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Summary:

As startups and consumer advocates push for more transparency in health care pricing, a study in the Journal of Consumer Research looks at how the price of medication can influence consumers’ perceived health risk.

health spending
photo: JCD

It’s hard to argue that more price transparency in healthcare isn’t needed – especially as employers increasingly shift to high-deductible plans and Health Savings Accounts that demand more responsibility from their employees.

But a new study in the Journal of Consumer Research suggests that price transparency alone could lead consumers to risky conclusions about their need for certain medications and procedures. As part of the study, the researchers, Janet Schwartz of Tulane University’s A.B. Freeman School of Business and Adriana Samper of Arizona State University, gave two groups of people two different flu shot prices, $25 and $125.

They found that consumers associated lower medication prices with a greater communal need and, therefore, a greater sense of personal risk and they associated higher prices with less need and less risk. The potential implication: consumers may forgo more expensive medication and procedures on the false belief that they’re less important.

“Price and risk should be very independent from one another, when you think about consumers making informed health care choices,” Schwartz told Kaiser Health News. “But now we see that they are very dependent on one another, in the same way that price and quality are very dependent on one another, and that can lead to some inconsistencies in health care purchases.”

As consumer advocates, policy experts and a growing group of startups try to open up the black box of health care costs, it’s an interesting study to keep in mind.  And the authors argue that more education about risk and need should accompany price transparency efforts.

Comparison shopping in health care is still in its earliest days, but sites like Castlight Health, ClearCost Health, Clear Health Costs, HealthInReach and PokitDok are trying to give consumers more clarity into health care pricing. Getting the data straight from the providers is tricky (although PokitDok and HealthInReach attempt to do this) but using claims data, many of these sites try to provide consumers with the spectrum of price options for a given procedure or visit.

And some already try to give consumers more context – such as physician ratings, outcome data when available and patient reviews. That information may not necessarily give patients more insight into their risk around a particular kind of medication or procedure, but it’s a start.

  1. This is a hot-button issue and is piece of the healthcare customer service situation that covers pricing transparency, consumer education and even simple things like presenting a patient with clearly delineated choices based on cost and risk.

    We wrote about it here: http://successfulworkplace.com/2012/12/26/the-real-customer-of-healthcare/

    This broad issue of customer service is a very hot topic on discussion forums with passion on both sides of the issue. I, for one, am very glad we’re having this national (and international) debate.

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  2. Michael Sinsheimer Saturday, January 5, 2013

    Interesting findings – price perception now has another element which is “risk” as you say – this is similar to price perception where low prices are sometimes associated with low quality. Transparency is a good thing, but for the most part, healthcare still hasn’t really moved to consumerism due to third-party payer’s paying a major percentage of all health bills which leads to the moral hazard of “patients” relying on other people’s money so driving up cost. It is getting better, but still a long, long way to go.

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  3. Good article on the future of health care consumerism! 2 points of clarification. Castlight Health works with employers. It is the most robust transparency platform mentioned, but unless your employer has a contract with them, you can’t use their service. Okcopay is probably the largest provider of health pricing yet they are not mentioned here.

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  4. Until all purchasers of health services pay the same price for the same service, all the data in the world will remain useless. My health insurance company typically pays 40% of the stated price on the billing from the care provider. Individuals will never get that favored pricing, so they will never have a sound basis for decision making, or indeed, the ability to make sound decisions at all. If you only have $25, it doesn’t matter how safe you want to be. If you can not afford $125 for a vaccine, you will not pay it.

    It won’t be a consumer based system until we see physicians advertising “gall bladder surgeries, this week only, $18,000. financing available with approved credit.” The third party payer also provides moral coverage to providers, so they don’t have to say “Sorry, no treatment for you because we don’t think you can pay.”

    Everybody needs health care. Nobody needs health insurance. We need a system that provides care for everyone, manages costs equitably and doesn’t see anyones illness as a profit center.

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