COMMENTARY: How to give patients a right to save on health care

Shopping around has never been easier. With a few clicks, consumers can easily find deals on flights, get multiple quotes on car insurance or price-match items in their local shopping mall.

Yet when it comes to spending money on something really important — their health — consumers are largely in the dark.

Federal rules that took effect last year were supposed to address this problem by requiring hospitals to publish the prices of 300 common services. The goal was to make health care more like other markets, where prices are transparent and consumers can shop around for the best value.

Unfortunately, few hospitals are complying with the law. A recent study found that nearly 85 percent of hospitals have failed to publish their rates as directed by the federal government. Even when they do, hospitals often use nonstandard abbreviations and publish their files in different formats, which makes it hard to compare prices.

This opaque system allows hospitals to charge patients wildly different prices. One Indiana hospital charges three times what another hospital 30 minutes away does for the exact same knee replacement surgery.

Researchers at Johns Hopkins found that some hospitals charge out-of-network patients and the uninsured more than 10 times what Medicare pays for the same medical services.

It shouldn’t take a degree in medicine — or accounting — to figure out what a surgery will cost. The federal government has issued more than 350 warning letters to hospitals that are not following price transparency rules. But just two hospitals have been fined for noncompliance.

Enforcing price transparency rules is an important first step to driving down health care costs and improving quality. But knowledge of prices alone may not be enough to compel people to shop around.

As long as insurers pick up most of the tab, patients are likely to select providers based on factors such as convenience or perceived quality. Typical cost-sharing structures offer them little incentive to pick a less expensive provider or one with a history of fewer complications or lower long-term cost.

Patient choice is also limited by provider networks. Patients can have reams of information about hospital prices. But if the best value is offered by a provider outside their network, they may not be able to select them unless they’re willing to bear the cost alone.

Worse, those out-of-pocket costs wouldn’t apply to their deductible, even if they chose a provider that would have charged their insurer less than an in-network provider.

A new report from the Cicero Institute, a Texas-based think tank, proposes a novel way to address these problems. They call it the Patient’s Right to Save Act. It would reward patients and providers alike for seeking the best value for care.

They start from what should be the status quo — with providers publishing their prices for cash-paying customers, which are on average 39 percent less than what insurers pay.

To encourage patients to shop around beyond their provider network, Patient’s Right to Save would allow them to credit the cost of care against their deductible and out-of-pocket maximum, as long as it’s lower than their plan’s lowest in-network rate.

Once the patient has reached his or her deductible, insurers would split any savings secured by a patient opting for a lower-cost provider. So a patient who finds a provider that charges $10,000 less than his or her insurer’s lowest in-network rate would receive a $5,000 payment. The insurer, of course, would be $5,000 better off as well.

This structure would also benefit providers by allowing them to compete on price in an open market. No longer would they have to go through tense negotiations to stay in an insurer’s network or worry about losing patients to the big hospital conglomerates that tend to dominate provider networks.

Instead, independent providers could leverage their advantages — say, lower overhead or quicker service — to attract patients from across insurance plans.

Price transparency in the health care market is long overdue. Once that information is readily available, we need to empower patients to act on it.

The Patient’s Right to Save Act offers a blueprint for creating a more competitive health care marketplace that lowers costs for patients and rewards providers for delivering better value.

Sally C. Pipes is president, CEO and Thomas W. Smith fellow in health care policy at the Pacific Research Institute. Follow her on Twitter @sallypipes.