Wanted: Access to Comparative Healthcare Quality and Cost Info.

Success of consumer-driven health plans, such as Health Savings Accounts (HSAs) depends on consumers’ willingness and ability, when their own money is on the line, to “research more about the cost, quality and the underlying necessity of the health care they use.”

The problem, though, is that while a wealth of medical resources are just a few key strokes away–typing “migraine treatment” into Google reaps 44,000 hits–some of the most vital information, such as cost comparisons between hospitals and doctors, remains scarce to nil.

“A lot of health care providers today can’t quote prices,” says Paul Mango, practice leader for the North American Payor Provider Practice at McKinsey & Co.

This is beginning to change, as discussed in this recent article, which includes links to some emerging online sources of the needed information.

“Smart Shopping: Maximizing Employee Health Dollars”, by Charlotte Huff in Workforce Management


  1. The problem is that it’s not as simple as that. Providers can’t quote prices because different insurers pay different prices for the same procedure. Your insurance company may only pay $500 for a procedure for which mine pays $700 to the same exact provider. This is a cornerstone of the insurance industry and a practice that certainly isn’t limited to health insurers. Auto insurers in particular also function this way.

    The high-deductible health plans attached to HSAs generally will only let “allowable amounts” — that is, the negotiated discount amounts — apply toward the deductible. Again, this is standard operating procedure and a practice that was around long before the advent of managed care.

    There’s a lot of disagreement about who sets prices because of the fact that prices are actually devised through negotiation between insurance company and provider. I could write whole posts on the strong-arm negotiating tactics I’ve seen. The way prices are set, though, makes sense of the fact that most insurance companies and providers consider the negotiated fee and discounting structures to be proprietary information; release of them can damage competition. They sometimes will show on explanation of benefits forms but there’s no requirement for that and (to my knowledge) no controls in place to make sure that the pre-discounted rates are truly comparable with the open market rates.

    Aetna is, then, taking a considerable chance by allowing its consumers access to those lists. While I agree that consumers certainly need it, it could backfire badly upon their ability to compete. Aetna is obviously hoping that consumers will attempt to negotiate with providers using their lists as a tool — but what if a consumer attempts to use Aetna’s list to negotiate with, say, Prudential in the hopes of a lower premium?

  2. If consumers are to make wise choices, they need to know the prices. If they make wise choices, the insurer, consumer, and employer all benefit. That is worth the risk to the insurer that you mention, I think.

    And inter-company competition is enhanced. If Prudential feels forced to also disclose because Aetna does, and Prudential has obtained a better deal from a provider than Aetna, Aetna will ask for the same deal, and vice versa. The consumer will expect the same price too. So the provider is forced to charge the same price to all. And why not?

    Meanwhile, the inter-provider competition intensifies, and inter-insurer competition focuses more on efficient administration and service.

  3. I don’t disagree with you.

    But the scenario you suggest tips the balance toward the insurance companies. If everyone wants the discount the physician gives to Aetna and Prudential (and why wouldn’t they?) then the provider has no control whatsoever over his pricing. Chances are the lowest discounted amount is below cost for him because he’s been padding other quoted prices to make up for it. If the provider is forced to offer services below cost, how is he going to stay in business?

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