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How Trump is upending Obamacare
How Trump is upending Obamacare

Laurie Cook went shopping recently for a mammogram near her home in New Hampshire. Using an online tool provided through her insurer, she plugged in her ZIP code. Up popped facilities in her network, each with an incentive amount she would be paid if she chose it.

Cook, a school nurse who is covered through New Hampshire's state employee health plan, found that choosing a certain facility scored her a $50 check in the mail.

She then used the website again to shop for a series of lab tests. "For a while there, I was getting a $25 check every few weeks," said Cook. The checks represented a share of the cost savings that resulted from her selections.

Paid? To get a test? It's part of a strategy to rein in health care spending by steering patients to the most cost-effective providers for non-emergency care.

State public employee insurance programs were among the early adopters of this approach. It is now finding a foothold among policymakers and in the private sector.

Lawmakers in nearby Maine took the idea further, recently enacting legislation that requires some private insurers to offer pay-to-shop incentives, part of a movement backed by a conservative foundation to get similar measures passed nationally.

Similar proposals are pending in a handful of other statehouses, including Virginia, West Virginia and Ohio.

Related: The Obamacare tax penalty isn't dead yet

"If insurance plans were serious about saving money, they would have been doing this stuff years ago," said Josh Archambault, a senior fellow at the Foundation for Government Accountability, a limited-government advocacy group based in Naples, Florida.

Still, some economists caution that shop-around initiatives alone cannot force the level of market-based change needed. While such shopping may make a difference for individual employers, they note it represents a tiny drop of the $3.3 trillion spent on health care in the U.S. each year.

"These are not crazy ideas," said David Asch, professor of medicine, medical ethics and health policy at the Penn Medicine Center for Health Care Innovation in Philadelphia. But it's hard to get consumers to change behavior — and curbing health care spending is an even bigger task. Shopping incentives, he warned, "might be less effective than you think."

If they achieve nothing else, though, such efforts could help remove barriers to price transparency, said Francois de Brantes, vice president and director of the Center for Value in Health Care at Altarum, a nonprofit that studies the health economy.

Yet de Brantes predicts only modest savings: "Ideally, transparency is about stopping folks from continuously charging more."

Among the programs in use, only a few show consumers the price differences among facilities. Many, like the one Cook used, merely display the financial incentives attached to each facility based on the underlying price.

Advocates say both approaches can work.

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"When your plan members have 'skin in the game,' they have an incentive to consider the overall cost to the plan," said Catherine Keane, deputy commissioner of administrative services in New Hampshire. She credits the incentives with leading to millions of dollars in savings each year.

Several states require insurers or medical providers to provide cost estimates upon patients' requests, although studies have found that information can still be hard to access.

Now, private firms are marketing ways to make this information more available by incorporating it into incentive programs.

For example, Vitals, the company that runs the program Cook uses, and Healthcare Bluebook in Nashville offer employers — for a fee — comparative shopping gizmos that harness medical cost information from claims data.

Crossing Network Lines

Maine's law, adopted last year, requires insurers that sell coverage to small businesses to offer financial incentives — such as gift cards, discounts on deductibles or direct payments — to encourage patients, starting in 2019, to shop around.

A second and possibly more controversial provision also kicks in next year, requiring insurers, except HMOs, to allow patients to go out-of-network for care if they can find comparable services for less than the average price insurers pay in-network.

Similar provisions are included in a West Virginia bill now under debate.

Touted by proponents as a way to promote health care choice, it nonetheless raises questions about how the out-of-network price would be calculated, what information would be publicly disclosed about how much insurers actually pay different hospitals, doctors or clinics for care and whether patients can find charges lower than in-network negotiated rates.

"Mathematically, that just doesn't work" because out-of-network charges are likely to be far higher than negotiated in-network rates, said Joe Letnaunchyn, president and CEO of the West Virginia Hospital Association.

Not necessarily, counters the bill's sponsor, delegate Eric Householder. "The biggest thing lacking right now is health care choice because we're limited to our in-network providers," said the Republican from the Martinsburg area.

Shopping for health care faces other challenges. For one thing, much of medical care is not "shoppable," meaning it falls in the category of emergency services. But things such as blood tests, imaging exams, cancer screening tests and some drugs that are administered in doctor's offices are fair game.

Related: Tens of thousands of Medicaid recipients don't pay their premiums

Less than half of the more than $500 billion spent on health care by people with job-based insurance falls into this category, according to a 2016 study by the Health Care Cost Institute, a nonprofit organization that analyzes payment data from four large national insurers. The report also noted there must be variation in price between providers in a region for these programs to make sense.

Increasingly, though, evidence is mounting that large price differences for medical care exist — even among rates negotiated by the same insurer.

"The price differences are so substantial it's actually scary," said Heyward Donigan, CEO of Vitals.

At the request of Kaiser Health News, Healthcare Bluebook ran some sample numbers for a Northern Virginia ZIP code, finding the cost of a colonoscopy ranged from $670 to $6,240, while a knee arthroscopy ranged from $1,959 to $20,241.

Another challenge is the belief by some consumers that higher prices mean higher quality, which studies don't bear out.

Even with incentives, the programs face what may be their biggest challenge: simply getting people to use a shopping tool.

Kentucky state spokeswoman Jenny Goins said only 52% of eligible employees looked at the shopping site last year — and, of those, slightly more than half chose a less expensive option.

Still, state workers in Kentucky have pocketed more than $1.6 million in incentives — and the state said it has saved $11 million — since the program began in mid-2013.

Deductibles, the annual amounts consumers must pay before their insurance kicks in and are usually $1,000 or more, are more effective than smaller shopping incentives, say some policy experts.

In New Hampshire, it took a combination of the two.

The state rolled out the payments for shopping around — and a website to look for best prices — in 2010. But participation didn't really start to take off until 2014, when state employees began facing an annual deductible, said Deputy Commissioner Keane.

Still, the biggest question is whether these programs ultimately cause providers to lower prices.

Anecdotally, administrators think so.

Kentucky officials report they already are witnessing a market response because providers want patients to have an incentive to choose them.

"We do know providers are calling and asking, 'How do I get my name on that list' [of cost-effective providers]?" said Kentucky spokeswoman Goins. "The only way they can do that is to negotiate."

Kaiser Health News is a nonprofit news service covering health issues. It is an editorially independent program of the Kaiser Family Foundation that is not affiliated with Kaiser Permanente.

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