 2005 to 2015 appears to have occurred in alternative work arrangements.

The researchers found between 2005 and 2015 workers in alternative work arrangements, such as “temporary help agency workers, on-call workers, contract workers, and independent contractors or freelancers – rose from 10.1 percent in February 2005 to 15.8 percent in late 2015.”

For these “gig workers,” buying health insurance coverage, for example in the Obamacare exchanges, means high premiums (see ) and very high deductibles, as the chart below from Avalere shows.

Deductibles of $4,000, $5,000, $6,000 are rarely seen in large employer insurance offerings. Only 20% of covered workers in large firms in 2018 had an annual deductible of $2,000 or more. Compare that to 42% of workers with a deductible of $2,000 or more in small firms (fewer than 199 workers), as the Kaiser Family Foundation chart below shows.

For the parts of the health care market states oversee, including the individual and small group insurance markets, state employees, and Medicaid, states will have their hands full in 2019 as they try to manage health costs for constituents who are working but can’t afford the health insurance options available to them.

It’s hard to understand why it’s reasonable that a freelancer or person working in a small firm can’t have access to the same affordable, robust health coverage as their counterparts in large firms.

States Help Drive National Solution to Help Patients Pay Less for Drugs

This week, President Trump signed two bills to help consumers choose lower priced drugs, the Patient Right to Know Drug Prices Act and the Know the Lowest Price Act of 2018. As state health policy people, we are glad to see the work of the past several years gaining the attention of policymakers everywhere, and improving access to health care for patients.

Between 2015 and 2018, 28 states passed laws banning a practice that prevented pharmacists from telling patients whether a lower price drug was available to them at the pharmacy counter. (See map from National Conference of State Legislatures below).

The so-called “gag clauses” were a common feature of contracts between pharmacies and pharmacy benefit managers until pharmacists started to speak out – usually in violation of the contract – that they were being banned from telling patients when a drug might cost less if they didn’t use their insurance. It seems simple on its face that a pharmacist, or any health care provider, should be able to give information to patients related to what the patient will have to pay for treatment.

We are proud to have been a part of state leadership on this issue in our role as state health policy advisors, and we are pleased to see this common sense approach is now the law of the land.

The Rising Cost of Health Care – a 360 Degree Perspective

The Colorado Women’s Alliance surveyed 2,000 swing women voters in Colorado earlier this year and asked them to identify their top issues of concern, as well as what they hoped the new Governor (who will be elected in November) and Colorado legislature will focus on in the coming session.

The rising cost of health care was the number one issue.

In response, Joni Inman, the Executive Director of the Alliance, in partnership with the Summit Chamber, organized a series of events, including a panel discussion in Frisco, Colorado last week titled “The Rising Cost of Healthcare – a 360 Degree Perspective.” I was honored to serve as a panelist alongside Colorado House Representatives Millie Hamner (D) and Bob Rankin (R), and professionals from the local hospital, a statewide health insurer and the Summit County Care Clinic.

While I am often asked to share policy ideas, for this panel, we were asked to share thoughts on what the consumer can already do that they might not realize is a good strategy available to them to lower their health care costs.

This is of particular relevance in Summit County as it is one of the healthiest places in the U.S., but also has some of the highest health insurance premiums in the country. Not surprisingly, Summit County health care consumers, as the audience quickly proved once the panel discussion started, are highly informed and interested in being proactive about their health care and the health care of their families.

My primary message was simple. When it comes to health care, we need to be much more demanding.

Be a demanding constituent

Sharing the stage with elected officials, I acknowledged the state legislature and Governor’s administration has some ability to make changes to how health care, and health insurance is financed and delivered. With that in mind, yes, it is important to advocate for policy changes. Vote. Call your representative. Send letters. Participate in hearings. Get involved in local politics. Make your opinion and preferences known.

This seems simple, but Reps. Hamner and Rankin were clear that they wanted to hear more from constituents, and individuals in particular, not just from lobbyists. Still, this can be hard to do. We all have busy lives and sometimes it is hard even to know what is happening regarding legislation or proposed policy ideas.

Be a demanding consumer

In addition to being a demanding constituent, it is important to be a demanding consumer. What can consumers already do that are good strategies to lower costs? Know more and ask questions.

First, know as much as you can about what your health insurance costs. What is the premium amount? What is the deductible? What types of services are covered at what levels? What are your rights to appeal a denial? Lots of resources exist. A great place to start is this compilation of websites from the Institute for Healthcare Improvement.

Second, as a consumer and as a patient, it is important to ask questions. Especially about how much a health care service will cost you. Of course, if you have been transported by ambulance to the emergency department, you aren’t going to be able to demand pricing information, but in the many instances you can ask, you should.

For example, as of May of 2018, 26 states, including Colorado (see map) have passed laws banning a practice that forbid pharmacies from informing consumers if and when the drug they were seeking to buy would be cheaper if they paid out-of-pocket instead of using their insurance. Yes, you read that right! Before these laws, many pharmacists were contractually forbidden by so-called “gag clauses,” from answering a direct question from a consumer at the pharmacy counter about the purchase price of a drug.

Ask this question: What is the price of this medicine, or this procedure, or this lab test, if I don’t use my insurance?

This strategy works outside of the pharmacy too. A consumer in the audience at the Summit County event gave an example of going to a local hospital with her husband over the fourth of July after he broke his elbow. When they asked the hospital about the price for the scan a provider recommended, they were told they could receive a 50% discount if they paid cash or used their credit card instead of using their insurance.

When I went to my dermatologist recently, I signed a document saying I wouldn’t submit a claim to my insurer if I agreed to use a specific pathology lab that would only charge $65 for lab tests. While my dermatology office wouldn’t tell me exactly how much I was saving (I was saving it since I was out-of-network and have a $7,600 deductible even in-network), they implied the insured rate for these pathology labs was hundreds of dollars more.

Demand more

Yes, call your legislator. Participate. Organize. Vote. But, we should all demand more of our employers, our health plans, and our health care providers, too. Ask for price lists. Ask for discounts. Ask what care options you have. Ask whether cheaper alternatives exist and how you can access them. Tell your employer you want choices.

We are all health care consumers, even if we aren’t all patients. Make your voice heard and your preferences known. Consumers can change the way the system works, but we have to demand that change.