A free-market system with competition should lead to reduced prices and savings-theoretically. In the case of healthcare, being able to shop around for the best priced service or product not only isn’t easy, but isn't always feasible.
A free-market system with competition should lead to reduced prices and savings—theoretically. In the case of healthcare, being able to shop around for the best priced service or product not only isn’t easy, but isn’t always feasible.
Here are 5 aspects regarding the ability to shop around for the best priced products and services in healthcare.
1. Price shopping for medications can yield savings
A paper in the July issue of The American Journal of Managed Care® (AJMC®) reported that price shopping can yield prescription drug savings for people who are uninsured or who are in a high-deductible health plan (HDHP). The authors found that a lack of price transparency might mean that patients are overpaying for their medications.
They found geographic differences, too, with medications being less expensive in lower-income areas. Furthermore, prices were lowest at independent pharmacies and when purchased using online coupons compared with grocery, big-box, or chain drug stores.
2. Having access to prices doesn’t necessarily lead to reduced spending
Just because something is available to people, doesn’t mean they will use it, however. That’s what the California Public Employees’ Retirement System (CalPERS) found when it offered a price transparency tool that highlighted the prices of certain shoppable services, such as lab tests, office visits, and advanced imaging services.
Despite this tool being available, only 12% of employees used it and the people who did use it to search for prices of lab tests or office visits did not receive lower priced care. Only the few individuals receiving imaging services saw savings.
3. Financial incentives need to encourage shopping around
Situations where consumers have become more price conscious and more likely to shop around for better prices include the use of HDHPs and the implementation of reference pricing.
In cases of HDHPs, consumers are more price conscious because they have more “skin in the game.” Researchers believe that HDHPs could reduce annual health spending by $57 billion if half of the country were enrolled in them. However, there are concerns that HDHPs could lead to people skipping out on needed services that ultimately lead to issues that increase costs down the road.
Employers who have implemented reference pricing for certain healthcare services have been able to see savings. As AJMC.com contributor Jon B. Christianson, PhD, explains, reference pricing is a strategy where employers set a reimbursement level for a service and consumers who choose a provider with a price that exceeds the limit will pay the difference. Research into reference pricing has found that consumers tend to choose providers with prices under the limit.
4. Barriers prevent shopping from becoming a reality
Interviews with patients, in a study published in the June 2017 issue of AJMC®, found that patients were enthusiastic about shopping for better prices in their healthcare, but there were barriers preventing them from actually doing so. One of the issues that prevent price shopping is the structure of health benefits. There were instances where shopping around ultimately proved useless as out-of-pocket costs would be the same and other cases where the limited choice of providers in a network did not offer a real choice.
5. Few people actually seek price information to begin with
More importantly, people simply are not used to shopping around for the best price when it comes to their healthcare. Studies have found that patients need reminders and education about using price transparency tools when shopping for healthcare. A study in Health Affairs found that just 13% of patients who had an out-of-pocket cost had sought cost information before and even fewer (3%) compared costs between providers before getting care.
The low rate of price shopping does not stem from interest. The reality is that patients have difficulty obtaining the information and often “provider loyalty and trust in their providers’ referrals typically trumped willingness to switch providers and out-of-pocket price data,” the June AJMC® study found.