January 25, 2012

Medical Cost Transparency: Lighting the Way

“Be a smart consumer.” It’s hard to read anything about buying a product that doesn’t include that advice. Know what you need, know what the market offers, and know what each of your options is going to cost you out-of-pocket. It’s a practice we’ve all grown up with, whether we’re in the produce aisle or at a car dealership.

Most of us wouldn’t commit to buying a toaster without solid information, let alone a car. But when it comes time to use medical services, it has become the norm. What most of us know from experience, government studies have confirmed1,2, – that it’s hard for consumers to learn price or quality information about health care services before using them. That means it’s difficult for patients to act like consumers.

Transparency is more important than ever

Because more of today’s consumers are spending their own money for medical services at market rates instead of just paying a pre-determined copay, they’re clamoring for information.

Blue Cross and Blue Shield of North Carolina has made a series of enhancements to its online “Find a Doctor” tool that lets members learn more than just a doctor’s specialty, medical school and phone number. Now, they can see the ratings and qualifications of different medical facilities, and see the cost of common services doctors perform.* The new tool even enables the kinds of direct comparisons that people are accustomed to using in other online shopping experiences.

There’s no doubt the stakes are high. Health insurance premiums continue to rise faster than family incomes in all 50 states3, and in this economy, that makes paying for care a struggle.

Choices to make

By now, most people are familiar with the principle of generic drugs. For many prescriptions, there’s an alternative to the name-brand product that will do the same job at a much lower cost. It may surprise some people to learn there’s just as much variety in cost when it comes to common medical procedures – such as surgery at a hospital or diagnostic imaging like a CT scan or MRI. Different doctors and hospitals simply charge different amounts. Within the same region, the cost of an MRI can vary by more than $1,000, and a back surgery more than $10,000 from one facility or hospital to another less than 20 miles away. They also achieve different outcomes of quality in the care they deliver – different doctors may present different certifications or accreditations.

Consumers will benefit most directly from having all this information because it will be easier for them to get the most out of their health care dollars. Armed to make smart decisions, they’ll get better quality and may avoid paying too much out of their own pockets.

Reversing the spiral?

Let’s look beyond the consumer. Giving people the information they need to make wise health care choices can set off a cascade of benefits. For example, most people still get their insurance through their employers. When people use information to spend less for their care, employers stand to save money as well. Employers also benefit when people are happier with the way their health plans work, since most people view their plans as a benefit of employment.

The potential benefits don’t stop there. If more people have the information and freedom to make informed health care decisions that may put the same kind of pressure on the health care industry that consumers have put on every other industry. The market will favor doctors or hospitals that offer better quality at lower prices. Higher-quality providers will get a greater share of business, which will ultimately reduce the cost associated with complications and readmissions. And if everyone ends up spending less, that might be one factor that helps curb insurance premiums.

Can something as simple as open, easy-to-understand information be the key to harnessing skyrocketing medical spending?

Cost transparency may not be the entire solution to the medical cost problem, but it’s certain no solution can work without it. Now, when someone tells you to “be a smart consumer” of health care, it may actually be possible to do it.

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