Do you trust your healthcare provider with your wallet?

Sept. 7, 2016 / By Steve Delaronde

The rising cost of health care continues to be a top concern for the American public.  Similar to any other purchase, consumers want value when purchasing health care.  Value means a good experience that leads to a positive outcome at a reasonable price – which is healthcare’s Triple Aim.  The existence of a third party insurer that has historically paid all but a small percentage of the cost of healthcare procedures and services has led to a situation where doctors and hospitals do not adequately consider the financial burden that their services place on their patients.

As reported in the media, Former CEO of Turing Pharmaceuticals, Martin Shkreli, embodies a widely accepted belief within the healthcare industry.  He placed the burden of responsibility squarely on the patient’s insurer for making the drug Daraprim affordable when the price was raised from $13.50 to $750.00 per pill.  In his view, insurance companies should protect their members rather than their profits by paying providers the price they charge for their services – no matter how unreasonable, or even necessary.  This allows providers to be disengaged from the financial impact of treatment to patients, since most continue to operate under the presumption that a third party should and will pay for the procedures and services they provide.

While all providers require patients to submit proof of insurance coverage prior to receiving care, they don’t ask how their charges will directly impact the patient.  The assumption is that the insured patient will bear little or no financial burden.  The provider that is paid by the volume of services he or she renders has little incentive to recommend or provide fewer or less expensive services.  The existence of insurance allows the provider to believe that the patient is shielded from the financial impact of their services in spite of the fact that this is rarely true.

One in five insured Americans report having problems paying their medical bills, such that three-quarters of those indicated that insurance copays, deductibles and coinsurance were more than they could afford.  Not surprisingly, half of those who are uninsured report the same issue.  Commercially insured patients are paying more for their health care upfront in the form of premiums, as well as higher deductibles.

Health plans with annual deductibles are now the norm, which includes 4 of 5 covered workers.  The average annual deductibles for single coverage among covered workers with a deductible ranges from $958 for workers in PPO plans to $2,099 for those in high deductible health plans.  As insurance premiums continue to rise, many Americans opt for plans with higher deductibles hoping that their gamble of staying healthy throughout the year pays off.  For some, it doesn’t.  Among those having trouble paying medical bills, two-thirds indicate they are for one-time or short-term medical events such as ER visits and hospitalization.  More than half of these experienced bills that were greater than $2,500, which represents a significant portion of the median household income of $53,657.

The out-of-pocket healthcare expense is rising for all Americans, but the burden is greatest for those who require the most care.  Out-of-pocket costs for those with diabetes were $1,922 in 2013 compared to $738 for those without diabetes. This is counterproductive in an environment where the majority of healthcare costs are incurred by the minority of patients with chronic conditions that require better management and coordination.

Medicare beneficiaries must also bear the burden of high healthcare costs in the form of co-insurance.  Even though these patients benefit from lower prices than most commercially-insured patients for the same services, it does not prevent unscrupulous providers from delivering unnecessary care or engaging in fraudulent practices.  The frequent reports of Medicare fraud, including a recent record $1 billion fraudulent billing scheme uncovered in Miami, impacts Medicare patients that must be a portion of this in the form of co-insurance.

Additionally, Medicare patients cannot rely on hospitals to tell them if they are being admitted as in inpatient or under observation status as an outpatient.  While this distinction may not affect the care they receive, it has a large impact on the cost to the patient, particularly if they require subsequent nursing home care.  CMS recognizes that this is a case of “buyer beware” and has issued a publication that places the burden on the patient to ask about their status.

There are four key steps that healthcare providers and payers can take to alleviate the financial burden experienced by patients when they seek care:

  1. Shift from volume to value-based care – This movement is well underway. Providers that are incentivized to deliver value to their patients and assume financial risk are more likely to achieve reductions in total cost of care that should transfer to patients in the form of fewer co-pays, lower co-insurance payments, and a decrease in unnecessary and potentially preventable services.
  2. Promote price transparency – As the price of medical procedures, prescription drugs and other healthcare services become more transparent, patients can make informed choices about the elective procedures and services they require. While this will only apply to “shoppable” and not emergency services, it may lead emergency rooms and urgent care centers to offer similar levels of price transparency that is accessible to patients when making urgent healthcare decisions.
  3. Develop value-based insurance design solutions – Patients with conditions that are best managed with prescription medication or routine visits to their physician can be incented to seek the care they need at low or no cost to avoid costly treatment services that result from improper management.
  4. Understand what the patient can afford – Identifying the patient’s insurer at the point of service is not enough. Providers need to know the patient’s “real” ability to pay and understand the financial implications of their treatment decisions to the patient.  This means prescribing generic drugs when available, prescribing generic medications, recommending applications that help patients find the lowest priced prescription medications, recommending labs with the lowest fees, and the conservative use of diagnostic and imaging services.

Healthcare providers and payers that seek to understand how healthcare treatment impacts their patient financially will be rewarded with a healthier and more satisfied customer.

Steve Delaronde is director of consulting for populations and payment solutions at 3M Health Information Systems.