Might we ever see a bipartisan health care bill that addresses costs and receives unanimous legislative support? Although one emanating from Washington seems unlikely anytime soon, an innovative bipartisan health care bill — referred to as Right to Shop — unanimously passed the Maine Legislature in 2017 and merits a closer look.
Americans spend over $3 trillion a year on health care, with out-of-pocket costs to patients topping $353 billion in 2016. Yet the national debate on health care largely fails to tackle health care prices, including those increasingly paid by patients.
There is a growing concern that, without cost relief, individuals will struggle to maintain access to health care, and high costs will hurt employer hiring or their ability to afford the workers they have. This concern is hardly new. However, as federal reform has stalled, recent innovative actions in the states deserve more attention than they’ve received.
The Maine Right to Shop law begins by giving patients direct access to price information, enabling them to make informed decisions about costs of their care. It simultaneously incentivizes them to shop for high-quality, lower-cost providers by offering them financial rewards when they do so.
Maine’s bill was developed by a local lawmaker who was fed up with the rising cost of coverage at his small, family-owned business. He borrowed from initiatives promoting transparency in at least three other states — Arizona, Massachusetts, and New Hampshire — and cleverly coupled these with cash (or other) incentives to encourage patients to shop. This combination has already shown promising results with state employees and at large companies, but until this legislation, it was largely nonexistent for those at small companies or buying insurance on their own.
But will this work to lower health spending? Some have questioned the effectiveness of price transparency, and others have reported mixed outcomes with transparency alone. But this shouldn’t be surprising, because price transparency has rarely been coupled to meaningful incentives — like paying cash to patients who use high-value providers.
Today, most of us make online purchasing decisions to obtain savings of a few dollars. But remarkably, we remain indifferent to choices between care options whose prices differ by tens of thousands of dollars, despite numerous studies showing that higher health care prices do not correlate with better quality. Choosing the wrong provider might cost patients and the overall system more, with no improvement or even with lower quality care.
Until providers are incentivized to compete for patients based on both the cost and quality of care, the massive waste of resources produced by this predictable market failure is unlikely to be remediated. The Maine law is one approach that just might open the door to such developments.
In addition to transparent pricing and rewards, a third key feature of the Maine law allows out-of-network providers to compete for patients on a level playing field. In other words, you can see any provider you want out of network, as long as they are lower-cost. Together, these ingredients could set off a race to provide high-quality care at lower prices. In addition, this policy would provide a counterweight to the growing trend toward hospital consolidation and narrower insurer networks, both of which reduce patient options. Consolidation drives prices and expenditures higher.
By combining transparent prices that enable a patient to shop with financial rewards for accessing the best-value providers — independent of insurer network — incentives may finally align to improve quality and reduce cost of care.
Like many legislatively driven health care solutions, Maine’s new law certainly won’t solve all the problems in health care. But broader application of Right to Shop could catalyze innovation to improve both cost and quality. Indications of bipartisan interest in the Maine law on the part of state lawmakers across the country suggest this approach could help break today’s partisan health care legislative gridlock. Why? At the risk of overgeneralizing: Republicans are drawn to the potential for more competition and Democrats to greater access to care, and both like the outcome of lower costs.
Some incumbent providers will probably resist this change, fearing price competition, and insurers may claim this would burden them with added administrative costs. Yet without innovations like Right to Shop, we’ll be stuck with high prices and inconsistent quality — the worst possible combination.
In 2018, federal lawmakers would be wise to consider similar efforts by rewarding patients who can shop on both private and public-subsidized insurance, like Healthcare.gov, Medicare, and Medicaid. Without such sensible innovations, many patients, whether insured or not, will struggle to afford care. With respect to both cost and quality of health care, Maine’s new law could be just what the doctor ordered.Dr. Jeffrey S. Flier, former dean at Harvard Medical School, is distinguished service professor at the school. Josh Archambault is a senior fellow at the Foundation for Government Accountability and the Pioneer Institute.