Christy Daggett, Maine Center for Economic Policy
Originally published in the Bangor Daily News on January 20, 2015.
I did an amazing thing the other day. I picked up the phone in my office, called a hospital on the other side of the state and asked how much a screening colonoscopy would cost. I was on hold for a few minutes and transferred once, but then a staffer came back on the line and gave me an estimate.
This shouldn’t be so amazing — but it is. Most patients don’t know how much their health care costs are until they receive a bill — and even then it’s often hard to understand. Economics 101 teaches us that the more information consumers have on prices, the better markets work for consumers. Until recently, health care prices have been frustratingly opaque.
It’s not news health care costs are a drag on wage growth and the entire economy. But increasingly, more and more of the costs are being shifted to patients in the form of cost-sharing — co-pays and coinsurance, for example — and high deductibles. Polls show a third of insured Americans have put off care because they feel they just can’t afford it. This is one reason why it’s so critical patients know in advance how much care will cost and whether they could get comparable care for a lower price if they went to a different facility.
Last year, the Maine Legislature passed a bill that aimed to shine more light on health care prices and, in turn, attempt to reduce Maine’s growing health care costs. And it appears to be working, which is why I was able to call a small, rural hospital and get a ballpark figure for a colonoscopy. Under An Act to Implement the Recommendations of the Commission to Study Transparency, Costs and Accountability of Health Care System Financing, not only must hospitals provide the average charge per procedure for any patient requesting the information, but hospitals also must provide uninsured patients a total price estimate for the care they seek — along with information on the hospital’s charity care policy, which makes care available for those who cannot otherwise afford to pay.
More price transparency doesn’t address the fact the uninsured still may forego treatment they can’t afford. Ironically, the uninsured pay the highest prices of anyone for health care. Medicare, Medicaid and private insurers all negotiate prices with hospitals on behalf of their thousands or millions of members. The uninsured have no such bargaining power. The 147,000 uninsured Mainers will remain exposed to enormous financial risk. Still, those with an ability to pay will be able to shop around for the best deal they can get. For instance, claims data shows the average price for a colonoscopy at a Maine hospital varies by $2,445, with the highest-priced site charging $3,166 and the lowest-priced site charging $721.
Price transparency is not a panacea in itself. In addition to the fact that too many people aren’t insured and can’t afford care, the estimates provided under the new law are only the average price and many insured consumers are confused by the complex web of tiered reimbursements and narrow provider networks insurers are relying on to rein in costs. New Hampshire’s HealthCost website lists the potential out-of-pocket costs for patients and Massachusetts went even further, requiring all insurers to post binding price estimates on their individual websites — but Maine isn’t there yet.
Also, price transparency can’t address some of the knottiest issues in health access. More than half of Americans would find it hard to cover an emergency expense greater than $400. The typical deductible for an employer-based policy is more than $1,200 per individual. Very sick patients rarely are in a position to shop around for the best price. Finally, transparency doesn’t address quality. It remains difficult for consumers to compare providers based on quality and price.
Despite the caveats, I was lucky the other day. I reached a quick and personable employee who gave me the information I asked for. Admittedly, my study was unscientific — I didn’t call every hospital in the state. The law as written has no mechanism to ensure accountability — that all hospitals will ensure that price estimates are available in a timely fashion, such as the one I received. But, for consumers’ bottom lines and for the sustainability of our health care system, the answer I got was a very good sign.
Christy Daggett is a policy analyst at the Maine Center for Economic Policy. She is a member of the Maine Regional Network, part of the Scholars Strategy Network, which brings together scholars across the country to address public challenges and their policy implications.