Can we shop for health care? A Minnesota Reformer colloquy

Photo illustration of nurses in a hospital
Photo illustration by FS Productions.

Editor’s note: This is a response to a guest commentary by state Rep. Jennifer Schultz, DFL-Duluth, about whether patients shopping for their health care will help control costs. Her response to this guest commentary can be read below. 

The fundamental problem with our health care system is that it does not empower patients. 

Instead, our health care system puts control of pricing in the hands of government and lobbyists to benefit insurance companies, hospitals and the pharmaceutical industry. This discourages competition and promotes crony capitalism. I believe we must empower patients by providing full price transparency and the right to shop for care. 

In a recent op-ed published by the Minnesota Reformer, Rep. Jennifer Schultz flatly denounced price transparency in health care as a broken idea which would not lower costs. Unfortunately, Rep. Schultz seems to be actively ignoring the growing consensus that price transparency works and will bring down costs. 

When hospitals and vendors disclose their prices, people are able to compare prices and shop for their own care. This will promote competition and bring down rates. I serve with Rep. Schultz on the Minnesota House Health and Human Services Finance Committee, and we were co-authors on a pharmacy benefit manager reform bill which will shine a bright light on pricing, kickbacks and rebates within the pharmaceutical industry. 

Rep. Schultz’s article has several facts and figures which outline that the United States spends more per capita on health care than other nations. Rep. Schultz and her data points are certainly correct in this regard. However, as Rep. Schultz begins her assault on price transparency, the citations and studies mysteriously disappear. As such, I feel that it is necessary to set the record straight on price transparency in health care. 

Contrary to Rep. Schultz’s strongly held feelings, there are many documented examples where price transparency has lowered health care costs. For example, New Hampshire launched a price transparency website which allows individuals to compare costs of care. Those who used the website prior to medical imaging visits saved 36 percent off the original cost. 

In California, the state adopted a reference pricing model for state employees. The result: a 9-14% point increase in the use of low-price facilities and a 17-21% reduction in prices. 

Additionally, 82% of people who have compared health care prices say they will do so again. People know that shopping for care will help with costs. Also, 69% of people want insurance companies to disclose what they pay physicians and hospitals for procedures. There is clear demand and popular support for price transparency. 

The purpose of price transparency is to remove barriers and promote competition in the health care industry. This is just the first step in using free market principles to improve health care.

Today, we require hospitals and vendors to disclose their prices, which will promote competition. Tomorrow, we can remove more egregious government regulations. 

Price transparency is only half the solution to lowering our health care costs. After all, what good is it to know where care is cheaper or better quality, but it is not accessible in-network? 

This is why I am the chief author of the Patient Right to Shop Act (HF 638). The Patient Right to Shop Act would require full price transparency and allow people to shop for care in or outside of the network where the insurance companies dictate they go. And when a patient finds care that is cheaper than in-network, the patient receives an incentive of 50% of the savings. The other savings goes into the insurance pool to lower costs for everyone else. The fiscal note on my bill shows a $12 million dollar savings for just the state employees in the first year alone. Roughly $6 million would be paid to patients for finding cheaper care. 

Minnesota’s insurance and pharmaceutical lobbyists oppose the bill, because it empowers patients and discloses the prices they negotiate with providers behind our backs and prevent us from discussing. 

Rep. Schultz has her own solution, asserting, “What has worked elsewhere is intervention by government or quasi-government groups to set prices.” 

As expected, Rep. Schultz does not provide any evidence to suggest that government intervention actually helps bring down costs. Instead, she speaks glowingly of government control, and then promptly changes the subject. As a matter of fact, government intervention in health care has crippled many health care systems around the world. In 2017, Canada’s government-run health care system reported that there is, “a median waiting time of 21.2 weeks between referral from a general practitioner and receipt of treatment” from a specialist physician. The United Kingdom’s government-run health care system is rationing care. In 2018, their health care system announced, “an initial list of 17 operations that will be discontinued completely or highly restricted.” 

With government-run health care falling apart, why would Democrats crave such a proposal? 

In the meantime, the conservative solution of shopping for health care actually works. 

Jennifer Schultz responds:

In my column I pointed out the problems that may arise with price transparency and how it may not be the silver bullet in bringing down health care costs. I discussed lack of competition; incentives to provide unnecessary care to maintain profits; lack of information on quality; and an inability to shop for emergency care. 

Here’s another problem: Narrow provider networks — meaning insurers give patients few options to choose from. And if they do find a cheaper service outside their network, they’ll have to pay substantially more out of pocket. How will empowering patients with full price transparency work in a very narrow network with no choice of hospital? Hospitals and private insurers are restricting choice and prices, not the government. 

To be clear: I am not opposed to price transparency — as is evident from the bills I am co-authoring — I’m just skeptical that it alone will bring down costs. (These are not my “feelings” on price transparency, as Munson states — these are the potential issues from a critical, educated perspective.)

But what is more American than trying everything else before we come to a real solution? 

Munson’s own citation notes that “…price transparency efforts are not sufficient by themselves to reform America’s health care system. Price shopping in health care still appears relatively rare despite increasing cost-sharing and the proliferation of price transparency apps and tools to inform and assist consumers.” (Emphasis mine.) 

The states using price transparency are also using “reference pricing,” which is where states or employers set the amount of reimbursement for services and the patient is left to pay the difference. If Munson is against price mandates, then one would think he would not support reference pricing, which is essentially the same as a mandated price. 

According to published, peer reviewed research, the introduction of a price transparency tool in California’s CalPERS plan did not reduce overall spending. In California, CalPERS used reference pricing but also evaluated quality of care and only selected hospitals that met or exceeded a certain quality threshold. This is a different strategy than simply posting prices. Other studies suggest price transparency tools are not associated with lower health care spending. 

Also, the unpublished, non-peer reviewed research by a conservative think tank that Munson cites about saving 36% fails to note that only 8% of folks use the price web tool to shop for MRI services — so the savings was less than 3%. 

Munson’s assertion that there is no proof that government intervention can make health care both less expensive and better is a deliberate attempt to ignore the existence of a world outside our country, and even to ignore our own successful Medicare program. 

In fact, it is nearly impossible to find an instance of government oversight in health care that doesn’t work much better than our system. All of the thirty-seven countries that beat the U.S. in health care quality also pay substantially less – usually less than half as much – than the U.S., and all use much more aggressive government intervention. Countries he attacks, like Canada and Britain, get substantially better results than we do for substantially less cost. His critique of the issue of waiting times for elective surgery and of cancellation of payments for some types of obsolete surgeries fails to pay any attention to the gold standard of health care: outcomes. British and Canadian patients both enjoy better outcomes in the very areas of medical care that he attacks, at least partly because their systems discourage or avoid unnecessary and obsolete surgeries.  

Furthermore, the wait times for appointments in the U.S. are not much better than compared to other countries with mixed system like Germany and the Netherlands, despite the fact that we spend almost twice as much on health care

Close government regulation is typical of the outstanding health care systems of the world, from the Netherlands to Japan to Norway to France. It is that closer regulation that both guarantees the better outcomes they enjoy and holds their costs to between 35% and 75% of ours.

Munson mentions that government-run systems in other countries ration health care. We do not avoid rationing care in the U.S. We just do it differently; markets ration care based on ability to pay. 

I want to know the prices of health care and so should everyone. People should support price transparency, but it must be used in conjunction with other reforms to guarantee reductions in health care cost growth.

Jennifer Schultz is a health economist and DFL state legislator in Minnesota.