What Do We Mean When We Say that We Want Employees to Be Active Consumers of Healthcare?
Consumerism is now the dominant employer strategy to move healthcare cost management to the next level. Despite the fact that it seems like common sense that people would be naturally engaged when making decisions about their health and one of the biggest parts of their personal budget, the reality is that only about 5-10% of any workforce are active and informed consumers of healthcare. Most employees still think that prices and cost aren’t important because “my insurance will pay”. They also believe that doctors and hospitals all deliver the same quality. The facts are in on both of these beliefs: neither could be further from the truth.
It’s a surprising fact that in a price conscious, shopping culture like ours, almost none of us have any idea what things cost in healthcare. Take the following as an example:
The difference in cost for a sore throat treated at your doctor’s office vs. an emergency room is:
a. $20
b. $50
c. $100
d. $700
If you said $700, you’re right. If you answered a, b, or c, you’re one of the 99+% of people who have little idea what anything costs in healthcare. An office visit at your primary care doctor is $100 vs. the $800 cost at an emergency room.
How did we get to this state of unawareness? Two factors got us here: the first is an unintended consequence of how employers have designed their health benefits. In an effort to be generous and encourage people to see doctors, employees generally have to pay a ‘co-pay’ of $20-40 to see a physician. Not surprisingly, that’s how much employees think the service costs. The other way this price vacuum has occurred is due to the doctors: they have resisted letting anyone know how much they charge because, in the words of one physician with whom I spoke, they don’t feel it’s anyone’s business. In fact, a sizeable percent of the contracts health insurers have with doctors and hospitals have so-called ‘gag clauses’, which prohibit the insurer from releasing the prices they are paying.
Why does it matter? It matters because it’s not possible to have an efficient system without people being price and quality conscious. This is why benefit designs that have deductibles and co-insurance (where you pay a percent of the cost rather than a flat fee) are so important. People are more efficient stewards of their own finances than they are of someone else’s: when people spend their own money, they are much more likely to find their way to the $100 service vs. the $800 one. In fact employers are moving in this direction as is clear from the rapid adoption of high deductible health plans. In addition, there is real progress being made in making prices transparent. Both Aetna and United Healthcare have easily accessible sites on their websites that gives this information. And independent companies, well-funded by venture capital, are developing the same consumer-friendly interfaces used by the Amazon and Google’s of the world. But remember that listing prices without information about quality is not enough – people are not looking for cheaper when they make healthcare choices, they are looking for the best value, i.e., the best quality at the lowest price.
What should employers do? Employers need to create benefit designs that drive sensitivity to price, communicate that the tools to support smart decisions are available and make sure these tools are as accessible as possible, e.g., on the mobile devices that people are using to get data on everything else. Information on quality should alwaysaccompany data on price.
While I’m a big fan of consumerism we need to remember that it is one piece of the puzzle of how to control health costs. Critics of this consumerist approach point to the complexity and emotional nature of healthcare decisions as a reason to not expect too much from employees. After all, we can’t expect people to know as much as doctors or to understand the technicalities of the health field. So what do we mean when we say that we want employees to be informed consumers? What we don’t mean is that people are expected to make decisions on complicated science themselves or that they should be looking at price data during the middle of an emergency; what we do mean is that we want them to be as engaged about healthcare decisions as they are about other key decisions in their lives. You don’t have to be a doctor to use information to choose the best doctor; you don’t have to be a health expert to know that paying more than you need to for something of equal quality is not in your best interest.