Have you heard of the latest health-care cost reduction proposal before our state legislature? Don’t feel bad if not, few have. The bill is LD 1305. It seeks to accomplish two objectives; the first is a mandate for health insurance carriers to establish both a toll-free telephone number and publicly accessible website providing enrollees with transparent information regarding health care costs; the second is the establishment of a shared-savings program that encourages those seeking medical services to “price-shop” on these price-transparency databases. The encouragement comes from the incentive provided by the shared-savings program, which dictates that if an enrollee finds the medical procedure or service they seek at a cost lower than the average price paid for that same procedure by their insurance carrier in Maine, the savings calculated by deducting the price paid from the average price paid by their carrier is split 50/50 between insurer and enrollees.
The shared-savings provision of the bill requires health insurance carriers to pay enrollees 50% of the saved cost if that enrollee elects to receive health care services from a provider for a particular admission, procedure, or service, for a lower cost than the average price paid in-state by the insurance company for such. So, if the average price paid by a patients insurance carrier for a hip replacement were to be, say, $20,000, and an enrollee found a service provider offering this procedure for $10,000, the shared-savings program would provide for half the savings, $5,000, to be paid back to the enrollee. The savings would be returned to enrollees in the form of being put toward the payments required by enrollees for maintaining the coverage of their health care policy, such as premiums, deductibles, co-pays etc., and the insurance company would keep the other five grand. Win-win, right? This leaves more money in the pockets of Mainers and provides a stimulating incentive for them to engage in regional “price-shopping” in order to find lower-cost, quality care in their area.
This incentive is desperately needed, given the current usage rates of the already available health-care cost-transparency websites, originally established with the objective of helping Mainers make more informed health-care decisions. Clearly, in absence of the necessary incentives sufficient for encouraging changes in economic behavior, the current transparency websites established by insurance carriers have fallen far short of their laudable goals.
According to usage data collected by Catalyst for Payment Reform, while 98% of health plans offer online transparency tools to their customers, only 2% of members currently use it. This is indicative of the information vacuum existing between the insurers offering these transparency guides and their customers. Although many health insurance companies have already established said cost-transparency websites, with what has increasingly become a seemingly symbolically stated objective of helping their enrollees make more informed decisions, the database usage rates exemplify how ineffective these laudable efforts have been thus far.
It would appear that detailing the varying costs of certain procedures and services rendered by health care providers in an enrollee’s geographical region would present a more attractive informational tool to the public then usage rates suggest, however, two reasons act as explanatory variables in this public policy mystery. Further examination of these transparency databases reveals the culprit of their abysmally low usage rates. A combination of little to no effort on part of the insurance companies to make their customers aware of their cost-transparency websites, in conjunction with the absence of incentives encouraging individuals to seek out lower costs for their health care appear as the most influential factors contributing to this phenomenon.
While the information problem is an easy fix, even those who know of these websites often defer against using them, offering the common justification that, regardless of the cost of the procedure, insurance will pay most to all of the expenses. Additionally, the differentials in out-of-pocket costs, such as co-payments, between one health service provider to the next lack the financial salvaging muster necessary to invigorate such individuals into investing time and energy into seeking out quality providers that offer the lowest cost health-care. The inefficiency of these cost-transparency websites to neither attract a noteworthy number of online visitors, nor achieve the intended objective of providing the informational tools sufficient for producing widespread depreciation in health care costs, provides insight into a social scientific fact economists have emphasized for centuries; incentives are the key to driving economic activity.
Without any tangible benefit available to the average health-care consumer in exchange for their time researching where to find quality services at the lowest prices, why would one take the time simply to save their insurance companies money? They wouldn’t. That is why the shared-savings provision of the proposed LD 1305 bill is so important to the goal of making lower health-care costs attainable.
A bitter fight over this provision has ensued and many special interest groups have addressed legislators advocating against it. For this and many other reasons, we here at MHPC have decided to give our audience a five part series on this bill. While one goal obviously is maintaining the shared-savings provision through committee for LD 1305, the overall objective is to make readers aware of this bill. This not only emboldens private citizens to push their representatives to pass this bill, but also illuminates how legislators respond to the oppositional cries of special interests with the influential stature of being quite generous campaign donors. By highlighting the legislative progressions of this bill, MHPC can show readers where legislative priorities lie, with the next election cycle, or with furthering the best interests of Maine citizens.