Tuesday, October 21, 2014

Half of Americans think expensive medical care is better. They're wrong.

(Christopher Furlong / Getty Images News)

There's a lot of clamoring in health care right now for more transparency in prices, making it easier for a patient to know how much their hip replacement costs before they land on the operating table.

Right now, it's nearly impossible to find out how much a given medical service will cost in advance; hospitals have an easier time giving out parking prices than those for surgeries. One recent paper estimated that, if patients had better access to price data, we could save $100 billion in the next decade.

This is the optimistic future of health price transparency, one where patients become better shoppers who go to the hospital that offers an $1,529 appendectomy rather than the facility charging $186,955.

A new survey on how patients think about health care costs gives reason to be a bit more pessimistic about what that shopping experience will be like, as many Americans see the price tag of medical care as an indicator of how quality.

Half of Americans think expensive medical care is better

Forty-eight percent of Americans in a new Associated Press—NORC Center for Public Research poll said they thought that higher quality medical care comes at a higher cost.

Prices

This is not at all a crazy notion: when we buy most other goods, whether they're televisions or new cars or airplane tickets, the more expensive things are usually the better version.

We often spend more because we want higher quality — and where is higher quality more important to us than securing our own wellbeing?

Research doesn't show a connection between higher medical prices and better outcomes

But the relationship between cost and quality is often much murkier in health care than it is in electronics. Most research shows no correlation between higher quality and better care (the best paper on this is arguably one that Chapin White published in the journal Health Affairs in January). The hospitals that set their prices higher don't, on net, provide better care than those who set their prices lower .

Hospitals can have higher prices for myriad reasons. Often really big health care systems will use their market clout to extract bigger payments from insurance plans, who don't want to leave a behemoth hospital out of their network.

Americans often aren't the ones footing the majority of their health care bill — typically, their health insurer takes care of the lion's share of costs. This will become increasingly true as Obamacare expands insurance coverage. And if somebody else is paying, the patient thinking can go, why not get the more expensive (and presumably better) medical care?

The best solution: pairing price data with information on quality

There are countervailing forces that could work against that mentality. Insurers are increasing moving towards consumer-directed health plans. These are insurance products where subscribers get a lump sum amount to spend on health care and have to decide the best way to use that pot of money (this is different from what most insurers do now: charge a flat co-pay regardless of the procedure's actual price).

Most transparency advocates want to pair price data with quality metrics, so patients could better know whether the higher price was actually warranted. This could be some type of pairing of hospital quality rankings, the type that U.S. News and World Report puts out, with prices. That would be a way to get at the value that hospitals provide, and bring some context to which hospitals really can justify charging more than their competitors — because they offer superior services.

Providing price data alone, however, could lead patients to do the exact opposite of what transparency advocates want: shopping on cost to pick the most expensive, and seemingly best, health care provider.

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