Does Increased Consumer Choices Lower Healthcare Spending?

Shoppable services were found to account for just 43% of the total healthcare spending by those with employer-sponsored insurance (ESI), according to an analysis by the Health Care Cost Institute (HCCI).

Shoppable services are defined as being services that can be scheduled in advance and are among the most used and highest priced services. Ideally, these services would allow consumers to use pricing information to comparison shop for healthcare services and providers, but not all healthcare services are shoppable, the study authors noted.

In the study, available services were divided into 6 categories: outpatient and physician services, non-shoppable inpatient facility services, outpatient and physician services, prescription drugs, shoppable inpatient facility services, and inpatient facility knee and hip replacements.

The study was comprised of patients under 65-years-old and covered by ESI. During the analysis, researchers replicated the White and Eguchi methodology as closely as they could by using the HCCI dataset that was weighted to be representative nationally.

The study primarily focused on what consumers paid-out of pocket and where comparison shopping can result in lower costs.

The results of the study showed that in 2011, less than 7% out of $542.2 billion in total healthcare spending was for out-of-pocket shoppable services. Meanwhile, 15% of total spending was spent by individuals out-of-pocket.

“What surprised us was the percent of total spending that [consumers] could affect was really pretty modest,” study co-author Amanda Frost told Kaiser Health. “Because these gains are pretty modest, designing systems around expecting consumers to become uber shoppers might not be the best way.”

The total out-of-pocket spending for consumers includes the amount they pay in deductibles, copayments, and coinsurance payments for services. Deductibles and coinsurance vary greatly and give consumers the best opportunity for shopping savings.

The deductible was nearly half the amount spent by consumers on shoppable services, while 27% were connected to coinsurance payments, with the majority being for outpatient and physician services.

In order to reduce overall spending, the focus needs to be shifted from consumerism that provides tools for people to compare quality and price of healthcare services to insurers, employers, providers, and regulators to change the focus to alternatives such as reference-based pricing, said study co-author and Executive Director of the Health Care Cost Institute, David Newman.

“Employers and insurers know where the low prices are,” Newman told Kaiser Health. “When you see somebody who’s gone in for back pain and they know is a candidate for back surgery, that’s the time to intervene.”