Shopping for best deal won't cure health care costs

Smarter shopping by patients would have only a limited impact on overall health care spending, according to a new study challenging how much cost benefit could come from making health care more like a shopping mall.

Shopping for the best deal might help lower costs for certain procedures in certain markets, said David Newman, executive director of the Health Care Cost Institute, a nonprofit that published the report last week

But the burden of overall cost control remains with health care providers that negotiate prices, Newman said, and insurers and employers that pay most of the bills.

His group's study found that only 7 percent of all spending in employer health plans comes from the pockets of individual consumers as they buy "shoppable" health care services like knee replacements and colonoscopies.

"It's just far more efficient to focus on those people who are spending 93 percent of the dollars to drive momentum, reform and all of the things we're trying to achieve than to think that relying on the consumer is going to generate enough horsepower," he said. In a blog post, Newman added: "We need to be realistic about the power of consumer shopping to rein in excess health care pricing."

The drive for price transparency and shopping tools for consumers isn't new, but momentum has built as more Americans have health plans with thousands of dollars worth of deductibles. The policies effectively give people more "skin in the game," since they're covering the actual price tag for health care services until post-deductible coverage kicks in.

In response, more companies see a market opportunity in providing health care shoppers with data on cost and quality. San Francisco-based Castlight Health, for example, provides information tools for employer-sponsored health plans where companies want workers to become savvy shoppers.

What's coming is the "retailization" of health care, Andy Slavitt of the federal Centers for Medicare and Medicaid Services told hospital executives in February. Slavitt, who previously led a high-profile rescue of the federal government's HealthCare.gov website when he worked for Minnetonka-based UnitedHealth Group, said the shift is clear among people buying coverage on the country's new health insurance exchanges.

"They are shopping for their health care, not their health coverage," Slavitt said. "And it's only a matter of time before the price of the hospital service and the quality score is known to them when making this decision."

The Health Care Cost Institute (HCCI) agrees with these ideas, Newman said in an interview. But he questions how widely they'll be adopted by consumers, since only certain people will want to do the equivalent of clipping coupons for health care — even if they had access to the information.

"It's not going to be the majority of people," he said, "and it's certainly not going to be the 5 percent of the people who spend 50 percent of the dollars because they're really sick."

HCCI is a Washington, D.C.,-based group backed by the insurance industry that provides researchers with data on medical claims from about 50 million people covered by Aetna, Humana and UnitedHealthcare. For the new study, researchers started with the HCCI database, which omits patient identification information, and weighted it to represent the under-65 population across the country that's covered by employer-sponsored health insurance.

National spending on all health care services for people in employer plans was estimated at $524.2 billion in 2011, according to the study. Researchers then looked at what share of the spending came from services that could be considered "shoppable" — things like knee replacements and colonoscopies that can be researched and scheduled in advance — and determined it's no more than 43 percent.

About $37.7 billion, or roughly 7 percent of the total, came from the patient through out-of-pocket spending on shoppable care.

Whether shopping could help an individual patient reduce his or her out-of-pocket costs depends on a number of factors, such as whether there's much variation among prices in a given market. It also depends on whether out-of-pocket costs are structured as deductibles and coinsurance — which could, to a degree, be reduced with shopping — vs. co-payments that generally wouldn't vary with shopping. The study concluded that "consumers may be able to alter a third of their out-of-pocket health care spending in a given year."

"This could mean important savings for people with serious health conditions or people with high deductible plans," researchers wrote. "At the same time, this also suggests that on average, consumers will have difficulty altering 65 percent of the out-of-pocket spending."

People with serious health problems might be unable or unwilling to shop, researchers wrote, and shopping would make it difficult to coordinate their care. Much of health care reform efforts in recent years have emphasized coordinating care for patients to drive better outcomes and more efficiency.

The study is helpful in setting realistic expectations, said David Lansky, chief executive of the Pacific Business Group on Health. Better shopping for health care remains an important goal, Lansky said, but "the enthusiasm for consumerism and consumer shopping was a little bit inflated."

The study shows why groups in Minnesota are focused on a different sort of shopping, where health care systems would be judged based on total cost of care for groups rather than prices for particular services, said Jim Chase, president of Minnesota Community Measurement, which publishes data on cost and quality.

"If there's still variation in the overall cost of which providers you chose, that comes back to you in your premiums," Chase said. He added: "Much of the driver for getting better value out of care is to work with the providers on how they are paid and incented. You can't rely just on consumers to figure this all out and drive the system."

Christopher Snowbeck • 612-673-4744