Health Care Proxy Shoppers

Over the weekend, I was listening to some health policy podcasts while gardening, as one does, and the surgeon and medical waste researcher Dr. Marty Makary was interviewed on Freakonomics. He mostly didn’t talk about surgical techniques or hardcore quantitative measures of wasted health care dollars, though. Instead, he outlined his mother’s strategy in grocery shopping. Mrs. Makary is a bargain shopper. While I might just grab a couple of lemons from whichever store I’m in when I think of it, she carefully compares prices between stores and buys the cheapest option. People like Dr. Makary’s mom make up only 10-20% of all shoppers, he said, but they hold down the price of lemons for the rest of us. Economists call them “proxy shoppers.” Just like proxy voters, they make decisions about the cost of lemons for all of us.

Dr. Makary shared this vignette to illustrate how price transparency may help contain costs in medicine. It got me thinking: Who are the proxy shoppers in medicine? Price transparency is increasing, after all, but patients still don’t use it as much as one might expect. And while there are ways to encourage patients to use price transparency, especially as it relates to their out-of-pocket expenses and deductibles, ultimately, the contract they’re working with barely involves them. As Larry Van Horn says in the Freakonomics episode, business-to-business contracts in medicine between a payer and a health system include a third party (the patient) who has no say in the contract at all.

So the proxy shoppers in medicine mostly are not patients. The actual proxy shoppers are the people most likely to be reading this blog post, like the HR professionals and benefits specialists who plan, coordinate, and pay for their employees’ health care. And we should use our power as proxy shoppers carefully.

That’s it. That’s my post. I don’t mean to be a downer. I know you have a lot on your plate already, trying to manage the benefits of dozens or hundreds or even thousands of employees’ benefits. But the next time you sit down to negotiate a contract, I hope this is in the back of your mind: You have a power like almost no one else’s to hold down the cost of medical care in a country where it’s genuinely out of control. You can pick up the lemon that’s closest to you and pay whatever it costs, or you can check the price of that lemon in the grocery store down the street.

As the Medical Director of the Kansas Business Group on Health I’m sometimes asked to weigh in on hot topics that might affect employers or employees. This is a reprint of a blog post from KBGH.

Wait…Can you really modify your hospital Consent and Financial Agreement?

As the Medical Director of the Kansas Business Group on Health I’m sometimes asked to weigh in on hot topics that might affect employers or employees. This is a reprint of a blog post from KBGH:

Dr. Marty Makary, general surgeon at Johns Hopkins who is more famous for his research on health costs and value, tells a riveting story of hospital billing (no, really!) in his book The Price We Pay: What Broke American Health Care–and How to Fix It (pages 167-170). A friend named Dina becomes ill while visiting Marty. When the two of them arrive at the emergency room, she is informed that the ER is “out of network” for her insurance. After some salty language on both sides, both sides agree she can be treated in the ER anyway. But prior to treatment Dina (with Marty’s help) asks for a physical copy of the hospital’s Consent and Financial Agreement form (Dr. Makary calls it the “battlefield consent form”), rather than automatically signing the form on the iPad that is brought to the room. Dina crosses out the clause on the paper agreement that states she would “sign away her financial life” (Dr. Makary’s words) before seeing any bill.

Dina has a minor surgical procedure, recovers, and eventually receives a $60,000 out-of-network bill. Marty shows her what her insurance would have paid had the hospital been in-network using Healthcarebluebook.com: about $12,000, or one-fifth the out-of-network bill. After getting Dina’s consent and requesting an itemized bill, Marty calls the hospital and offers $12,000 to settle the bill, which is refused. He explains to the hospital that Dina has no contractual obligation to pay because she struck out the clause in the contract saying she’d pay whatever they charged. Marty adds that legally the hospital is prohibited from using collection agencies to hurt her credit if she does not pay. The hospital director immediately offers to settle for $30,000, then $25,000, then $19,000.

Marty sticks to his original offer of $12,000, and the bill eventually gets sent to collections. When the collections agency calls, Dina asks them to send her a copy of the Consent and Financial Agreement, the form on which she’d deleted the section indicating her obligation to pay. The collection agency never calls back, and Dina eventually makes a $5,000 donation to the hospital’s fundraising drive, earning a plaque on the wall.

This is, shall we say, a novel way to deal with surprise medical bills. But it has some high-profile proponents. Al Lewis, Harvard-trained attorney and famous skeptic of worksite wellness, told Dr. Makary’s story on his blog. He went so far as to suggest making a card for your employees to carry and has even produced a template. He suggests the card say something to the effect of, “I consent to appropriate treatment and (including applicable insurance payments) to be responsible for reasonable charges, up to 2 times the Medicare rate.”

Needless to say, one party’s idea of “reasonable” can differ radically from another’s. Al says that reasonable charges can be “settled by binding arbitration using the New York law as a model. That law, based on Major League Baseball binding arbitration rules, is well-accepted and has generally been successful at curbing abuses.” [Disclosure: KBGH has a financial relationship with Quizzify not related to medical billing, but rather for health literacy training]

So. Is this a real strategy that at-risk patients could use? It seems under-handed. But some (most) would say that the entire system of surprise out-of-network payments in health care is under-handed, especially when the agreements are, as some have argued, signed under duress. Al Lewis’s website deftly says “Legally, we can’t guarantee this will work. But we know the alternative—signing whatever they put in front of you—carries the risk of much higher bills, and more chance of inappropriate treatment.”

And that’s what we say, too. The Kansas Business Group on Health is not endorsing this practice. We simply want our members to be aware of its growing use by frustrated, scared patients.