According to a new report by PricewaterhouseCoopers (PwC), health care costs will increase 7.5% next year, compared to 9.6% in 2009, when the recession kicked in. PwC identifies as the main drivers behind this slowdown a reduction in medical equipment costs, the shift in doctor compensation from fee-for-service to one based on a patient’s outcome, the use of generics as more drugs lose their patents, and price transparency. “What surprised me most when we talked to health plans in particular, is that many were able to explain why health care costs increases came down, but few could say why they could see a resurgence next year; the trend for going back up is not very strong,” says Mike Thompson, the study’s primary author.
Economists are pondering whether the slowdown in health care costs ushers in a permanent shift in the way patients consume health care, but it is highly unlikely that the trend will reverse. The reason: consumers are increasingly paying out-of-pocket for health care in the form of higher deductibles and premiums. In PwC’s survey of 1,400 employers, more than half plan to increase their employees’ share of health care costs.
As consumers start bearing the brunt of costs, they are going to shop around and push for greater price transparency. Prices for medical procedures and tests are mostly based on negotiations between health care providers and health insurers, and are kept confidential. As a result, prices can vary widely. In San Francisco, for example, the price of a cholesterol test ranges from $11 to $150. Used to having their employer pick up most of the tab, patients are now shocked to discover those price discrepancies. As reported in the Los Angeles Times, a woman who paid $2,236 for a CT scan at a Long Beach Calif. hospital sued her health plan, when she found out that it cost $1,054 if she hadn’t used her insurance. More startling, the cash price for a CT scan at a nearby medical center was only $250.
Patients will be battling with health care providers and insurance companies–some more enlightened than others, for their right to know how much medical services cost, before they pay for them. It won’t be easy. As health care investment analyst Avik Roy pointed out in his Forbes blog, an Arizona state senator tried in vain to pass a bill which would have required health care providers to post direct pay prices for common procedures. She blamed “swarms of lobbyists” for the bill’s failure to pass.
In the meantime, start-ups have spotted an opportunity to help patients reduce their health care costs, either by providing more clarity on prices, or rewarding healthy behavior by reducing out-of-pocket expenses. Here are a few:
1- Castlight Health: Allows employees of self-insured companies to compare prices for medical procedures and tests. Customers include Honeywell, Life Technologies, and Willis North America.
2- GoodRx: The insured and uninsured can shop around for the cheapest drug price. In my neighborhood, thirty 10 mg tablets of the generic version of cholesterol drug Lipitor cost between $76.20 for a mail order from FamilyMeds (free shipping) and $102.27 at Rite-Aid.
3- SeeChange Health: Members lower out-of-pocket expenses by taking preventive steps, such as check-ups and basic blood tests. Health plans are available in California, and roll out in Colorado next month.
4- EveryMove: Health plan members who register accumulate points for engaging in physical activities, such as jogging, walking, or gardening. Those points translate into rewards in the form of lower out-of-pocket expenses. Launches this September with Premera Blue Cross in Washington; expects to sign up four plans next year.
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