Consider your last major appliance purchase. You probably thought about your needs, researched several products, and compared prices at multiple stores. When it came time to decide you picked what balanced your needs with your budget, and you paid with YOUR credit card…or a wad of $100s. What if while you were comparing products the store sales person said “INSURANCE has agreed to buy your appliance for you!”? Would you purchase the product that balanced your needs and budget or buy the latest and greatest appliance that INSURANCE would pay for?
Why shop if you don’t save?
Now switch to healthcare. Instead of “your last major appliance purchase”, substitute “your last big diagnostic test” or “emergency room visit”. So let me guess, you did not research several products, or compare prices at multiple locations. Why would you, your copay was likely a fixed amount, or your coinsurance was a small percentage of the negotiated charges. Did you know that there can be a 3x-6x difference in negotiated charges between facilities, even within the same network? If you were paying with YOUR credit card, would you ask your care provider about the value of the intervention, and seek out the most cost effective facility for the intervention?
With incentives and tools, cost effective choices will be made
When INSURANCE pays most of the bill, you have little incentive to shop facilities or to question the value of the intervention, so you and your provider typically chose the most convenient facility and the latest and greatest procedure that INSURANCE will pay for. You and the provider know your specific needs and are in the best position to chose, but you and the provider have little incentive to shop value.
Cost shifting is not the answer
While replacing INSURANCE with YOUR money is not the answer, creating a structure where you and the provider are motivated to shop for value can have a profound impact on the demand for services and the cost of healthcare.
Value-based benefits, narrow-networks and new incentives might be
Our challenge is to create value-based benefits and incentives that motivate you to be a smart and proactive healthcare consumer, and to provide you with tools to help you be successful.