Healthcare consumers have no real power to impact the cost of services.
Who is the biggest purchaser of healthcare services in California?
Often times we consider ourselves the consumer of health care services when we go to see the doctor for an ache, have lab work done or go to a hospital for a procedure. While we maybe the recipient of health care, we aren’t necessarily the consumer in the traditional sense of receiving the service and paying the bill. In reality, health insurance companies are the largest purchasers of health care services.
In 2009 California recorded $230 billion spent on health care services. Medicare represented 22% of the spending, Medicaid 16.9% and private insurance, other government programs and individual out-of-pocket pay totaled 61% of the total dollars spent on health care. Private insurance and government programs, combined, are the largest purchasers of health care services in California.
Low price guarantee!
If you have health insurance, before you even step in the doctor’s office or the surgical room, health insurance companies have already negotiated the cost of the treatment. You may have a copay and you may have a deductible, but the price of the services were determined long before you became ill or had an emergency. It is in the best interest of the insurance company to negotiate the lowest price possible for all goods and services whether you pay the bill, you are sharing the cost or it is all covered by the insurance plan.
Health insurance companies have contracts with the physician groups, hospitals, laboratories, and pharmacies that are in their network of providers. Even when you are in the deductible portion of your plan you are getting the benefit of the contracted rates. Unfortunately, the health care providers see the patient as the recipient of care and the insurance plans as the purchasers or paying consumer.
Competition drives down prices, unless you are really sick
There has been much discussion and support for consumer directed high deductible plans to force health care recipients to shop more for their care. The theory is that shopping will drive prices down and folks will be more prudent with their spending. However, in 2009, approximately $75 billion was spent on hospital care where there is little room for consumer driven decision making. Most people don’t shop for care in an emergency, major surgery or debilitating illness.
Prices for the vast majority of basic health care services are set either by Medicare or contracts with private health insurance companies. The recipients of the care can do little to effect the pricing. 81% of California’s population receives their health care services through the conduit of government, employer group or individual/family health insurance plans. Even when the plan members have an extremely high deductible, they are still encouraged to see in-network providers or risk paying more out-of-pocket to see non-contracted out-of-network providers.
POP! the myth
It is a myth that patients or consumers will be able to have a measurable impact on health care costs when the majority of Californians receive health care arranged through a health insurance company. Health care services don’t exists in a free market where consumers can easily shop around. Don’t buy the myth that with a consumer directed high deductible plan you’ll be able to save any more money. The health insurance companies have already negotiated on your behalf.
Addendum: New York Times report on Health insurance companies working with hospitals to drive down costs
“After years of self-acknowledged profligacy, hospitals, doctors and health insurers say there is a strong effort under way to bring medical costs under control. Their goal is to slash the rate of growth in the nation’s $2.7 trillion health care bill by roughly half to keep it more in line with overall inflation. Private insurers, employers and government officials are providing urgency to these efforts, and the federal health care law passed two years ago helped accelerate them.” New York Times, May 24,2012