This is the first essay in a three-part series looking at problems and solutions in the health-care marketplace.
When I became a doctor, last year, I had to sign up for health insurance. The hospital where I work offered two primary options, a Value plan and a Plus plan. One cost less up front, while the other promised more benefits. I didn’t know which to choose; after factoring in co-pays, deductibles, and variations in coverage across networks of doctors, it wasn’t clear which would be more economical. Ultimately, I enrolled in the Plus plan, the product of guesswork more than reason.
At the start of November, the open-enrollment period for plans on U.S. health-insurance exchanges will begin, and millions of Americans will face a similar struggle. As consumers, we’re accustomed to making informed choices about what food to eat, what car to drive, what school to attend. But health insurance is a striking exception. Only one in seven Americans understands the basic components of a health-insurance plan, according to a study published a few years ago in the Journal of Health Economics. That means most of us are signing up without knowing what we’re getting or what it’s worth.
Health care is especially complicated to purchase because it’s consumed differently from just about everything else. If I want a cheeseburger or a haircut, I can pay someone who makes cheeseburgers or cuts hair. But as a patient, I don’t necessarily choose the care I receive. My doctor decides which tests to order, medications to prescribe, and procedures to perform. In most cases, I also don’t pay for those services in full; my insurer covers part of the expenses. This creates a strange dynamic. Doctors, under a traditional fee-for-service model, are rewarded for providing more care, while insurers have incentives to restrict coverage. Meanwhile, most patients, despite being the ultimate consumers, lack a direct relationship with insurers. Instead, the interactions tend to be at best transactional and at worst confrontational. Attempts by insurers to create brand loyalty and improve outcomes by forming relationships with patients and influencing their behavior—persuading them to exercise more, smoke less, or take their medications, for example—have met with limited success, whether because patients don’t trust advice from insurers, don’t know how to access information, or simply aren’t paying attention.
Historically, patients have lacked much motivation to know their insurers well. Employer-sponsored insurance appeared before the Second World War, when a group of schoolteachers in Texas agreed to pre-pay Baylor University Hospital six dollars per person per year in exchange for access to care. As these kinds of arrangements spread, they eventually evolved to become Blue Cross. Today, the vast majority of individuals with private health insurance, myself included, are covered through an employer, who selects insurers and negotiates health-plan benefits on employees’ behalf. Even when employees get to pick a plan from among a short list of options, they don’t necessarily choose their insurer; the two options I was given, for instance, were from the same one.
Distrust is also a barrier to a closer relationship. An annual Harris Poll of more than two thousand American adults on perceptions of industry trustworthiness has found, year after year, that health insurance is one of the least trusted industries (tobacco and oil are the only ones to consistently rank lower). So it’s perhaps unsurprising that patients are not turning to insurers for health guidance. Another survey conducted last year by Welltok, a health-optimization company, reported that only eight per cent of respondents relied on insurers as a source of health and wellness.
Even if patients did want to interact more with their insurers, the user experience leaves much to be desired. Explanations of benefits can be difficult to understand, insurer Web sites cumbersome to navigate, and customer service woefully hard to contact. Too often, health insurance seems more like a labyrinth of bureaucracy than a gateway to health.
Many health-care providers struggle no less in their administrative dealings with insurers, losing considerable time and money simply submitting, disputing, and collecting claims for reimbursement. The American Medical Association, which offers providers a series of “Administrative Simplification Initiatives,” has estimated that ten to fourteen per cent of revenue is wasted on inefficient claims processing. The fee-for-service model, which reimburses providers according to the volume of services they provide, and which still predominates today, likely exacerbates this antagonism because incentives are poorly aligned between providers and insurers.
At the same time, many providers aren’t accustomed to factoring costs into their clinical decisions. In medical school, and in residency, we are taught how to save lives—not how to save money. Often, we simply aren’t aware of what things cost, or how to value them. Recently, for instance, I participated in an operation to remove a patient’s kidney, during which the surgeon asked everyone in the room to estimate the out-of-pocket cost to the patient. Though we participate in these types of surgeries on a regular basis, none of us came close—in fact, we underestimated the cost by a factor of four.
Cost transparency alone, of course, won’t necessarily change spending behavior. The harm of overusing resources can seem abstract, whereas the risks of under-diagnosing or under-treating are felt acutely, and include possible harm to the patient and legal liability. The skyrocketing use of expensive diagnostic imaging, like computed tomography (CT) and magnetic-resonance imaging (MRI), is a classic example of this; a study, published in 2012 in the Journal of the American Medical Association, reported that the use of CT scans tripled and the use of MRIs quadrupled from 1996 to 2010. While expensive diagnostics are valuable, there’s evidence to suggest that they’re used in excess of what is necessary. Providers need to be rewarded for making decisions that are not only clinically sound but also economically prudent.
In a 2012 feature in this magazine that compared health-care delivery to food delivery at a restaurant chain, Atul Gawande suggested that standardizing the care-delivery process could improve outcomes and reduce costs. But to fix health-care delivery, you must also fix health insurance. This entails a whole host of changes, from aligning financial incentives to improving customer service to making better use of technology. Fundamentally, though, it comes down to redefining the dynamics of the patient-insurer-provider triad: building a stronger relationship between patients and insurers, and turning the reimbursement tug-of-war between insurers and providers into a partnership.
Insurers are in a unique position to make these things happen. They have the ability to employ incentives that reward health-promoting behavior while avoiding unnecessary costs. But thus far they haven’t capitalized on the opportunity to do so. The result is that the triad remains imbalanced: patients and providers are close with each other, but insurers lack a strong affiliation with either group. Improving health insurance will require reimagining these relationships. And, as daunting an undertaking as that may be, it’s our best hope for improving health-care delivery.
Read part two, on new approaches to the relationship between patients and insurers, here, and part three, on the relationship between providers and insurers, here.__
