A few months ago, laws went into effect in both Texas and Tennessee that provide patients with new avenues to avoid overpaying for health services. These laws offer a glimpse at one of the next steps for states in the effort to make prices more transparent. More specifically, these new “self-pay” laws allow individuals covered by certain health plans to receive deductible credit if they can find services cheaper than the rate their insurer negotiated.

Are there really that many services where patients could find cheaper prices than what their insurer has agreed to pay? Surprisingly, the answer appears to be yes. According to a recent report, when offering to pay cash instead of using insurance Josh Archambault found:

We recently made some phone calls in Nashville and found we could pay $541 in cash for a colonoscopy, far less than the $2,400 average rate the three largest insurers in the state negotiated. In fact, we found at least four providers in downtown Nashville that would charge less if we paid cash instead of using our insurance card.

In other words, it’s likely that many patients are currently overpaying for services when they use their insurance. And what these new laws do is allow patients to take the $541 option and require their insurer to count that spending toward their yearly deductible, as their insurer would do for any other spending on covered health services. For many patients, especially those with chronic illnesses, this change could result in significant cost savings.

As I’ve written before, price transparency isn’t a silver bullet for our health care system, but it will be key for lowering health care costs—if Missouri lawmakers ever decide to get serious on the issue. Going into this year’s legislative session, I hope our lawmakers decide to make tackling skyrocketing health care costs a priority. Following what’s recently worked for both Texas and Tennessee would represent a step in the right direction.

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It’s been a little more than two years since the federal government began requiring that hospitals disclose their prices in a consumer-friendly format. As of a few months ago, compliance was reportedly still incredibly low. The Centers for Medicare and Medicaid Services (CMS) and the American Hospital Association (AMA) claim that around 70% of hospitals were complying, which is much higher than the numbers we found in our investigation into Missouri’s hospitals.

A recent study in the Journal of the American Medical Association throws some cold water on the supposed success thus far for hospital price transparency. The problem isn’t simply that so many hospitals seem uninterested in complying with the federal rule, or at least complying in spirit. Even the hospitals that are “complying” don’t appear to be publishing their real prices. The report concludes:

Findings of this cross-sectional study suggest that there was poor correlation between hospitals’ self-posted online prices and prices they offered by telephone to secret shoppers. These results demonstrate hospitals’ continued problems in knowing and communicating their prices for specific services. The findings also highlight the continued challenges for uninsured patients and others who attempt to comparison shop for health care.

In other words, hospitals are quoting different prices if you call them than what they’re publishing online. This also means that the federal price transparency rule has not succeeded in making health care services easily shoppable—at least not if you’re only shopping online.

Price transparency is important because it allows patients to know the price of the treatment they’re receiving before getting the bill. Knowing the price can then empower patients to shop around and search for savings. Informed consumers (patients) and market forces can then apply downward pressure on the nation’s constantly rising health care costs. Or at least that’s the idea. Needless to say, for transparent prices to have the desired effects, the posted prices need to be accurate. If they’re not, how can patients, especially those uninsured, make the best financial decision for themselves with that information?

Going forward, it’s clear more needs to be done to ensure patients are armed with the information they need to make their health care decisions, and I’m hopeful Missouri policymakers will take action in 2024. But until they do, be sure to call ahead for your medical procedures just in case.

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To boost hospital compliance, Missouri’s policymakers should consider reforms that would work in conjunction with existing federal rules. As Show-Me Institute researchers recommended in last year’s blueprint, establishing state level requirements for health care price transparency (including non-hospital providers) to publish charges for hundreds of shoppable services in a way that most Missourians can understand would represent a significant step forward.

Additionally, no price transparency requirement is effective if the providers charging those prices won’t comply and there is no effective enforcement mechanism. Under current federal rules, hospitals that fail to disclose prices in a comprehensible way can be fined from $300 to $5,500 a day. It doesn’t appear, however, that fines are being imposed. Missouri policymakers may need to consider noncompliance penalties with teeth for providers if they continue withholding pricing information from patients.

Policymakers should also consider ways to make it easier for patients to access and use these prices. States including Florida, and nine others, have taken the issue into their own hands and created online tools that help patients shop for various procedures. Something similar could be done in Missouri.

While greater transparency in health care will not single-handedly fix all the health care problems in Missouri, the hope is that it will take some of the uncertainty and confusion out of the process. Patients deserve clarity, not mystery, when making decisions related to their health. And until patients can be informed consumers of the care they purchase, we can’t expect to keep the cost of medical services under control.

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I decided to try the same thing out at the flagship hospital for four of St. Louis’s major hospital systems. I found that the price without insurance for a knee replacement was $26,122 at Barnes Jewish and $18,766 at St. Luke’s. Using that search term in the pricing websites for both Mercy St. Louis and SSM Saint Louis University turned up no matches. I then decided to broaden my search to every hospital in Missouri.

I used the rules outlined by the Centers for Medicare and Medicaid Services (CMS) to evaluate how “transparent” each hospital’s pricing was. The rules state that each hospital needs to have a consumer-friendly way to shop for common services, as well as a comprehensive list of all services and charges in a digital file. I found that of Missouri’s 164 hospitals, only 47 fulfilled both requirements. That is a compliance rate of just 29%, which, considering the federal rule is a year and a half old, is pretty terrible.

Many of the 47 “compliant” hospitals, such as Mercy, had some sort of online form to estimate prices but, in my opinion, did not make the system all that easy or intuitive to use. Many of these sites would not accept a general term for a procedure, like “knee replacement”, but instead required a technical procedure name or hospital code. Requiring the average patient to have such specific information is not “user friendly.” Likewise, the digital files many hospitals provided are difficult to read unless you have extensive computer software and coding knowledge. The digital file Mercy provided was one of these difficult file types. After spending approximately 45 minutes using code to read Mercy’s file, I found that it was still missing key information CMS requires about negotiated rates between the hospital and insurers.

The bottom line is that Missouri hospitals, by and large, are not following the plain intent of the rules, which makes it difficult for patients to know how much their care will cost and to effectively compare prices. If you would like to try to research the prices of procedures for yourself, I have included an Excel file at the bottom of this post that has URLs for every hospital’s pricing information.

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For years, hospital executives have defended these prices saying it’s about quality, or that they see sicker patients, or lots of folks on Medicare.

“That’s just not true,” said co-author Yale economist Zack Cooper.

Cooper said the team, including John Van Reenen from the London School of Economics and the University of Pennsylvania’s Stuart Craig, controlled for all those factors. And Cooper said market power matters more than the rest….

Change starts, says Cooper, when people who buy the MRIs and the C-sections can simply see real prices. And change may happen when those same people negotiate next year’s deals knowing what they know now.

You can find the full report here. Its implications are straightforward. For one, a hospital that holds and can maintain monopoly control over a health care in its region can charge higher prices than if it had competition. For another, concealing the prices of health care services serves to fatten providers' wallets. Without readily available prices, it is harder for patients to determine whether they're being overcharged. That was true before Obamacare was passed… and has continued long after Obamacare was implemented. The problem in health care is not the free market. The problem is the lack of a free market in health care.

Market reforms like price transparency are important tools to make health care in this country better, less expensive, and more accessible. Rather than go farther down the hole of failed government-run health care, we need to move toward freeing our health care system to make sure that patients' needs—both their health needs and their financial needs—are in the center of the system. Price transparency would be a step in the right direction after far too many steps in the wrong.

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But the difference between concierge and direct primary care isn't just academic; the terms also appear to be related to the price of the services rendered by these nontraditional physician practices. According to a study by Phillip Eskew and Kathleen Klink published this month in the Journal of the American Board of Family Medicine, practices that simply self-describe as a concierge service are more than twice as expensive as direct primary care on a monthly basis.

We found the public perception of the term concierge as having higher prices holds true. Self-described DPC practices charged a lower average monthly fee ($77.38) than DPC practices that self-described as concierge ($182.76). Concierge practices such as MDVIP and MD² have listed average periodic (monthly) fees of $137.50 and $2083.33, respectively; these periodic fees are billed in addition to standard fee-for-service office visit and procedural charges that would be encountered in any traditional medical practice.

In other words, while they sometimes use these terms interchangeably (and for understandable reasons given their similarities), both doctors and patients should be mindful that these models differ in very important ways, and that pricing is perhaps the most important difference. Making that fact clear is especially important for patients seeking cost-effective treatment plans with direct primary care physicians—because in the process of trying to find one, they could balk at the price tag they might find if they're only looking at "concierge" practices.

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Without price competition, properly valuing medical services is next to impossible, and findings from the Department of Health and Human Services in 2013 reiterate the point.

For example, average inpatient charges for services a hospital may provide in connection with a joint replacement range from a low of $5,300 at a hospital in Ada, Okla., to a high of $223,000 at a hospital in Monterey Park, Calif.

Even within the same geographic area, hospital charges for similar services can vary significantly. For example, average inpatient hospital charges for services that may be provided to treat heart failure range from a low of $21,000 to a high of $46,000 in Denver, Colo., and from a low of $9,000 to a high of $51,000 in Jackson, Miss.

Price transparency in American medicine is the exception rather than the rule when it comes to state policy, and a new report card from the Health Care Incentives Improvement Institute (which focuses a great deal of attention to transparency issues) and Catalyst for Payment Reform hammers this point home yet again. The researchers found that there has been “little progress since last year and, in some cases, regression” at the state level on price transparency matters, and most states received an “F” grade overall on the matter. Missouri was one of those states. The report doesn’t say a great deal about Missouri’s lack of progress on transparency issues in its national report, altough it does note that “a gag clause ban was introduced in Missouri, but failed to pass in February 2014.” That bill, SB 847, also included a wide array of other welcome transparency measures; unfortunately, the bill never made it out of committee.

As the HHS data lays out, the vast divergence in pricing in health care is a serious problem that isn’t explained by quality differences, but by limited information and, in general, limited incentives to mitigate the cost of one’s health procedures. If the state really wants to bend the cost curve of care in the state, Missouri needs to do better in the arena of price transparency and ensure that the prices charged for delivering health care in the state are more accessible to health consumers.

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First, some of the data relies on physician and patient surveys. Individuals in different countries have different expectations for their health care systems, an important factor that the study’s authors admit might have affected the ratings:

Patients’ and physicians’ assessments might be affected by their experiences and expectations, which could differ by country and culture.

One of the categories I find most objectionable is “long, healthy, and productive lives,” which has a rather ambiguous meaning. The authors used three indicators to determine what constituted a “long, healthy and productive life.” (Table data excerpted from the study):

Exhibit 8. Long, Healthy, and Productive Lives Measures

These three indicators do not fully capture “productive” or “healthy” lives. There are more relevant measures of productivity and quality of life, such as statistics about morbidity, the amount of time spent ill, or disability-adjusted life years (DALYs), which account for degree of sickness as well as length of life. These are sometimes difficult to calculate, but they are standard measures used by the World Health Organization (WHO) and far more relevant for a category about “healthy” and “productive” lives.

The indicators used do not capture the fact that someone waiting 18.3 weeks for surgery in Canada may also be losing four months of work productivity, as well as spending a long time with an impaired quality of life. The United States ranked first in wait times for specialists and nonemergency surgeries. When one includes those factors, a different story emerges from the data.

For the indicator “Health life expectancy at age 60” the United States ranks sixth, but a closer look at the raw percentages shows a very small range from first to last; whether these differences are even statistically significant was not addressed in the study. Nor does the category capture that Americans work longer — both in their work week and in their lifespan — than the other countries listed, which could explain the slight difference in the raw percentages. American work ethic is a cultural issue, not an implication of the health care system.

Also, infant mortality is a contentious indicator for the success of a health care system. Different countries use different measurements to calculate the statistic. The United States strictly follows WHO guidelines by counting all babies that have shown any sign of life, whereas Germany, for instance, only counts babies that weigh at least one pound at birth. Other countries do not count births earlier than 26 weeks. This disparity in measures of reporting artificially skews the rates, without factoring in cultural differences, like teen births, that also contribute to higher infant mortality.

In developed countries, a large portion of the increase in life expectancy is not attributable to the health care system. During the past century, the average life expectancy in the United States has increased by 30 years; modern medicine can only account for five of those years, while public health measures account for the other 25. Attributing small changes in mortality to medical care is very tricky. Lifestyles can affect health outcomes as much — if not more — than health care. The obesity rates in the United States are much higher than the other countries listed. Holding health care systems equal, that one factor would lead the United States to have lower health outcomes. Again, this is a cultural issue, and not an indication that a universal system would improve U.S. results.

A conclusion some may reach after reading the study is that universal health care is the solution to perceived disparity; this seems to be the conclusion the authors hoped to make. In fact, the study actually suggests that the new federal health care legislation will improve U.S. outcomes:

Newly enacted health reform legislation in the U.S. will start to address these problems by extending coverage to those without and helping to close gaps in coverage—leading to improved disease management, care coordination, and better outcomes over time.

Incentives need to be realigned, but that has more to do with the disconnect between patient and physician — the health care wedge, explained in the Show-Me Institute study “Prognosis for National Health Insurance: A Missouri Perspective.”

The Commonwealth Fund study admits that none of the other nations considered have “ideal” health care systems, and makes some questionable comparisons in order to “prove” that universal health care is the best way to solve problems in health care. Show-Me Institute staff and scholars have discussed better solutions for health care reform in blog entries, op-eds, and policy studies.

The Commonwealth Fund study notes that the largest problem in the U.S. system is affordability of health care; the study thus concludes that universal health care is the solution, rather than making health care more affordable. The Congressional Budget Office has calculated that the recent legislation, lauded in this study, will actually increase the cost of health care. The Commonwealth Fund study suggests a solution that will bring the exact opposite of the problem it anticipated: Health care will become too expensive for some people.

Just because a few countries are getting (questionably) better results by some carefully selected measures under universal health care systems does not negate the fact that market-based solutions are a better solution for Missouri and the whole United States.

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There has been a lot of charged rhetoric on the topic of autism mandates, and I’m positive that its proponents have had the best of intentions. (In fact, I played softball last weekend with one of the sponsors of the bill, Sen. Eric Schmitt, and he seemed like a great guy.)

It’s important, though, to understand the economic mechanisms behind mandates. Insurance becomes prohibitively expensive if the government attempts to mandate coverage of everything that could happen to anyone. As I’ve mentioned before, high-deductible health savings accounts are one of the best ways to handle these sorts of issues; once the policy owner exceeds a certain deductible, their insurance can cover the cost of treatment. The high deductible helps to minimize costs by reducing the health care wedge between patient and doctor, as well as reserving insurance for its intended purpose: large, catastrophic costs. Market competition is a more effective way to bring health coverage to all children with autism and other conditions, and not just a select few.

(Also, a quick thanks to John Combest for linking to my op-ed in the Springfield News-Leader! My op-ed will also be available in the Sunday edition of the Joplin Globe.)

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