Right to Shop: Empowering Health Care Consumers

Expand health care competition through pricing transparency

The Issue

Under the current system, healthcare competition is stifled because consumers are not generally given the pricing information necessary to shop for high value care. A poll of registered voters showed that 88 percent of respondents said that they generally shop for the best value in other areas. However, over half of all respondents reported that they have trouble getting any estimated costs prior to care, and even when the bill does arrive it is difficult to decipher.

Prices vary widely in health care due to a variety of factors. The same X-ray on the same kind of machine can vary in price from a few hundred to thousands of dollars if the X-rays are performed in different locations. Surgery by the same doctor but in different facilities can vary greatly.

Enabling people to shop for care, also known as “right to shop,” is simple: A provider recommends a medical service, such as an MRI. The patient then calls a toll-free line or goes to a website operated to research options and prices, and then chooses the best location at the best value. After receiving the MRI at a location of his or her choice, the patient then receives a cash benefit based upon the shared savings for choosing the best-value care.

The success of such programs lies in (a) the ability of consumers to access quick, accurate, and transparent cost comparisons and (b) even more important, that consumers have “skin in the game”—an incentive to economize. While it would be preferable for them to be in complete control of their spending, as long as we have a third-party based insurance payment structure, cash benefits will achieve a similar saving effect. Programs like these are available for many at large companies and some state employees around the country.

Private companies that have implemented these programs have seen positive changes. One employer with 47,000 workers reported a savings of $1.7 million over a nine-month period, after paying employees about $218,000 in rewards incentives. And program participants find that shopping pays off. One employee found an $18,000 price difference for a weight-loss surgery performed by the same physician, depending on the facility in which it was performed.

The state of New Hampshire has operated an incentive based program for roughly three years. So far, almost 90 percent of enrollees have shopped at least once, with 2 out of 3 shopping every year and receiving an incentive payment. Average savings have been around $670 each time a service or procedure is shopped. The state has saved over $12 million and paid over $1 million in incentives so far. Fairly new programs have also been implemented in Kansas, Kentucky, and Massachusetts.

The ability to compare prices and shop for high-value health care is not widely practiced in Texas. While these types of incentive plans can, and should, grow more organically in the free market, government-subsidized programs are often slower to adopt innovative methods for improving patient outcomes and cutting costs.

Within state government, right-to-shop would bring savings to services funded by taxpayers. The Employees Retirement System (ERS) is a strong candidate to first implement right-to-shop. The State of Texas pays 100 percent of health benefits for state employees and eligible retirees and 50 percent of health benefits for spouses and dependent family members. In the 2016-2017 state budget, approximately $3.7 billion all funds was appropriated for the state share of these health care costs, an increase of over $600 million from the previous biennium.

The ERS program is an optimal fit for a right-to-shop model because of the financial commitments the state has made, and also because the agency has access to the service and cost information required in order to operate a website that allows option and price comparisons.

Recommendations

  • Develop systems to provide people with actual cost-of-care information, not merely list price data.
  • Create financial incentives so health care consumers can economize and the system as a whole will operate more effectively.
  • ERS is a good place to start an “Enable Shop-for-Care” program.

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