Why price transparency won’t affect health care costs

in Policy | 21 responses

by Kumud B. Jindal, MD, MPH

Many patients and self-appointed health care experts view medical services as commodities, and openly express frustration with seemingly opaque pricing for a visit to the doctor’s office. “Doctors should publish their fees so we know what we’re paying!” The idea that this matters significantly with regard to health care costs is a terrible myth, one that deserves much closer scrutiny.

The health insurance industry and our legislators have successfully made it a violation of anti-trust laws for me to discuss my payments from Aetna, for example, with other internists in my area. Since I must “charge” every payer the same for a given service, naturally, like any business, I will set my fee a little higher than the best known payer in my area.

So, if for a typical office visit Medicare pays $80, and other insurances pay me $35 to $70, it makes sense for me to “charge” everyone $85 even though I will only get this amount from cash-paying patients. In fact, charging different amounts to different payers is considered insurance fraud; this includes waiving co-pays and discounting fees for cash-paying uninsured patients.

For your doctor’s office to display a list of fees is completely irrelevant to the issue of health care costs. What is relevant, and should be more commonly understood, is that insurance companies set payment rates unilaterally, disallow communication among doctors of those rates, and therefore are able to legally discriminate against smaller practices. This is a widespread common practice in New York. The only recourse I have in dealing with an under-paying insurer is to stop seeing their patients. Since I have been in practice, only Medicare has increased fees, and even this is well short of inflation.

I encourage anyone to examine their Explanation of Benefits statement after their next primary care doctor visit, and compare what was charged with what was actually paid. Then compare what was paid to the total annual premiums collected by their insurer. Hopefully they they will understand what a tiny fraction of their health care dollars actually goes to their doctor, why insurance company executives often take home 8- and 9-figure incomes, and why insurers don’t really want transparency, or at least want to mislead the public that their doctor is “overcharging” rather than the fact that they are underpaying.

Kumud Jindal is an internal medicine physician.

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Comments

ninguem
>>The health insurance industry and our legislators have successfully made it a violation of anti-trust laws for me to discuss my payments from Aetna, for example, with other internists in my area……..
Is he trying to claim that antitrust laws prevent price transparency? That’s nonsense. Physicians are perfectly free to advertise price. What they can’t do is collude to fix prices.
They can advertise their prices, same as Wal-Mart and Sears.
>>In fact, charging different amounts to different payers is considered insurance fraud; this includes waiving co-pays and discounting fees for cash-paying uninsured patients.
That’s just not true. Physicians are free to discount their fees for payment at the time of service. A cash patient is ready to cut a check on the spot, you can create a policy to discount for payment at the time of service. What you have to do is offer the same to the insurers. If the insurance company is willing to wire the money to account number XYZ at Main Street Bank in Podunk, they can get the discount as well. In reality, they aren’t going to do that…..so far at least.
Heck, I’m not a lawyer and all that, so not legal advice; all I know is I’ve practiced in a couple states, I go to the state medical association risk management and business management courses, attend the courses run by people with experience in medical billing, Not one of them has ever suggested otherwise to me. Anyone with contrary experience, I’d like to hear it.
You have to charge the same. You are allowed to set policies discounting for payment at the time of service, you just have to offer the same to everyone. You are free to waive copays for hardship. Document same, and one would presume it is an infrequent event.
JPB
Sir, you compare disclosing fees to patients with discussing fees with your fellow internists. These are two very different things!
How can it possibly be insurance fraud to disclose your fee before services are rendered to the self-pay? I have never seen any doctor reluctant to disclose fees once they are billed. (In my experience when a claim was denied, I found that some of our doctors were charging 2-4 times what the insurance companies would pay.)
I do agree with you that we need massive reform for the insurance companies. We also need all segments of the medical care industry to take a long, hard look in the mirror because all parts of this industry need to be held accountable for their part(s) in the current mess!
stargirl65
Not only is the price invisible to the patient, it is also invisible to the doctor providing the service as well. Whenever we want to add a new service, the first thing we do is inquire as to how much we will be paid for the service by the various insurance plans. Many insurance plans will not tell us. They say the only way to find out is to submit a charge. What?!
Nick__C
So why is it legal for car salesmen to charge people different amounts (based on willingness to pay and haggling ability) but doctors can’t do the same?
twaw
Perhaps times have changed, as I have been a salaried physician for all but 5 years of my 20+ year career. However, back then it was clear that I could not provide discounted/free care to those in financial distress because Medicare would use that number ($0.00)as my “usual and customary fee.” Charging above that for those who had insurance or medicare would be fraud. Hence the unintended consequence was no possibility of individualizing (discounting, bartering, in trade) my fees for those less capable of payment. In fact, it was that concept which caused the abandonment of “charity” care which all local primary care physicians provided free of charge at the local “free clinic” one day a week. For those non-dinosaurs out there, this was before the days of medicare/medicaid.
pcp
Ironic that the posts suggests that disclosing prices and fees won’t lower costs and then goes into how we really don’t know that majority of our dollars go to the insurance companies with much smaller amount going to the doctors.
Disclosing that is the whole push behind the transparency. If such a thing existed, then people would know all these details and actually demand better services from the insurers. Most folks know that majority of doctors are not overpaid.
Many of the assertions are just false or at best distractions as pointed out by other posters. Try again.
Mike
PCP… you misunderstood the post,. Dr. Jindal isn’t arguing against disxlosure of doctor’s fees. He’s saying IT DOESN’T MATTER because the INSURANCE COMPANY sets the fee. NOT the doctor.
He IS arguing for transparency from ther INSURERS! Because thats the only price that matters. (This excludes, of course, the cash-only model, where they can charge whatever they want,. But how many physicians can do that???)
Ninguem, doctors cannot charge whatever they want if they signed a contract! And they can’t charge one person in one contract one price, adn another patient in another contract something different, in the world of Medicare, anyway.
How in the world can any of you people possibly argue that doctors are somehow as much to blame as insurance companies??? Is it not obvious how much money they are raking in, and what paltry amounts trickle down to actual providers of care???
The game is stacked in favor of the insurers. The primary care doctor is not the problem, nor is the list of prices you seek. Look to your insurer. They run the show. Period!
Southernsurg
Mike, we (physicians) are as much to blame. We (or at least our predecessors) have allowed it to happen.
I don’t see what the big deal is about posting a fee schedule. Just put a big notice at the top, stating: THIS IS THE FEE WE SUGGEST TO THE INSURANCE COMPANIES, MEDICARE, AND MEDICAID THAT WILL ALLOW US TO COVER OVERHEAD, AND PERHAPS EVEN HAVE A LITTLE EXTRA TO TAKE HOME (AND PAY TAXES ON). PLEASE KNOW THAT THE PAYORS ARE NEVER IN A MILLION YEARS GOING TO PAY THIS AMOUNT; ON AVERAGE THEY WILL PAY ABOUT HALF OF IT, IF THAT MUCH.
Problem solved!
Any patient that calls and asks, or asks me in the exam room about the price of a certain procedure (colonoscopy comes to mind) is informed up front by me. I think it helps them decide on the value of their health if they think about it while I am conducting my office visit. It allows me to tell them the price of the more invasive/extensive procedure (e.g., colon resection) that they will need in the future. Seriously, it does allow me to tell them the consequences of not sacrificing in the near term.
Transparency is fine by me, and the payors should practice it as well.
Doc Stone
Ignorance abounds and is stronger than truth. If insurance companies are setting Jindal’s fees, then it is because he is consenting to that arrangement.
He can set his fee for all but medicare patients, collect at the time of service, and let them deal with the insurance company.
Government payers have taken the position that if you waive co-payments, your fee is effectively zero and collecting the insurance payment is fraud. The logic is sound. Private payers with whom you contract view this the same way usually. The logic is sound. If you collect zero from the patient, and the insurance is obligated to pay 80% of the fee, then 80% of zero is zero and they have no obligation.
You are perfectly free however to charge patients nothing. That is in no way fraud. Charging them nothing doesn’t mean waiving co-payments and collecting insurance. 80% or whatever percent of nothing is nothing so you are to then not bill the insurance. It is indeed a form of false charity to pretend generosity on the insurers back. If you want to reduce the bite for a patient by reducing the fee without then reducing your UCR, you can easily just not charge them for some of the visits at all, no charge ticket, no book entry, no financial transaction at all. Not a sound way to run a practice in my view and treacherous waters for the doctor patient relationship.
Unless you have some state law to the contrary–and I personally know of no such state–you do not have to charge the same fee to every patient. You are legally free, except in the case of Medicare patients in which the government has taken a constitutionally questionable ownership of the doctor-patient relationship, to charge what you want to whoever you want as long as you haven’t contracted that right away.
I have never been in a practice where my fees were not quoted to patients before the first visit nor where I did not (even as an employee) adjust the fees in particular cases according to my judgement of what was appropriate.
http://www.zepherella.com No-Surprise Healthcare Pricing
Physicians I talk with are open to disclose price assuming they know payment will be secured at time of service. There is a small issue with the complexity of CPT codes but that can be overcome so their patients understands the office pricing structure.
Great physician blog to address this very problem – http://www.villagepediatrics.com/blog/
stargirl65
JPB
“I found that some of our doctors were charging 2-4 times what the insurance companies would pay”
Shouldn’t it be that the insurance companies are only paying the doctors 25-50% of what they charge? Your perspective is different than mine apparently.
The insurance companies are forcing physicians into very low fees schedules in order for physicians to gain access to the insured patients. If physicians don’t sign the insurance contract that reduces the fees excessively then the insurance company won’t let the physician see the insured patients. The doctor could see the patients, but unless they are in plan the patient essentially becomes a cash patient like they have no insurance. Most people will not do this after paying so much for their insurance.
Therefore, no contract for ridiculously low payments, then no patients. They have you where they want you.
RAP
Price transparency obviously won’t work. But cost transparency will. Unfortunately, the medical community will resist cost transparency since it will require establishing a prevailing wage for medical doctors and expose for all to see their profit markups. Also, there are a lot of subcontractors that medical doctors deal with on the basis of price, not cost, and they will be even more resistant to cost transparency.
stargirl65
Profit?
I admit that trying to decide on the price of time managed activities is challenging.
The markup on many other things is almost zilch.
Cost of Gardasil vaccine: $124.75
Payment from insurance: $125.50
This is pretty much how it is for all the vaccines. Your are lucky if you get a profit of $1.00. For that dollar you are supposed to order the vaccine, store the vaccine a fridge (not free), keep the fridge cool, manage your stock of vaccines, submit payment for the vaccine to the supplier, etc. Where is the profit? I actually lose money if you look at the investment vs reimbursement for the vaccines.
RAP
To Stargirl: The $124.75 vaccine probably cost the manufacturer a lot less to make, maybe $10.00 or less, so the manufacturer is getting the profit, not the provider, and, even worse, the manufacturer found a way to snooker providers into giving patients the impression there is no profit for anyone. If you are only looking at your own costs and profit, your not serious about looking at costs, you are still looking at price, and the manufacturer even more so. The cost for the trinkets manufacturers give providers (donuts, lunches, “education” trips to exotic locations, etc.) to get them to prescribe overpriced brand name medication has to come from somewhere, and they probably try to call it “overhead” on their tax returns and financial statements to give the false impression they also have a low overhead.
RAP
Make the end of that last posting “low profit” instead of “low overhead”
Southernsurg
RAP-The powers that be have decided that physcians are so stupid and easily swayed that trinkets, donuts, and God-forbid educational trips have been nipped. But Congress is incredibly objective and smart; lobbyists still have their way.
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Doc Stone
People will pay out of pocket to see physicians when they are convinced that they will get better service. It puts a lot of pressure on doctors to stay on the ball–and that is good. If you want insurance companies to instead provide you with a steady supply of patients, don’t complain if they treat you like you are their rent-a-boy, because you are. Indentured labor has always been cheap. If you want the wages that the free enterprise system provides to the best, you have to accept the insecurity and the competition that go with that.
Likewise with patients. If you want an agent of your insurance company controlling your care, if you trust corporate American that much, then limit yourself to the docs who accept the low-ball rates and get on their panels. You will accept with that the rushed schedules and doctors who are demoralized and unable to give their best. If you want someone who is constantly driving themselves to perform at the razors edge, you usually won’t find them on the panel. There are exceptions, but people like that usually like to put themselves where they can be rewarded for their achievements.
Another aspect of this is that some people generate fees all out of proportion to any economic rationality and thereby force patients to accept the protection of the insurance company from rapacious fee setting. Fees should not, ideally, be set by what insurance companies will pay. They should be set by the economic reality of what pricing signals in the community about what that level of skill and effort is “worth”–with a bit of English on it for what people can afford. One should look not only at what the other docs are charging, but also other professionals–accounting for the differences in risk, effort, and previous educational investment. When my CPA is charging more than I do, I know that I am undercharging unless he is a really top dog specialist CPA, for I invested a great deal more years and hours in my training.
Doctors and patients would ultimately be better served charging rational fees and insisting on collecting them, severing the, medical profession from the insurance industry. If insurance pays for lab and hospital charges leaving docs to deal with patients on the basis on mutual terms (including charity as appropriate), then we can start to restore of the professionalism that has been lost. As it is, medicine is becoming a profession of indentured servants and grifters.
Southernsurg
What I see from all of this going on today is that we (society) need to figure out if healthcare should be like our educational system or like the free enterprise system. I’m OK either way, as long as the situation is explained before, rather than after the fact.
RAP
Apparently doctors think they are not swayed by trinkets, but if you look close enough, they are being swayed; they are just in denial. But let’s say it’s a perception. Patients have the perception they are swayed, so it doesn’t matter whether they are being swayed or not, it is the perception that matters. A simple proof of them being swayed is observing what they prescribe – always a brand name, never a generic. Obviously, some drug company “educated” them. Seeing headlines of medical doctors, prominent medical doctors, ghost writing medical articles adds to the perception, and they are suppose to be outstanding examples of ethical behavior for the less prominent medical doctors.
Now as background, I work as a civil servant in a sensitive position involving spending taxpayer monies. I can’t even accept a cup of coffee without being perceived as accepting a bribe. Yet, I’ve had medical doctors tell me that accepting such trinkets is a sign of “respect”. Since doctors usually directly deal with life and death issues, which should be more important that money, why do they think they are exempt from such unethical behavior and I’m not? And I make a small fraction of what doctors make.
I’m still not seeing anyone on this blog getting away from the price approach to fees; the postings seem to want to go back to it. Why? Why does the industry work so hard at hiding cost information? For instance, when I see doctors complain about malpractice insurance being so high, sometimes stating a alleged scary actual cost; I never see them say what percentage of the fee is for malpractice insurance. So if malpractice lawsuits were made illegal how much would the fees go down? 1%? 5%? 95%? No one, not even the AMA will commit to a range, say 50% to 55%. I suspect the money will be pocketed and the “usual and customary” fees will still go up just as fast anyway. If so, then why change the malpractice laws? It won’t benefit the patient.
Now if the true costs were known, then it would be known what fee is necessary to make the medical practitioner whole, that is reimburse the only the costs needed to make the provider, and their suppliers (who also overcharge), are in the same financial situation they were before they saw the patient. Then a fair fee can be set. Right now, there is no way of determining that, and the medical industry doesn’t want a way of determining that. If you say they do, well the perception is they don’t, they want fees based on price, and perceptions matter. If such a perception is false, then the medical community has a serious public relations problem that will no longer go away by the current policy of stonewalling. Instead of discussing it with the public, they want to discuss it only with their lawyers and legislators and keep the public confused and in the dark.
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