Study says health care pricing tools aren’t driving down costs

Dan Gorenstein May 3, 2016
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A report by JAMA raises doubts about the efficacy of online tools meant to help consumers be savvier health care shoppers. Above, a newly insured man receives a checkup. Photo by Joe Raedle/Getty Images

Study says health care pricing tools aren’t driving down costs

Dan Gorenstein May 3, 2016
A report by JAMA raises doubts about the efficacy of online tools meant to help consumers be savvier health care shoppers. Above, a newly insured man receives a checkup. Photo by Joe Raedle/Getty Images
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Here’s a key theory behind cutting health care costs: If consumers knew how much they’d have to pay for various medical services, they could be savvier shoppers, which would ratchet up competition among doctors and hospitals,  to cut prices.

So, employers and insurers created online tools to help folks distinguish costly providers from less expensive alternatives.

But a new study out today, published in the Journal of the American Medical Association (JAMA),  raises some doubts about whether these tools are working.

Say you live in a place where an MRI costs anywhere from $400 to $4,000. In response, companies hire firms like Castlight and IBM’s Truven Health Analytics to give that price information to their employees.

Harvard Medical School’s Michael Chernew, who studies health care policy, worked with a team of researchers to look at two large employers who fired up Truven’s online pricing tool.

I think the tools themselves are functioning moderately well. But it is not as simple as transparency advocates would sometimes have us believe,” Chernew said.

In the first 12 months, just 10 percent of workers used the service, and it looks like no one saved any money. In a statement, Truven said it welcomes this research and the chance to work towards a system of value-based care.

While health policy types remain bullish on the concept, this research shows if employers want workers to shop smarter, more is needed, said Yale School of Public Health’s Zack Cooper.

This is a signal to employers to go to their insurance companies and say, ‘We got to do better,’ that there are real savings to be had. That the system is incredibly inefficient,” Cooper said.

To realize the potential here, Craig Garthwaite, of the Kellogg School of Management at Northwestern, said he’d like insurers to tweak their policies. 

He suspects so few people shopped for lower prices because plans lacked the right financial incentives.

Instead, he said insurers could limit what they are willing to pay for procedures.

And if you want to go to a place that’s more expensive than that, then that’s on you. If you did that, then people would be more willing to shop on price,” he said.

The challenge? It may be harder to figure out how to set prices and measure quality, but it may take that kind of heavy lift before smarter health care shopping is much more than the promise of better days ahead.

 

 

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