Employee incentives drive lower-cost health care
— -- Sarah Gardner wants her company's employees to be savvy medical shoppers.
So this year, she rolled out a plan that sets limits on how much the company will pay toward a range of tests and procedures, from MRIs to hysterectomies. Workers at Buffalo-based Prodigy Health now know to call their employee insurance plan to find a list of local doctors and facilities that meet the price. Or they can choose to go to a higher-price center elsewhere in the insurer's network and pay the difference themselves.
Before the new program, workers' incentive to shop around was limited because they had no idea — or any easy way to find out — that prices for many types of medical treatments varied widely. A test at one center might be $3,700, while "right down the street they could get it for $900," says Gardner, the vice president of benefits at Prodigy, which provides benefit management for self-insured employers.
Other employers and insurers are pursuing the same strategy, experimenting with ways to slow rapidly rising spending on medical care. Some, like Prodigy, are going beyond simply offering high-deductible insurance to being more directive, using financial incentives to promote doctors, hospitals or medications they've deemed more cost efficient.
Safeway employees in the San Francisco Bay Area, for example, face higher payments if they choose centers that cost more than $1,500 for a routine colonoscopy. And in January, the giant California Public Employees' Retirement System (Calpers) said it would not pay more than $30,000 toward knee or hip replacement. Workers who choose a hospital that costs more pay the difference. Next year, the program will be expanded to outpatient colon cancer tests, as well as some surgeries, including cataract repair for the 345,000 people enrolled in Calpers' preferred provider plans.
Employers say they hope the efforts, often called "reference pricing," will get patients to act more like consumers — and drive down the cost of some procedures.
"This sends a signal to (medical) providers about what is considered a reasonable and acceptable price," says David Lansky, who is closely watching the California efforts by Safeway and Calpers from his post as CEO of the Pacific Business Group on Health, a San Francisco-based coalition of employers.
Still, patient advocates fear the trend may leave workers not only footing more of the cost of health care, but also choosing among providers mainly with information on price, not quality.
Kathleen Stoll at the advocacy group Families USA worries that some employers may be "simply picking an arbitrary number" for the price they're willing to pay and not considering "accessibility (of the centers) or quality."
Medicare, some private insurers and a few states track a few quality measures, such as mortality rates at hospitals, but there is generally little information on the outcomes of specific procedures, especially at facilities that are not part of a hospital, says Elliott Fisher, a Dartmouth Medical School professor well known for his research into quality and cost variation in medical care.
"Cost doesn't tell you anything about quality," Fisher says. "Americans confuse higher cost with quality, which in health care is not necessarily so."
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