Let patients be purchasers: one doctor’s order for lower healthcare costs

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A few months ago, my 5-year-old nephew broke his arm while running through his house. It turned out he was fine and my sister’s concern over her son’s welfare eventually gave way to financial frustration. The total cost for X-rays and a tiny cast: more than $800, which, of course, fell shy of the family’s insurance plan deductible.

“Is it just me?” my sister asked in a family email, “or does this seem seriously out of whack?”

If Brad Weinberg, cofounder of both the social wellness platform Shapeup and the seed accelerator Blueprint Health, has his way, more and more people will be asking just that question over the coming decade.

The exit of large employers from the insurance market coupled with the widespread adoption of high-deductible plans by individuals will, he believes, put unprecedented pricing pressures on providers, forcing them to operate more efficiently and offer better value.

All of which, Weinberg says, constitutes an enormously positive development, and one that is a necessary foundation for what people refer to as the ultimate “consumerization” of healthcare. “If you actually want consumer change to be possible,” Weinberg says, “you need to get consumers involved in purchasing medical services.”

Here’s how he sees that shift playing out:

  1. Employers, who currently compose two-thirds of the health insurance market, can no longer afford to keep paying rising premiums for health insurance.
  2. Employers will shift toward a model in which they pay employees under defined contribution plans. Rather than acting as defined benefit providers, employers will pay their workers a certain amount of money each month and send them to private or public exchanges, like Bloom Health or Liazon, where individuals can shop for the benefits that best fits their needs.
  3. Individuals, confronted with choice, will tend to opt for high-deductible plans, choosing to take more responsibility for maintaining good health and betting on the chance they won’t need professional help.
  4. These individuals on high-deductible plans will look carefully at the cost, convenience, and peer reviews of medical services before agreeing to them.

If Weinberg is right, and insurance companies shift toward focusing on catastrophic coverage, individual consumers can look forward to a truly participatory role in medicine – evaluating the cost of medical visits and procedures in exactly the same way they evaluate the price of other consumer goods – school supplies or groceries, for example.

And startups, like those in the newest class of the Blueprint accelerator program, would do well to follow these trends and build companies that help providers, insurers and consumers adapt to this changing landscape.

Photo by swanksalot

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Showing 7 comments
  • Mike Hoskins

    Thanks for this post, Julia. Of course, a natural question that comes to my mind, though: What happens to those individuals who aren’t the “norm,” and have chronic conditions or medical issues that necessitate more regular doc visits or expenses?

    • Brad Weinberg, MD

      There will be an interesting dance in insurance pricing. You will probably see an increase in the monthly premium for lower deductible plans and a decrease in the premium for higher deductible plans. Each individual will have to guess which scenario they will save money in and people that consistently have medical expenses will probably choose to pay a higher premium and have a lower deductible. Interestingly this will further increase the number of people that choose high deductible plans.

  • Kirk McIver

    Unfortunately, Dr. Weinberg, we are nowhere near having the transparency in provider pricing and quality to make the shift toward consumerism as stated in #4. Consumers will make the switch to HDHPs based on price, but find they haven’t a clue on what anything costs once they make the switch…and they typically can’t find out even when they ask. There seems to be resistance among providers and insurers alike to get this data into the consumers hands so they can make informed decisions. This is yet another opportunity for startups. While a few are taking on the challenge, we have a long way to go.

  • @cascadia

    Health care is not really a consumer good -it fails the initial test of any free market – equal access to information and capital and is one of the few purchase decisions driven by someone else – the providers. The bulk of our healthcare purchasing decisions are made by providers and the highest “cost centers” are n end of life care (would you be asking how much intensive care is for example?) or for those with multiple chronic conditions. No studies have ever shown that giving patients cost data results in better outcomes – in fact most high deductible plans simple shift costs and people put off needed preventive care.

    The average health care consumer also has an 8th grade reading level and even providers are not known for being able to make rational decisions about health care spending so it is hard to fathom that a parent might request an ultrasound vs an MRI to diagnose their child’s abdominal pain or a woman might switch to having a mammogram or pap smear every 3 years when her doctor is recommending more frequent screening.

    Their are very very few situations where you would want to be shopping for care at a point of crisis. Excuse me but could you transfer my husband down the street? I heard they can treat a heart attack for $900 less. In fact what we see (Boston is a case in point) is that most people use cost as a surrogate for quality and select the highest cost providers in a market. They want the lexus not the yugo when it comes to health care and patient experience is a bigger driver than cost is in health care.

  • Kirk McIver

    @cascadia Indeed we don’t want to shop for the cheapest and highest quality ER in the middle of a cardiac episode. There are ample opportunities, however, for us to shop around to find the best value (with value measured in terms of cost and quality)…provided we had the resources to do so. Our doctor may recommend an MRI at a particular location. If the tools were available to us, we as consumers could quickly understand that an MRI is a commodity service with a wide disparity in price ($500 to $1,500 or more). I agree with you that a patient might hesitate to get the MRI at a cost of $1,500. Perhaps that decision might change if he knew where to get it for 67% less.

  • Davis Liu, MD

    Agree that increasingly patients will have more financial skin in the game as it relates to health care. The question is will health care costs be lower and patients benefit? That remains to be seen.

    The creation of consumer-driven health plans (CDHPs), health insurance policies with high deductibles linked to a savings option and with more financial responsibility shouldered by patients and employees and less by employers, was completely inevitable. The American public likes to have everything, whether consumer electronics or other services, as cheap as possible. With escalating health care expenses rising far more rapidly than wages or inflation, it’s not surprising employers needed a way to manage this increasingly costly business expense.

    In the past, companies faced a similar dilemma. It wasn’t about medical costs, but managing increasingly expensive retirement and pension plan obligations. Years ago, companies moved from these defined benefit plans to defined contribution plans like 401(k)s. After all, much like health care, the reasoning by many was that employees were best able to manage retirement planning because they would have far more financial incentive, responsibility, and self-motivation to make the right choices to ensure a successful outcome.

    How did that assumption turn out anyway?


  • mk

    can we change the language used to describe humans in need of health care? why call humans consumers?

    to get humans involved in their health care, you only need to provide universal health care for all. eliminate the insurance companies and their executives that are sucking all the money out of the system.

    provide universal health care and there is no need for companies to provide health care coverage.

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