NCPA | Study #296, The Market for Medical Care

The marriage of the computer and telecommunications led to electronic mail and the Internet. As a result, the cost of information to the average consumer has fallen dramatically - and continues to drop. The resulting innovations are increasing economic efficiency and improving quality. Entrepreneurs of consumer-driven health care are taking advantage of these developments and are utilizing the Internet in ways that will revolutionize how health care is delivered.⁵³

General Medical Information. The growth of the Internet is leading to dramatic changes in consumer access to health care information.⁵⁴ In the past, most medical literature was available only at large libraries, medical schools or by subscription to expensive scholarly medical journals. Now, much of it is readily available to anyone with Internet access.⁵⁵ For instance, the United States National Institutes of Health placed its National Library of Medicine online for consumers to peruse. And WebMD.com, a commercial Web site, provides consumers with up-to-date information on diseases and treatments. Overall, there are approximately 20,000 health-related Web sites,⁵⁶ and about 80 percent of adult Internet users (or 93 million people) have searched for health information online.⁵⁷ This is a sharp break with the tradition of relying on doctors as the sole source for answers to health and medical questions. According to a 2002 survey of patients visiting an internal medicine practice, more than half used the Internet to gather health information. Of these, about six-in-10 rated what they found online "the same as" or "better than" the feedback they got from their doctors.⁵⁸

Information on Evidence-Based Protocols. In normal markets, sellers cater to customer requests for clear, concise information about quality. When objective evaluations are needed, independent third parties often provide data.⁵⁹ Several new Web-based tools are now available to help physicians and patients find the most appropriate treatment.

MedEncentive is an Oklahoma-based firm that works with health plans to promote greater use of evidence-based, best-practice guidelines. The company provides health insurers with Web-based tools that both doctors and patients can use to identify recommended treatments, and gives both parties financial incentives to comply with them. Once physicians log on, patient treatment screens suggest a best-practice guideline for the diagnosed condition. Physicians who agree to follow the best practices (or provide a good reason for deviating) receive a higher reimbursement. They also receive more when they prescribe what is called "information therapy" to their patients - which may include having the patient read about procedures or protocols for taking medications or other treatments.⁶⁰ Once patients receive their prescriptions, they log on to a similar Web site that explains in lay terms the best evidence-based treatment. Patients who do so earn rebates that lower their out-of-pocket costs. According to MedEncentive, a recently completed year-long trial with several employers found participating firms reduced health care costs substantially, and both doctors and patients liked the program.⁶¹

HealthDialog, a service offered through employee health plans, helps facilitate consistent use of evidence-based medicine by patients and doctors by providing personalized health coaching for chronic conditions and medical treatments. The goal is to encourage patients to take a more active role in the decision-making process and collaborate with their doctors to better manage chronic conditions. HealthDialog offers tools such as analysis of "unwarranted variation" from evidence-based protocols, based on academic research by John Wennberg from Dartmouth University: ⁶²

Information on Prices. Some insurers are trying to remove the veil of secrecy that often surrounds health care costs. One example is Dallas-based insurer HealthMarkets, which offers Web-based decision support tools that allow enrollees to compare out-of-pocket costs online for 20,000 procedures performed by about 400,000 doctors nationwide.⁶³ Enrollees can use these tools to reduce their out-of-pocket costs. [See the sidebar "Using the Internet to Integrate Health Insurance and Consumer-Driven Health Care."]

Other health insurers are also taking steps to improve transparency - making price and/or quality information readily available to consumers. Aetna discloses on the Internet the prices it pays for common physician services in the Cincinnati area. It recently expanded this service to other cities and increased the number of procedures disclosed. Humana, UnitedHealth Group and other insurers are improving their Web-based tools to assist enrollees.⁶⁴

There are also Internet services that offer medical price information directly to all consumers. HealthGrades.com recently announced a plan to sell price reports online; consumers can look up the approximate cost of 42 different surgical procedures - ranging from vasectomies to gastric bypass surgery - across the country.⁶⁵

Quality Information. A few hospitals are posting quality information on their Web sites. For example, Dartmouth-Hitchcock Medical Center (DHMC) discloses its performance indicators for virtually all of the procedures and conditions it measures. DHMC also discloses the average costs of medical treatments and customer satisfaction ratings.⁶⁶ The Cleveland Clinic also discloses its quality indicators on a Web site.⁶⁷

“Some health insurers provide hospital and physician price and quality data to patients.”

Some health insurers are partnering with third parties to make quality information available to members. For instance, HealthMarkets, Lumenos and other health plans contract with medical information providers like Subimo to provide quality indicators on hospitals and clinics across the country in a Web-based, consumer-friendly format. On the Subimo Web site, each hospital's performance for a number of specific surgeries and treatments are rated in general terms (worse, average or better) compared to outcomes at hospitals nationwide. Health care quality metrics are still being fine-tuned (and are arguably still confusing for the layperson), but for each condition include complication and mortality rates. Additional quality indicators include the degree to which a hospital follows best-practices for treatment and prevention, and the level of technological services compared to the average hospital.

Subimo also reports the approximate number of procedures performed in each hospital compared to benchmarks for the volume of procedures considered necessary to keep skills sharp. Even if insurers do not make Web sites like Subimo part of their free Web-based services, consumers can access them directly by paying a nominal fee.

Medscape, owned by WebMD, recently created a Web-based hospital comparison tool called HospitalWise Professional.⁶⁸ HospitalWise Professional allows patients to view a variety of benchmarks for hospital quality, such as number of patients treated, mortality rates by procedure, major complications, number of days patients spend in the hospital and average hospital charges.⁶⁹ Medscape also has a directory that allows patients to sort physicians by travel distance, specialty, physician profile and/or hospital affiliation. In most cases patients can even request, reschedule or cancel an appointment online through this service.⁷⁰

A Department of Health and Human Services Web site tracks quality benchmarks at hospitals across the country.⁷¹ There are indicators of treatment quality for four conditions: heart attack, heart failure, pneumonia and surgical care. The quality measures are based on the care recommended by the Hospital Quality Alliance (HQA), a collaborative effort of doctors, hospitals, federal agencies and health care accrediting organizations. To learn more about treatment quality for heart failure at a given hospital, for example, one can view data on the percent of patients who received an assessment of their left ventricular function; the percent given drug therapy for left ventricular systolic dysfunction; the percent given post-discharge care instructions; and finally, the percent of patients who smoke advised to stop smoking. If a patient selects an individual indicator, the Web site displays that hospital's rates compared to hospitals across the United States, other hospitals in the same geographic region and the average score for the top 10 percent of hospitals across the nation.

Patients themselves can help create one form of a quality indicator: Online forums for patient feedback. The Internet makes sharing experiences more convenient than ever. The Aetna Navigator Web site provides an easy way for enrollees to provide feedback on experiences with physicians.⁷² The drug-rating Web site, AskAPatient.com, lets patients compare experiences with drugs therapies.⁷³ For instance, patients tend to rate antihistamines rather low. Antihistamines received an average score of only 2.6 out of a possible 5 points. By comparison, people rated Viagra 4.2 out of 5.

Shopping for Drugs. Patients' access to prescription drug prices and information has improved markedly over the past few years. Consumers can reduce the cost of some common drug therapies through the same techniques they routinely use when shopping for other goods and services. These include comparing prices, buying in bulk and looking for low-cost substitutes. Patients can also look for an over-the-counter or generic alternative or a therapeutic substitute in place of a high-priced, name-brand drug.

In some cases, patients may be able to buy medications in double-strength and split them in half. To find out about opportunities for lower-cost substitutes, patients can log on to Rxaminer.com and enter their prescription medications, prescribed strength levels and dose schedules. The Web site will produce a report that includes therapeutic and generic substitutes and over-the-counter alternatives for name-brand prescription drugs. The report explains the patient's options and can be printed out to discuss with a physician.

Armed with information about potential substitutes, a patient could then go to DestinationRx.com, a Web site affiliated with Rxaminer.com, to find the best prices for them at a number of highly competitive online pharmacies.

Case Study: Cardiovascular Drugs. Patients who pay for drugs out of their own pockets can save a lot of money by using the Internet. For example, patients prescribed 50mg of Tenormin daily can save money by comparison shopping for the best price and quantity. [See Table I.] For instance:⁷⁴

Smart buying of this drug lowered the potential overall out-of-pocket cost by 96 percent - from a high of $155.66 to a low of $5.65.

Online Savings for Seniors. DestinationRx.com's technology is also used on the Medicare.gov Web site to help seniors shop for a drug plan with the lowest annual out-of-pocket costs. Seniors can utilize another tool, called the Part D Optimizer, to find out if there are therapeutic substitutes on their plan's formulary that have lower out-of-pocket costs. The optimizer was designed specifically to help seniors avoid the coverage gap, or doughnut hole, in Medicaid Part D drug plans by finding the lowest prices.⁷⁶ [See the sidebar "Using the Internet to Lower Seniors' Drug Costs."]

Online Access to Laboratory Tests and Prices. Physicians usually don't offer patients options when ordering laboratory tests. But patients can gain by comparing the prices of different testing laboratories. Patients can even order some diagnostic tests on their own, without seeing a doctor. Storefront locations or walk-in clinics are beginning to offer affordable lab tests in a convenient setting, providing results quickly and without a visit to a physician's office. Here are a few Internet options:

Some labs also sell genetic tests that can determine a patient's risk for cancer or heart disease. Prices for patient-ordered genetic testing for susceptibility to breast and ovarian cancer range from $586 for a single-point mutation to $3,312 for a complete sequence.⁷⁹

Patients can also order "virtual exams" using MRI or PET technologies to detect cancer, heart disease and other conditions.⁸⁰ Many physician groups oppose patient-ordered body scans for asymptomatic individuals because scans often yield ambiguous results that encourage patients to spend money on follow-up tests.⁸¹ However, medical societies support doctor-ordered preventive screening for various conditions, at various ages, called for in medical protocols. Patients can order many recommended screening tests themselves, for less than a doctor would charge. The difference: Patients typically have to pay out of pocket for scans they obtain without a doctor's written orders, whereas their insurance typically covers physician-ordered tests.⁸²

Using the Internet to Integrate Health Insurance and Consumer-Driven Health Care

The Dallas-based insurer HealthMarkets offers innovative health plans that integrate third-party insurance with the financial incentives of individual self-insurance. The company provides Web-based data on physicians and hospitals, allowing enrollees to compare out-of-pocket costs and quality indicators when choosing physicians and hospitals.¹

Health Insurance. HealthMarkets provides its enrollees access to a nationwide network covering 400,000 doctors providing 20,000 procedures. For each doctor and each procedure, there is a negotiated price. However, the insurer does not necessarily cover any particular negotiated fee. Instead, HealthMarkets pays a flat rate, similar to fee schedules that were once very common in health insurance. Typically, the fee the insurers will pay is at the 70th percentile - high enough to cover the negotiated amount charged by 70 percent of the doctors in a geographical area. Almost always, the fee covers the 50th percentile.

This means the out-of-pocket costs to the patient can vary widely depending on the choice of provider. If a patient chooses a physician whose negotiated fees are less than HealthMarkets will pay, there is no out-of-pocket cost, whereas seeing a doctor with fees higher than what HealthMarkets pays means the enrollee must pay the difference out of pocket. Thus, enrollees have a strong financial incentive to check on prospective out-of-pocket costs before obtaining medical services.

Transparency on the Internet. An important component of HealthMarkets' plans are decision-support tools that enrollees can access on a personalized Web site. Specifically, they can look up participating doctors and hospitals and compare their out-of-pocket costs for a variety of procedures. An enrollee can search by specialty and geographic area for a physician to perform a specific medical service. A list of physicians in the network is displayed, with a color-coded "thermometer" which indicates the out-of-pocket cost to the enrollee of the service from each provider. Low-cost physicians appear first on the list in green, while higher-cost physicians appear farther down the list in red. A second screen provides more detailed information. It displays the dollar amount the enrollee would pay out of pocket for a service by each provider. It also shows how much HealthMarkets will pay toward that physician’s charges.

Hospital charges are more complex than physician visits, but another search tool generally indicatesout-of-pocket costs on a sliding, color-coded scale from green (lowest out-of-pocket payments) to red (highest).

The HealthMarkets Web site also has quality indicators, provided by Subimo, a medical information service company. Information about doctor quality includes medical school attended, board certification and years in practice. Examples of hospital indicators include the volume of procedures performed (higher is better), adherence to patient safety standards and clinical outcomes. The Web site also allows enrollees to submit feedback on physicians and view other patients’ comments. The Web site offers patient education on medical conditions.

Personal Health Accounts. Some HealthMarkets plans integrate insurance with a personal health account for routine and preventive care called StartWell, to which the employer contributes $250 to $1,250 per year. A portion of any funds left over at the end of the year can be rolled over for use the following year. Another health plan option is a “smartfund” budget for chronic conditions (such as hypertension), treatment for some specific conditions (such as upper respiratory infections) or elective procedures (such as knee surgery). The amount budgeted varies depending on such factors as the patient’s health status, complicating conditions and geographic area. Patients can control their out-of-pocket costs for treatment by the choice of providers and by changes in personal behavior.

^Notes:
¹ Information obtained from demonstration and “Consumerism in Health Insurance: Plans and Tools That Make a Difference,” HealthMarkets, White Paper, 2006.

Using the Internet to Lower Seniors' Drug Costs

Seniors in Medicare Part D drug plans often fall into the so-called doughnut hole where cost sharing can exceed $3,000 before more generous coverage kicks in. However, by taking advantage of several useful tools, seniors can greatly reduce their out-of-pocket costs by choosing less expensive drug therapies and by choosing a plan that best meets their needs.

Finding the Lowest-Cost Drugs. Rxaminer.com, a Web site owned by DestinationRx, has a search tool that allows a patient to determine if there are lower-cost substitutes for drugs they are currently taking. Take four common chronic conditions among seniors: arthritis, high blood pressure, high cholesterol and a serious form of heartburn. The patented medications for these conditions are among the most common drugs seniors use, and it is not uncommon for a senior to have all these chronic ailments and to take all these drugs.

For each of these drugs there are substitutes that might work as well. Taking advantage of drug substitutions could potentially save a senior a lot in out-of-pocket costs. The amount of savings depends on the choice of drug plan.

Choosing the Right Drug Plan. During the annual open enrollment period, seniors can choose from a number of government-approved plans offered by insurance companies, but some levels of benefits may differ. It is important to remember that seniors should not shop for the drug plan with the lowest prices on the drugs they take (or the cheapest pharmacy); rather, they should shop for the drug plan with the lowest annual out-of-pocket costs - including premiums and copayments - for the drugs they currently take.

Armed with information about therapeutic substitutes, a senior can use the comparison tool on the Medicare.gov Web site to find the plan with the lowest out-of-pocket costs. (Seniors who have already chosen a drug plan can use another DestinationRx tool, called the Part D Optimizer, to find out if there are therapeutic substitutes on their plan's formulary with lower out-of-pocket costs.)

For instance, DestinationRx, which provides the technology behind the Medicare.gov plan comparison tool, found out-of-pocket costs for a hypothetical senior in Denver with four chronic conditions, taking a five-drug regimen, varied widely among popular Medicare Part D plans in the area:

Using the name-brand drugs, annual out-of-pocket costs ranged from $2,692 to $3,752.
However, using lower-cost therapeutic substitutes, annual costs ranged from $622 to $1,777.
Thus, a senior could potentially save $3,130 in out-of-pocket costs by using therapeutic substitutes and choosing a low-cost plan.