Price Comparisons---2AC

Helaine Olen 17, former columnist for Slate and co-author of The Index Card, 1-9-2017, "Health Comparison Tools Were Supposed to Shrink Medical Bills. They’ve Failed.," Slate Magazine, http://www.slate.com/articles/business/the_bills/2017/01/why_those_price_comparison_tools_to_reduce_medical_costs_don_t_work.html

It’s a new year, and you know what that means: Your health insurance deductible just reset. Which for many of us means looking forward to paying a significant amount out of pocket for health care until we’ve spent enough for our insurance payments to kick in. According to the Henry J. Kaiser Family Foundation, in 2016, the average deductible for an American with employer-based insurance was $1,221. People covered through the Affordable Care Act exchange will likely pay more than that. Close to 90 percent of those enrolled will select a plan with an individual deductible of at least $1,300, or $2,600 for a family. Can’t afford it? Feel squeezed? No worries. Your employer or insurer probably offers an online price-comparison information tool for you to find the best deal on everything from blood work to birth control. “Be a smart health care consumer,” reads the landing page for my insurance company’s price-comparison site. “Use our tools and information to help you save money.” But will it? Less than five years ago, online price-transparency tools, with which patients can compare the costs of nonemergency procedures in advance of booking them, were heralded as miracle cures that would finally get health care costs under control. No longer would the cost of medical procedures be a mystery. It made sense. Online, we can compare prices for books and hotel rooms and TV sets. Why not doctors? “Life inside the fortress will increasingly be disrupted,” noted health care economist Uwe Reinhardt said of the concept in a 2013 Journal of the American Medical Association article. The rush was on. A 2015 survey by human resources consultancy Mercer found that more than three-quarters of U.S. employers said they offer employees access to such tools. Numerous states jumped into the fray, passing legislation that mandated some form of transparent pricing.* Yet this past spring, JAMA re-emerged with a less rosy diagnosis. In a study of how employees at two corporations actually made use of the health care cost-measurement tools made available to them, researchers at Harvard Medical School discovered that not only did few use them, their spending actually increased after the tools designed to encourage comparison-shopping were introduced. “There was no evidence that health spending declined in the settings where transparency tools were offered,” a JAMA editorial noted. What went wrong? Comparison tools work by allowing people seeking nonemergency health care like hip and knee replacements, MRIs, physicals, and lab work—and even more mundane services like earwax removal—to compare the cost of the care at different practitioners and determine what their co-payment will likely total based on their insurance and whether they’ve met their deductible. That should be easy enough. But do you really pick your doctors the way you bargain shop for electronics on the web? Of course not. A 2008 survey by the (now-defunct) Center for Studying Health System Change found that about half of us turned to friends and relatives for recommendations when seeking a new primary care doctor. And when it comes to specialists, almost everyone relied on the advice of other medical professionals, with less than 10 percent turning to online information to make a choice. Things haven’t changed much since then. A 2014 poll from the Associated Press and the NORC Center for Public Affairs Research found barely 1 in 4 identifying excellent ratings on sites like Yelp or Healthgrades.com as a decisive factor in deciding on a particular doctor. Moreover, one man’s frivolity is another woman’s necessity. With health care, many of us are willing to pay extra for everything from convenience to communication skills. When the AP–NORC poll asked people what traits made for a high-quality doctor, “affordable” and “accepts my insurance” were the two least important qualities, outranked by more than a dozen other traits including attentiveness, office environment, and bedside manner. Yet another survey, this one by Healthgrades, found many patients prioritizing location over co-pay and quality ratings when they needed a hospital. And when consumers do make cost-conscious decisions, their ability to make good ones is limited. A recent study released by the National Bureau of Economic Research makes the point. The researchers looked at a company that moved all its employees into a high-deductible health insurance plan. Yes, the workers spent about 15 percent less on health care. Unfortunately, they appeared to cut their medical consumption willy-nilly, making little distinction between needed treatments and ones they could forgo. They didn’t actually spend less on the services they sought out. “We show that consumers did not price-shop after the switch—that is, they did not move toward cheaper providers, for example, when they were going to undergo a specific procedure,” wrote Benjamin Handel, one of the authors of the study. As for the JAMA paper on health care comparison tools, the researchers speculated that if consumers did attempt to price services, it’s quite possible they ended up paying more money. That’s actually not that surprising. Behavioral finance studies repeatedly find we use cost as a measure of quality. The more expensive an item, the better we think it is. Yet even if consumers did use comparison tools as they were supposed to, it’s questionable how much they could actually impact prices. The medical system in the United States is a complex beast. The recipients of the services, even if they are the best shoppers around, have little actual control on the overall costs. For example, the Health Care Cost Institute determined the average knee replacements cost more almost $17,000 more in Palm Bay, Florida, than in Miami, which is 180 miles away. But few consumers, even if they do the research, are likely to sign up for a surgery that far from their home. How will they get there? Who will pay transport and house their families? What happens if there’s a complication after they return home? That’s not even the big picture, because these tools aren’t actually taking on the American medical health care system itself. They’re simply offering customers some room to maneuver within their insurer’s fortress, to borrow Reinhardt’s phrase. When many of us use an insurer’s price-comparison tool, we’re receiving the prices the medical providers have agreed to charge people using that company. “A hospital can charge one person $500 for a cholesterol test and $10 for another,” says Steven Weissman, a former health care executive turned industry critic. “The problem with health care transparency tools is they do nothing to make health care providers compete the way other businesses compete.” And how much does it really matter? It’s not, after all, the nonemergency MRIs and lab bills that are breaking the bank. Less than half of all medical services can even be priced in advance, according to the Health Care Cost Institute. Hip and knee replacements, which are an example frequently cited by price-transparency promoters, are a mere fraction of our annual tab. And getting an advance estimate for everything from emergency-room visits to strep tests at the doctor’s office is all but impossible—if an ill patient is even capable of that. In many situations, the power remains with the providers. Pharmaceutical giants set the prices of their drugs. As long as the law permits a hospital that chooses to be in network with a particular insurer to service patients with out-of-network providers, consumers will remain at risk of receiving a surprise medical bill if they need to visit an emergency room. Advertisement Yet cheerleaders remain undeterred. Dr. Adam Bernstein, the chief medical officer of Rally Health, speculated that the problem the 2016 JAMA study revealed is that consumers need a “financial reward” in return for using the online price-comparison site, such as making the insured pay a greater share of the bill if they choose a provider charging more than a pre-determined amount for a particular medical service. Others say that as tools are able to include more information about pricing from providers, more people will use them. “Transparency hasn’t even started,” Dr. Giovanni Collela, a founder of Castlight Health, a publicly traded company that markets yet another online price guide, told the New York Times last year. Supporters say they hope that over time patients can be coached into using the tools more often. Maybe. Maybe not. I’m all for transparent pricing of medical services, but I suspect that even at their most successful, price tools will only make a marginal difference in what we pay the doctor. Once again, we’re seeking an individual solution to an economic and political problem that our politicians not only don’t have the will to solve themselves, but which they might actively make worse by repealing the Affordable Care Act.

They make it worse because of the placebo effect

Peter Ubel 13, physician and behavioral scientist at Duke University, 4-9-2013, "How Price Transparency Could End Up Increasing Health-Care Costs," Atlantic, https://www.theatlantic.com/health/archive/2013/04/how-price-transparency-could-end-up-increasing-health-care-costs/274534/

As a response to the hidden variability in health care prices, an increasing number of states have passed price transparency legislation. Federal legislators have even introduced several bills into Congress to make health care prices more transparent. Expect more such bills to follow. But will health care price transparency help reduce costs? Seems it would. But health-care can be a strange and unique sect of economics. Could price transparency backfire and cause spending to increase? In the traditional consumer marketplace, price transparency is a powerful force in incentivizing producers to raise the quality and lower the price of their goods. When a consumer decides to purchase a flatscreen television, for example, she will be hesitant to buy an expensive model when a less expensive alternative exists that is just as good. As a consequence of such consumer scrutiny, the average price for a 32 inch LCD TV dropped from $1,566 in 2005 to under $400 today, at the same time as the quality of those products increased dramatically. Expensive pain pills reduce pain better than the same pills listed at a lower price. The same kind of consumer pressure rarely exerts a similar influence on the cost and quality of health-care goods. For starters, most patients have little inclination, or motivation, to shop for health-care bargains. Insurance companies pick up most of the tab for patients' health-care. A patient who pays a $150 co-pay for an MRI (like I do with my insurance) won't care whether the clinic she goes to charges the insurance company $400 or $800 for that MRI. The MRI is still going to cost the patient $150. Even patients responsible for 20 percent of the tab (a phenomenon called co-insurance) face a maximum bill of only $160 in this circumstance. That is not an inconsequential amount of money, but it is still not enough money to prompt most patients to shop around for less expensive alternatives, especially when most consumers don't realize that the price of such for services often varies significantly, with little discernible difference in quality. To make matters worse, patients often don't shop for health care in the kind of rationally defensible way that economic theory expects them to. According to neoclassical economics, when making purchasing decisions consumers independently weigh the costs of services from the quality of those same services. If toaster A is more expensive than toaster B, the consumer won't buy A unless it is better than B in some way -- unless it is more durable or has better features -- and unless these improved features are worth the extra money. Sometimes, however, cost and quality are not perceived by consumers as being independent attributes. Instead, people assume the cost of a good or service tells them something about its quality. For instance, blind taste tests have shown that consumers rate the flavor of a $100 bottle of wine as being superior to that of a $10 bottle of wine, even when researchers have given people the exact same wines to drink. Other studies show that expensive pain pills reduce pain better than the same pills listed at a lower price. Price, then, leads to a placebo effect. Such a placebo effect is no major concern in the context of wine tasting and pain pills (even if it suggests that consumers could save themselves some money if they didn't hold this strange belief that higher cost means higher quality). But suppose your doctor asks you to get a spinal MRI to evaluate the cause of your back pain, and you decide to shop around for prices before getting the test. Would greater price transparency cause you to choose an MRI provider more rationally? Or would you instead mistakenly assume that higher price means higher quality? There is reason to worry that price transparency won't lead consumers to make savvy decisions. It is too difficult for people to know which health-care provider offers the highest quality care. If patients are not going to make savvy use of price information to choose higher quality, lower cost health-care, some health-care providers, like doctors and hospitals, will probably respond to price transparency by raising their prices. Imagine you direct an MRI center in Massachusetts, and the state government requires you and your competitors to post prices for your services. You consequently find out that the MRI center around the corner from you charges $300 more than you do for their spinal MRIs, and that this increased price hasn't hurt their business. Imagine, also, that you are convinced that your competitors don't offer higher quality MRI scans than you do -- your MRI machines are just as new and shiny as theirs; your radiologists and technicians are just as well trained. In that case, if patients are not going to be price-sensitive, you are going to raise your prices to match your competitor's. Otherwise you are just leaving money on the table. Consider what happened in Denmark, according to an article published in the New England Journal of Medicine in 2011: In response to concerns that the highly concentrated suppliers of Ready-Mix Concrete were charging widely varying prices to different buyers, Danish antitrust authorities began publishing information on actual invoice prices on a quarterly basis, beginning in October 1993. The result was an increase in average prices of 15-20 percent within a year, as the lower prices in the market rose and the higher prices edged up. Or consider what happened in New Hampshire after the state began releasing price information on things like MRIs, as part of its health care price transparency efforts. In the twelve months following that bill, prices hadn't budged at all. This probably happened because there was not enough local competition for the price information to change patient behavior. Price transparency may also cause prices to rise by reducing health-care providers' willingness to bargain with insurance companies. Currently, the price any given hospital charges for, say, a hip replacement will vary depending on which insurance company is paying for the service. A given hospital might have negotiated a higher fee from Aetna than from Blue Cross. Now suppose that legislation required hospitals to make all these negotiated rates public. Do you think Aetna is going to stand by and pay more money for a hip replacement than Blue Cross? Of course not. It's going to demand the same deal. If price transparency made such negotiations public, then no hospital in its right mind would offer a discount to one insurance company unless it was willing to offer that discount to everyone. Price transparency could be a huge impediment to price negotiations. I witnessed this phenomenon second-hand in the early 90s, when my wife was the director of managed care at Temple University (her job was to negotiate with managed care companies on Temple's behalf). During that time, two managed care companies in Philadelphia merged, and quickly discovered that they had negotiated different rates from Temple for different services. The merged company came back to Temple and demanded that the new price of care match whichever of the two companies had previously negotiated the lower rate for any given service.