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We begin to look into health care pricing transparency. What does it mean, and how does it work?

When I go buy gas, the station has a big sign out front, announcing the current price per gallon. And when I need to purchase shaving cream, the can has a little sticker, indicating its price.

But when I need a shot, or a finger stitched up, or when it’s time for my better half to have her mammogram, no such information is available.

Until, that is, I receive the EOB (Explanation of Benefits) a few weeks later. At that time, of course, it’s a bit too late to negotiate the price, or fit it into the budget. Such services, once received, are on my nickel (less any amount the insurer has paid).

If one looks closely at the EOB, one can see (among other things) two interesting items: the amount charged by the provider, and the amount “allowed” by the insurance carrier. The latter is is called the “negotiated rate,” and it indicates the amount that the provider has agreed to discount in order to be a part of a carrier’s network. This saves both the insurance company and the client money, and gives the provider a steady source of patients.

How come, then, one must wait until after the shot, or exam, or PSA screening, to know how much that service will cost? Wouldn’t it be more advantageous for one to know this going in, in order to make a more informed, rational health care purchase? This is even more critical, of course, when one is covered under a HDHP (High Deductible Plan), where those first few thousand dollars are not reimbursed by insurance.

In the biz, we call this “transparency,” and it means having this information readily available, in real time, and in advance of any health care consumption. Obviously, it’s not really practical to know ahead of time how much that emergency appendectomy is going to cost, but for less urgent matters, such information is invaluable.

Of all the criticisms of CDHC (Consumer Driven Care), this is the one which I believe has the most (indeed, only) validity. If we are to be empowered to make health care decisions, we need the tools – the information – to make these choices fully informed of their economic impact. And yet, these are the very tools which are not yet widely available to us.

Fortunately, that is changing:

Carriers like Aetna and Humana have begun to roll out programs which give us this information. Currently, such programs are in their infancy, with only certain information available, and only to folks in a few geographic areas. Other carriers are beginning to follow suit (Blue Cross, for example), but with less fanfare and even fewer opportunities. In the weeks ahead, we’ll look at what programs are available, how they work, and what the future portends.

Next week, for example, we’ll have a chat with the director of Aetna’s transparency program.

Be Well.

Henry Stern, LUTCF is an independent insurance agent in Dayton, OH. A licensed Continuing Education instructor for Ohio and Kentucky, he has well over 20 years of experience in “the biz.”  He blogs every day (or so it seems) at InsureBlog.

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from InsureBlog on Sun, 07/16/2006 - 7:56am

The latest column is up at The Medical Blog Network. This week, we begin our examination of price transparency in health care.

Comments (7)

Submitted by Marc on Tue, 07/18/2006 - 7:06pm.

But when I need a shot, or a finger stitched up, or when it’s time for my better half to have her mammogram, no such information is available.

I'll just comment on the finger stitching scenario.  

So if you went to the emergency room to get your finger stitched, and didn't like the price, would you go to another emergency room?  Or would you just call around, prior to heading to an emergency room, and ask for pricing first?  Or would you have had enough foresight to have had a list of all emergency room pricing in the area, and pick the one with the best price, for that particular problem?

I doubt you would do any of the above. I contend, that if you cut your finger bad enough that it needed stitches, you wouldn't give a damn what the cost was.  You'd just go to the nearest emergency room. 

Sure transparancy in health care costs for such routine procedures as getting a mammogram or a shot, could help reduce the costs of those or other similar routine procedures, but that's not where the major cost of health care lies.

For those types of procedures, no one is going to give a damn about the price, and they are certainly not going to go to a doctor or hospital they are unfamiliar with, just because they have a lower price.


Submitted by hgstern on Wed, 07/19/2006 - 5:58am.

But I think you missed the point.

I agree that most folks aren’t going to "go shopping” for the cheapest thoracic surgeon. OTOH, it would be nice to know, especially if one has an HDHP (High Deductible Plan), how much that surgery is going to cost. Granted, it’s not likely that all of the associated costs will (or even can) be known ahead of time, but let’s not allow the perfect to become the enemy of the good.

As far as the stitches go, I can speak to that authoritatively (if sheepishly): a few months ago, while making a salad, I accomplished a rather robust chiffonade of my index finger (yes, I know, that wasn't technically a part of the recipe). My wife and I decided, based on a quick examination, that a trip to the ER was warranted.

At which point, I’ll stop, and step into “transparency mode:” this was, indeed, an “emergency,” but it was unlikely that I’d die (at least quickly) or become seriously disabled. Rather, it was one of those common situations that required a decision of where. Being a Sunday evening, my two choices were the local Urgent Care, or the local ER. The UC facility is not in my plan’s network, while the hospital is. Score one for choice. Had they both been in-network, an additional decision would have been made.

Back to the story:

After examining my finger, the resident offered two treatment modalities: stitches, or SuperGlue (don’t laugh: the product was originally developed for this exact application). Here’s a perfect example of how transparency would have worked for me: in addition to the other (non-economic) factors, I would have had additional information available to help me choose.

Most folks, however, do not use their digits as cooking ingredients, and so transparency is generally taken to mean that consumers can (and will) use this information as a factor in deciding how to budget for healthcare.

It is this idea, that we can (and should) be more aware of what health care really costs, that is at the heart of transparency.

Is everyone going to want to know the price of that shot, or mammogram, or prescription? Well, no. But then again, no one is forcing folks to use the information. But denying it to those who will is just plain wrong.

Submitted by Marc on Wed, 07/19/2006 - 6:19am.

Transparancy for routine care, may encourage many to shop around for such care, but even if everyone did have access to that information, and used it, it still would do little to produce any significant health care cost savings. 

The real costs of health care are for those procedures we don't have the luxury of shopping around for.

And as far as your finger goes, if I understood you correctly, you really didn't have a choice of where to go, so knowing the price wouldn't have made a difference.

And as far as stitching or super glue, should price really have been the deciding factor?  How about effectiveness of the super glue vs stitching?  Would one be more painful than the other? 

My criteria under those circumstances, if both procedures were equally effective, would be which one resulted in less pain.  I might also consider which one had the greatest potential for leaving a disfiguring scar. 

Price would have been at least third down the list.


Submitted by hgstern on Wed, 07/19/2006 - 7:20am.

Although I think we're talking at cross-purposes.

You say that shopping for routine care  "would do little to produce any significant health care cost savings," and that the "real costs of health care are for those procedures we don't have the luxury of shopping around for."

This is simply not true. Most of the cost of health care is, in fact, for such items. The small, routine claims are those which are most expensive to adjudicate. And, of course, rx costs (which are generally not purchases made in an emergency) are a substantial piece of the pie, as well.

As to the UC/ER dilemna, I did, indeed, have a choice: in-network (lower OOP) or out (higher OOP). So my decision in that case was cost-driven.

I went back and re-read my initial response, and can find no instance where I said that cost was the only, or even most important, factor as regards the stitches/glue decision. Of course the others that you mentioned would have been at the top of the list. But that does not mean that cost wouldn't have been one factor. Indeed, all things being equal (though they seldom are), I probably would have chosen the glue for the simple reason that it did not require a shot (for anaesthesia). I hate shots.

Again, I don't think that cost is, or should be, the sole criteria when shopping for health care. But it seems to me that it is a valid consideration, one which is currently difficult to pre-determine.

Submitted by Marc on Wed, 07/19/2006 - 9:08am.

I don't think that cost is, or should be, the sole criteria when shopping for health care.

I just think the cost of health care carries a lot less importance in selecting what doctor/hospital, or what treatments may be selected, then many people are placing on it.  And transparancy will do little to stem the increase in the cost of health care.

That's my point!


Submitted by hgstern on Thu, 07/20/2006 - 10:20am.



I'm not ignoring you; working on a major post for IB (my blog), which is eating up my time. I do appreciate your comments, and have some thoughts on them.

I'll try to get to this this evening.

Thanks for your patience!

Submitted by hgstern on Fri, 07/21/2006 - 12:59pm.


I am truly sorry to have taken so long to respond. Thanks for your patience.

You said that "transparancy will do little to stem the increase in the cost of health care."

Never claimed it would.

Advertised prices for oil changes and brake jobs hasn't helped reign in the increasing cost of automobile insurance, either.

In both cases, one has nothing to do with the other. That is, it is not the purpose of transparency to affect the cost of health care, except in (probably rare) instances where market forces come into play.

The purpose of transparency is to enable consumers to more effectively budget their health care (and, of course, discretionary) dollars.

Have a great weekend!

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