This article first appeared in the Raleigh News & Observer.
The next time you hear someone say the market is failing health care, ask him how much his last blood test cost. His failure to tell you won’t be a memory lapse, but a symptom of our system.
That is, the market never failed health care, the system did. The system? You know, that byzantine World War II-era arrangement among doctors, functionaries and insurers that leaves the patient (i.e., the consumer) out of the loop.
According to a recent poll by the Civitas Institute, 75 percent of North Carolinians either "don’t know much" about health savings accounts (HSAs) or are not familiar with them at all. As it happens, I’m one of the 25 percent who do know.
My family has an HSA with a high-deductible plan (HDHP). That means instead of traditional prepaid health care like a PPO, we pay for our basic health-care needs from a tax-protected health-care account. And what we don’t spend on health care, we save. But since we get to keep what we don’t spend on health care (plus interest), we’re a much more cost-conscious family, which means we save both ourselves and others money.
For example, instead of asking the doctor for Nexium to relieve acid reflux, we get Prilosec over-the-counter, or Zantac, which is even cheaper. If one of us has a minor infection, we go to the MinuteClinic instead of the M.D. because the nurse practitioner charges only $60 per visit. The doctor charges anywhere from $100 to $250.
MOST PEOPLE DON’T THINK THIS WAY ABOUT HEALTH CARE, because actual prices never occur to them. They pay their copays, but that’s not the actual price. All that extra money they don’t pay still gets paid — in the form of higher insurance premiums for everyone (which everyone seems to be complaining about lately).
But what about cost-conscious folks like us who have consumer-driven plans? We’re HSA dreamers in a PPO world. The system is set up for people who shift costs using their traditional insurance plans. Care providers and insurers negotiate the prices. Both benefit enormously from the arrangement, because, by and large, they’re not having to face an army of frugal customers like us — yet. And here’s where we return to so-called "market failure."
Markets thrive on information. The most obvious way to communicate information in a market is through the price system. When you go to the store, you see nacho prices are up. Maybe this week you’ll buy Pringles? But the ease with which people express their preferences is not the same in health care.
My wife, for example, just had a routine examination. Given that we use the HSA, she took great care to ask the doctor how much this would cost — "I’m paying out of pocket," she insisted. The doctor was able to give her information about the cost of the visit, but he omitted the laboratory test charges that arrived in the mail a few weeks later like unwanted guests. She had no idea. The doctor had no idea. We learned the hard way.
But price transparency in health care shouldn’t be that hard. It should be easy, because the only way we can make rational decisions about care is to know how much things cost. Doctors’ offices are used to letting everything be handled through paid administrators and insurers — the rest is outsourced to labs that negotiate with the insurance company independently. This puts paying customers like my wife at a disadvantage. In other words, it’s not easy being a bona fide health-care consumer in a WW II-era system. But that’s going to change.
HSAs and other consumer-driven plans have been around only since 2003, because these plans were introduced as part of the Medicaid Part-D bill. And that’s why it’s going to take some time for the consumer-driven revolution to catch fire. But it’s coming. And providers will soon have to compete for our dollars — with lower prices and greater transparency.
PEOPLE ARE TIRED OF PAYING TOO MUCH for insurance, and some simply go uninsured. But many employers and individuals are opting for plans that — while asking folks to be cost conscious — allow them, literally, to save health-care dollars.
Will this be the year of an HSA tsunami? With the costs of traditional insurance premiums going up, and catastrophic premiums-plus-HSAs going down, it looks that way. As more employers come aboard, we may start to see tectonic shifts in the health-care sector as providers scramble to accommodate the consumer-driven wave. Adopting HSAs is just one way we can control costs and put patients back in charge.
But it’s not going to be enough. Government is going to have to allow individuals to pool risk, expand choice of insurance providers beyond state lines and offer refundable tax credits to the poor. Until the politicians get it together, it’s time for the private sector to do what it can. HSAs are a great start. Just look out for those lab bills.
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