price & cost transparency: understanding the issues – shaping the agenda

Price & Cost Transparency: Understanding the Issues – Shaping the Agenda

Consumer-Purchaser Disclosure Project: Invitational Working Session

May 25, 2006

© Consumer-Purchaser Disclosure Project, 2006 2

Agenda

• Goals, Drivers & Context

• Audiences for Price Information

• Defining Price & Cost Information

• Examples of Price Transparency

• Major Issues and Questions


Why New Attention to Price/Cost?• Consumer Demand

– Increased cost sharing– More consumers in plans with coinsurance– Equity concerns regarding pricing for the uninsured

• Private Purchaser– Inclusion of cost/price information in NCQA new health plan

“Physician/Hospital Quality” Accreditation Module– Push for efficiency leading to cost alone

• State Interest– Legislation mandating publication of chargemaster– Concern for equity of pricing for the uninsured– Public reporting efforts

• Federal Interest– Price transparency core element of Administration Initiative – CMS Request for Comment (Fed.Reg. due 6/12/06)– House Ways & Means Hearing


Goals of Price/Cost Transparency• Promote higher value – linking quality and cost

• Enable consumers to make better informed choices (especially as they bear more direct out-of-pocket exposure)

• Bring market forces to bear on providers to reduce costs

• Encourage payment system overhaul by making transparent current dysfunction


Administration Comment Request • “Any” ways HHS can encourage transparency in health care

quality and pricing – voluntary or through regulatory authority• How could CMS use of its regulatory authority to enhance

transparency of quality and pricing information?• Would the publication of Medicare rates be helpful or harmful?

– Should CMS publish is risk-adjusted DRG rates for every hospital?

– Should HHS establish conditions of participation for hospitals that require posting of prices and/or policies regarding discounts and other payment options for uninsured patients?

– Should CMS publish total payments over an episode of care?


Context: Who’s Doing the Spending


Context: Where’s the Money Going


Nonelderly Coverage


Context: The Uninsured


Plan Enrollment of Covered WorkersConv/FFS

3% HMO21%

POS15%

PPO61%

Source: Kaiser/HRET 2005 Annual Employer Benefits Survey


Costs in Context – Consumers in PPOs Single Family

Share of Premium

-- Worker

-- Firm

Total

$603

$3,547

$4,150

$2,641

$8,449

$11,090

Annual Deductible

(In-Network) $323 $679

Out-of-Pocket Maximum

For In-Network care; may be larger or no max for Out-of-Network.

“Low”: 29% Single; 25% Family (by Large Firms Offering)

>$1,499 >$2,999

“Medium”: 36% Single; 37% Family

$1,500-$2,499 $3,000-$4,999

“High”: 34% Single; 36% Family

<$2,500 <$5,000

Source: Kaiser/HRET Employer Health Benefits, 2005 Annual Survey


Costs in Context – Consumers in HDHPsSingle Family

Share of Premium

-- Worker

-- Firm

Total

$423

$3,008

$3,503

$2,654

$5,876

$8,530

Annual Deductible

(In-Network) $1,870 $3,868

Out-of-Pocket Maximum

For In-Network care; may be larger or no max for Out-of-Network.

Average $2,859 $5,075

Contribution to HSA or HRA

Note: only approximately 20% of firms fund accounts or offer HSA eligible accounts employees can fund

Firm Contribution $792 $1,556

Source: Kaiser/HRET Employer Health Benefits, 2005 Annual Survey (examples for “HRA”)


Medicare Coverage


Sources of Payment for Medicare Beneficiaries

Source: Kaiser Family Foundation, Medicare Chartbook 2005


Medicare Out-of-Pocket Spending



MedicareOut-of-Pocket



Medicare Out-of-Pocket for those with High Costs

Source: Medicare Beneficiaries Out-of-Pocket Costs: Are Medicare Advantage Plans a Better Deal? May 2006, Commonwealth Fund


Adapted from Regence Blue Shield

SAVE LIVES, S

AVE MONEY

Remember the Value Equation


Price/Cost Information Users

• Consumers

• Providers

• Plans

• Purchasers


Consumers’ Circumstances• Plan/Payer Status

– Health plan enrollee– Medicare FFS– Uninsured

• Health Status/Condition– Procedure/Medical– Urgent/Non-urgent– Chronic– Preference Sensitive

• Education/Information Seeking

See Appendix for Consumer Vignettes


ALL Consumers Need Price Information that is “QUAARP”:

• Linked directly to Quality measures (outcomes, patient experience, compliance with EBM)

• Understandable• Actionable• Accessible• Relevant to their circumstances (health and

coverage status)• Predictive (accurate)


Consumers’ Needs by Payer Status (“QUAARP” Plus)

Consumer Type Price Information Needs

Health Plan Enrollee • Relative quality/price of plan choice

• Plan design specific (copays, coinsurance, OOP Max, deductible, funded accounts, in/out-of-network pricing)

Medicare FFS • Relative quality/price of plan versus FFS choice

• Terms of Medicare supplement or Part-D plan

Uninsured (or out-of-plan) • Information to shop/negotiate


Consumers’ Needs by Health Status/Issue (“QUAARP” Plus)

Consumer Type Price Information Needs

Procedures/Medical • IF non-urgent• Total costs of all related care

(facilities, tests, RX, professional)

Chronic Conditions • Total costs of all related care (facilities, tests, RX, professional)

• Plan negotiated pricing

Preference Sensitive • Costs in context of information to inform exercise of preference


Purchasers’ Information NeedsPurpose Price Information Needs

Select Health Plan(s) • TOTAL Population Cost• Link to quality information for

value assessment• Risk and benefit adjustments

needed

Select “high performing networks” and drive R4P (rewards for performance)

• Episode of care• Link to quality information

Promote consumer engagement in price and quality decisions

• “QUAARP”• At actionable level for consumer• Link between quality information

with price


Health Plans’ Information NeedsPurpose Price Information Needs

Provider contracting and payment

• Negotiated unit price• Episode of care costs• Need quality information • Risk and benefit adjustments

needed

Select “high performing networks” and drive R4P (rewards for performance)

• Episode of care• Need quality information

Promote consumer engagement in price and quality decisions

• “QUAARP”• At actionable level for consumer• Link between quality information

with price


Providers’ Information NeedsPurpose Price Information Needs

Benchmarking to maximize income

• Comparison to peers (practice and region)

Support engagement in R4P Programs (Rewards for Performance)

• Comparison to peers (practice, region and quality performance)


Consumer Care Types• Procedures:

– Outpatient– Inpatient (e.g., Hip Replacement, Delivery, CABG, Disk Surgery)

• Discrete Services– Preventive Screening– Tests (e.g., MRI, biopsy)– Prescription/OTC Drugs

• Ongoing Chronic Care– Diabetes– Asthma– COPD– Depression

• Emergent and Very Expensive – “Never-Relevant Events”– Heart Attack – So expensive – OOP irrelevant


Cost/Service Categories (1 of 2)• Total Costs All Care: costs for all medical expenses attendant with

ALL care received by an individual, family OR population. Issues:• Most relevant information for an employer or public purchaser• Needs effective risk adjustment for comparative purposes• Increasingly “plan chooser tools” are estimating consumers’ total costs including

share or premium and all out-of-pocket• For consumer can address the unknown of future care needs

• Episode of Care Costs: costs for all medical expenses attendant with a particular procedure including all professional costs, therapy, diagnostics and drugs. Issues:

• Rarely available or made actionable for consumers or providers• Annual Treatment Costs: costs for all medical expenses attendant

with a particular chronic condition (e.g., asthma), including all professional costs, therapy, diagnostics and drugs. Issues:

• Average estimates may vary greatly• Difficult to predict actual scope of some visits


Cost/Service Categories (2 of 2)• Inpatient Costs: costs of particular procedures (e.g., hip

replacement). Issues:• Cost may only reflect partial elements of total costs (e.g., only those of inpatient

facility, not ancillary physician costs)• Outpatient Costs: costs of typical outpatient procedures. Issues:

• Costs likely to reflect facility and professional service fees, but may• Office Visit/Unit of Service: costs for “typical” office visits (e.g.,

physician visit, physical therapy, MRI, x-ray). Issues:• Difficult to predict actual scope of some visits

• Unit of Service: costs for specific tests, services (e.g., charge master-detail). Issues:

• Difficult to predict actual scope of some visits• Prescription Drug: costs of prescription drug associated with

particular treatment. Issues:• Cost for what course of treatment• Whether costs compared to alternatives


Cost Information Displays

• Full charges (no health plan discounts)• Discounted rates (health plan discount

applied)• Average costs (NOT provider specific; may

be commercial, Medicare or combined)• Range of costs (NOT provider specific; may

be commercial, Medicare or combined)• Provider specific costs – charges, discounted

or relative• Cost to member/Out-of-pocket


Sources of Price Information

• Health plan

• Multiple health plan

• Medicare

• Provider (e.g., hospital)


Examples of Price Information In the Market

• New Hampshire: Department of Insurance and Hospital Association

• Consumers Union (Prescription Drugs)

• United Health Plan

• Aetna


Presentations


New Hampshire Price ToolsDepartment of Insurance: “NH Health Cost” @ www.nhcost.org

Hospital Association: “New Hampshire PricePoint” @ www.nhpricepoint.orgNHCost (Dept. of

Insurance)NHPricepoint (NH Hospital Assn.)

NHCost (Dept. of Insurance)

NHPricepoint (NH Hospital Assn.)

Portsmouth General Hospital, Portsmouth

NH

Hip ReplacementNHCost: “Total hip replacement (PROC 8151PricePoint: “Major Hip, Knee, Ankle, Foot Surgery, including Replacement”

Uncomplicated Vaginal Delivery NHCost: “Vaginal delivery without complicating diagnosis, DRG 373PricePoint: Uncomplicated vaginal delivery

“Typical” or “Average” “Price” or “Charge”

$24,162 $35,924 $6,158 $3,714

Facility Cost $17,165 $35,924 Inclusive $3,714

Provider Cost $6,977 Not included Inclusive Not Included

Price Range or Comparison

$11,140-$41,656

$30,0619 = “Comparison Group”

$30,433 = “All NH Hospitals”

$4,400-$8,908

$5,002 = “Comparison Group”

$4,804= “All NH Hospitals”


Sample Presentations

• Consumers Union (Prescription Drugs)

• United Health Plan

• Aetna


Major Alternatives: Strengths, Weaknesses and Recommendations

• Price in Absence of Quality Information

• Total Costs of Care – Population or Multi-Condition

• Full charges (no plan/other discounts)

• Actual plan rates

• Average, relative or range of costs

• Others


Administration Comment Request • “Any” ways HHS can encourage transparency in health care

quality and pricing – voluntary or through regulatory authority• How could CMS use of its regulatory authority to enhance

transparency of quality and pricing information?• Would the publication of Medicare rates be helpful or harmful?

– Should CMS publish is risk-adjusted DRG rates for every hospital?

– Should HHS establish conditions of participation for hospitals that require posting of prices and/or policies regarding discounts and other payment options for uninsured patients?

– Should CMS publish total payments over an episode of care?


Template: Considering Price Reporting Options

Strengths Weaknesses Recommendations

• E.g.,• Relevance to

consumer• Ease of collection• Accuracy for

consumers

• E.g.,• High potential

unintended consequences

• E.g., • Don’t use• Context needed• How to improve


Price in Absence of Quality InformationStrengths Weaknesses Recommendations

• May drive more rapid development of quality measures

• Only partial (and not most important) picture

• Belief of many consumers that “more expensive means better care”

• Promote quality measures ASAP


Annual Total Costs of Care (Population or family/multi-condition)

Strengths Weaknesses Recommendations

• Most relevant to purchaser

• Informs plan selection

• For consumer recognizes unpredictability of care needs

• Not actionable at time of “teachable moment” of illness

• Costs often not adequately risk-adjusted

• Purchasers often don’t encourage enrollment in highest value plan


Full charges (no plan discounts) Strengths Weaknesses Recommendations

• Easy to collect• Does not facilitate

provider negotiating up

• Very misleading for insured

• Misleading for all


Actual Plan RatesStrengths Weaknesses Recommendations

• Highly relevant to insured

• May foster lower price providers to raise prices (negatively impact plans’ negotiating strength)


Average, Relative or Range of CostsStrengths Weaknesses Recommendations

• Recognize inaccuracy of general prediction

• Huge variation by provider, geography


Major Outstanding Questions


Price TransparencyAppendix

• Consumer Vignettes

• Covered Workers’ Cost-Sharing and Coinsurance

• Medicare Benefits and Cost-Sharing

• Consumer-Purchaser Disclosure Project Information


Consumer Vignettes (1 of 2)Personal Circumstance Price/Cost and Quality Interests

Joan has allergies or hypertension – has predictable medical services needs albeit w/ swings.

She would value provider choice support – what’s the relative difference in cost if she uses MD/Practice A versus MD B/practice B for a year of care…don’t need exact $$; potential interest in relative RX costs and options.

Diane is pregnant or wants a preventive care checkup/5 yr H&P.

She is purchasing a transaction with relative certainty and she needs the exact $$ amount of service from provider A vs. provider B; adjusted for her benefit design.

Bob is choosing his health plan and deciding on funding an HSA/FSA. He is in good health/low risk factors.

He can predict reasonably well expected costs but always an element of uncertainty; he wants help making plan choice (considering his share or premium) and a budget with average OOP cost of service given the provider network he uses.

Victor needs therapy for cancer or major degenerative disease.

Potentially very large RX costs (especially for biologics or injectables) – often huge markups in this world – Victor wants the price schedule posted just like FTC mandated for funeral homes in 1980s so he knows cost of each element of the care package; he wants a market clearing price to drive down the markups. He may also want costs of in versus out-of-network providers as he is condition is so serious he wants ability to consider “all options.”


Consumer Vignettes (2 of 2)Personal Circumstance Price/Cost and Quality Interests

Roberta needs surgery that includes implantable device/part (knee replacement, pacemakers etc.)

She’s don’t the math and knows that regardless she will hit her OOP maximum – she’s not price sensitive, she wants information on quality.

Steve has “Quality of Life” purchase interest and wants to use up his funded HRA.

He wants price information that is as precise as possible to comparison shop and purchase (e.g., cosmetic repair, Lasik).

Angela has chronic disease that is not well controlled, peaks/valleys in service use.

She may need more advanced decision support to parse the cost components that are predictable (like medications or bimonthly office/therapy visits) to price shop those components to get average $$ cost if I use MD/practice A vs. MD/practice B.

OR

She want comparison of average episode costs to her for year comparing providers AND comparing higher severity cases versus well managed chronic condition.

OR

She may want help in selection health plan that generally does a better job on mix of quality and cost.


Coinsurance for Covered Workers


Cost-Sharing for Covered Workers


Medicare Part A: Benefits and Cost-Sharing



Medicare Part B: Benefits and Cost-Sharing



The Disclosure Project

The Consumer-Purchaser Disclosure Project is a coalition more than 50 of the nation’s leading consumer, labor, and employer organizations that working to advance publicly reported, nationally standardized measures of clinical quality, efficiency, equity, and patient centeredness for health plans, hospitals, medical groups, physicians, other providers, and treatments. The Disclosure Project is supported by financial and in-kind support of participating organizations and by financial support from the Robert Wood Johnson Foundation.

For more information:

Visit our website: http://healthcaredisclosure.org/

Contact: Katherine BrowneManaging DirectorEmail: [email protected](202) 238-4820

price & cost transparency: understanding the issues – shaping the agenda

Documents

medicare chartbook

medicare beneficiariessource

medicare advantage

price cost transparency

context consumers

transparency of quality

publication of medicare

pricing information