What My Child’s Ski Accident Taught Me About Consumer-Driven Healthcare
It is hard to think straight when your child gets hurt. It happened to me this past weekend. My 12 year-old son, Jacob, crashed and injured his knee while skiing at Lake Tahoe. We were hoping that RICE (Rest, Ice, Compression, Elevation) would help his knee get better, but it did not. When the pain did not go away, we took Jacob to see his pediatrician.
The pediatrician spent 30 minutes manipulating Jacob’s leg and declared that she had no idea what was going on. She referred us to a pediatric orthopedic surgeon and told us to get a knee X-ray. Since our pediatrician is affiliated with a large hospital — the California Pacific Medical Center / Sutter Health (“CPMC”) — she referred us to CPMC Radiology, located in the same building.
The CPMC Radiology patient intake coordinator seemed surprised when I asked her about the cost of the X-ray procedure. “Our family has a high-deductible insurance plan, so I like to know the cost,” I explained.
She typed and clicked for a long time on the computer and then handed me a hand-written note that said: “Estimate number for X-ray $347.” The word “estimate” was underlined and she repeated several times that this was just an estimate and it could be less or more, or a lot more than this number. With my child in pain next to me, and the X-ray technician hovering over us asking if we want to proceed, I decided that it was not a good time for price shopping.
When we got home, I found a Treatment Cost Estimator on our health insurer’s website. It told me that 3 minutes (0.5 miles) away from CPMC Radiology there was a Radnet Medical Imaging Center, where I would have paid $74 — $126 for the same exact X-ray — a savings of 60–80% off CPMC Radiology’s price!
The following day we went to a pediatric orthopedic practice affiliated with CPMC. They referred Jacob for a knee MRI. The referral was again to CPMC Radiology. When I inquired whether this referral can be directed to Radnet instead, the RN managing referrals asked me why. When I told her that Radnet was going to be a lot less expensive, she seemed very surprised. She has not received this request before, and said that she needed to investigate the issue further, but it would probably be OK. It would, however, make it more difficult for the provider to review the MRI results, and the provider would have to create a clinical note to provide to Radnet for them to get insurance authorization. The insurance authorization may also take longer and is not something that she would be able to assist us with since it is for a vendor outside of CPMC. Would I still like to go with Radnet?
The reason that I requested the referral to be sent to Radnet is simple — estimated cost for a knee MRI at Radnet was $450 — $550. Estimated cost for the same procedure at CPMC Radiology was a whopping 4–5 times higher: $2,200 — $2,300.
Given that a knee MRI procedure is essentially a commodity product, how is it possible that two outpatient facilities 3 minutes apart can have such a dramatic difference in price? How can this happen in San Francisco, which has one of the most educated and tech-savvy healthcare consumer populations in the world?
The answer is that consumer-driven healthcare is a fundamentally flawed idea.
Consumer Directed Health Plans (CDHPs) also known as High-Deductible Health Plans (HDHPs) coupled with a Health Savings Account (HSA) are the centerpiece of the consumer-driven healthcare strategy. These plans were embraced by our policymakers in early 2000s as a way to incentivize American healthcare consumers to pay attention to the cost of their care. The thinking went like this — if patients were required to pay more out of pocket, they would be more likely to price shop. Low-cost providers would come to dominate healthcare delivery, and this would turn the tide of unsustainable healthcare cost inflation.
As a result of government policies promoting CDHPs, between 2006–2018, the percentage of American employees enrolled in CDHP plans increased by 10 times from 3% to 30% of covered employees. [1]
However, while more Americans are now exposed to greater out-of-pocket healthcare expenditures from CDHPs, the percentage of American healthcare consumers who are price-shopping across healthcare providers remains extremely low — estimated as low as 3%. [2]
The net result of these changes is that healthcare costs are continuing to grow at 4–6% per year, while American consumers are paying a lot more out of pocket for their healthcare. According to the Commonwealth Fund research, the percentage of American adults with employer coverage who are spending more than 10% of their income on out-of-pocket medical expenses more than doubled between 2003 and 2018 from 6% to 14%. [3]
There are three main problems with the concept of CDHPs / consumer-driven healthcare:
In case you are wondering, we ended up going to Radnet for my son’s MRI. We paid $473.13, a savings of roughly $1,800 versus CPMC Radiology. That makes us one of the roughly 3% of Americans who are price shopping (and saving) across providers.
Is that really the best that we can do for the American healthcare consumer?
© 2019. Anatoly Bushler
Last updated: 4/19/19
[2] https://www.healthaffairs.org/doi/10.1377/hlthaff.2016.1471
[4] https://www.westhealth.org/press-release/survey2018/
What My Child’s Ski Accident Taught Me About Consumer-Driven Healthcare
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