Andy Larsen: Understanding health care costs — and why knowing what something costs isn’t enough

More information would help, but only 8 of 20 hospitals in Utah studied by a patient rights group were fully compliant with federal cost transparency rules.

(Leah Hogsten | The Salt Lake Tribune) Utah Valley Hospital in Provo, Feb. 7, 2023. The hospital was one of 12 of 20 studied in Utah that were noncompliant with federal health care cost transparency reporting requirements, according to PatientRightsAdvocate.org.

We just got out of our open enrollment period at The Tribune, and I wasn’t especially happy with what I saw this year.

To The Tribune’s credit, our health insurance plan premiums didn’t rise. But everything else was bad news. You see, the deductible rose significantly — by 66% year-over-year. And just as bad, the amount of each procedure our insurance would pay for dropped by 10 percentage points, nearly across the board. Not great, Bob.

I tell you this not to try to garner sympathy, but out of empathy for you all. It turns out most Americans, like me, saw significant increases this year in their deductibles and/or out-of-pocket expenses as businesses tried to keep premiums equal, according to Mercer’s National Survey of Employer-Sponsored Health Plans. Mercer also expects even larger jumps moving forward.

That means that you and I likely bear a larger burden of our health-care costs than we did last year. And that’s made me more interested in exactly how much those medical procedures, exams, and prescriptions cost. Unfortunately, health care billing is a topsy-turvy world where even the solutions seem to cause problems. I’ll show you what I mean.

Cost transparency resources

The good news is that there are significant resources available in Utah for finding out the cost of health care procedures.

First, Utah is one of 18 states in the nation with an established all-payer claim database (ABCD). The idea here is pretty cool. Essentially, every bill sent to a health care insurer is logged into one massive database, which then researchers can work with to answer all sorts of healthcare questions: which procedures are being done most often, which medications are given and when, how much each procedure costs, which hospitals and doctors are most and least expensive, and so on. We love data, and this is great data!

The most complete representation of this data I was able to find is at the state’s open-data website from 2021, posted in one big Excel spreadsheet at the end of 2022. That sheet is huge — 141,000 rows — and really tough to use. Put simply, different hospitals bill the same procedure or set of procedures differently, making it really difficult to compare apples to apples.

Unsurprisingly, the most common procedures were COVID-19 tests. The most expensive line item on the list is when Primary Children’s Hospital delivers a dose of nusinersen — a spinal muscular atrophy treatment. On average, the hospital charged $120,000 for the procedure in 2021.

Or consider “total knee arthroplasties” — total knee replacements. At various hospitals in Utah, those run anywhere from $22,000 to $124,000 when the costs were totaled up.

Still, the size and difficult comparisons make this data unwieldy. So the State Auditor’s office tried to come up with a solution for people to more easily access health care price information: healthcost.utah.gov. You can go on there, chose one of 177 procedures or exams, and see what it will cost you from various doctors and hospitals. For example, a strep infection test can cost anywhere from $5 to $124 — because seemingly everything goes in medical billing.

The biggest problem is that the data on the website is now pretty old: best case it’s from the first half of 2020, worst case it’s from 2018. As we know, medical costs have exploded in those last 3 to 5 years. Also, if you want something done outside of those limited procedures, you won’t find information about it there.

If you want more recent information, sometimes the best source is the hospitals themselves. You can go to healthcare.utah.edu/pricing for the University of Utah Health Care system or intermountainhealthcare.org/patient-tools/hospital-cost-estimates/ for Intermountain Health Hospitals, enter in some information about you and your insurance, and get an estimate of what a procedure will cost.

Unfortunately, only 8 out of 20 hospitals in Utah studied by PatientRightsAdvocate.org in Feb. 2023 were fully compliant with federal cost transparency rules.

The problems

In announcing the healthcost.utah.gov, State Auditor John Dougall explained his primary use case for the site: people shopping around for the best price on a given medical procedure.

The problem is that this doesn’t actually happen all that often.

Most folks don’t get much of a choice where they get their medical procedures done. In emergency situations, hospital proximity probably matters most. In non-emergency situations, people go to where they can get their costs somewhat covered by their insurance — in most plans, most local hospitals or doctors are out-of-network and therefore practically off limits.

Interestingly, where the site has gotten most traction is in its cannibis section, where 15,000+ users have looked for prices on medical marijuana. That makes sense, given how many people don’t use insurance to pay for that product in particular.

Dougall also hoped that primary-care providers would be able to use the site to smartly refer their patients to doctors or procedures that fit their budget. That doesn’t seem to be happening much either, though — they seem to be relatively disappointed with the number of people using the website so far. Again, the insurance exclusivity issue strikes here, and so too do the incentives of providers. They’re probably incentivized more to get their clients care they feel comfortable in referring rather than those that are cheapest.

These problems aren’t unique to Utah. As these states have instituted these massive all-payer claim databases and other items promoting transparency, one of the major goals was to push down the cost of health care. The thinking goes that, with transparency, hospitals will be susceptible to free-market influences of competition, and maybe be forced to charge less for their services or risk going under. You know, like a normal business.

That hasn’t happened. In fact, a Nov. 2022 study entitled “The impact of price transparency and competition on hospital costs: a research on all-payer claims databases” looked at exactly this issue. The results are pretty damning.

First, the study found that states with All-Payer Claim Databases (APCDs) tend to have higher health care prices than states without them — the opposite of what you’d hope.

Maybe that’s getting the correlation direction wrong: states with more expensive healthcare try to solve the problem by making APCDs, rather than the APCDs are pushing health care more expensive. Or maybe, hospital system administrators are looking at the APCDs and seeing what they can get away with charging. Regardless, it’s not great.

Second, researchers found that states with weak market competition and no APCD at all actually had the lowest hospital costs. In fact, “market consolidation helped coordinate care more effectively, economize operating costs, and enjoy economies of scale due to their large size,” they say. In other words, competition simply doesn’t seem to make hospital costs cheaper, according to this study.

Now, listen: I love data. From an early age, I’ve always loved numbers. I was a math major. I am a data columnist for The Tribune. But the research — and frankly, consideration of the dynamics and incentives here — seems to indicate that the cost of health care isn’t really a problem data transparency can get us out of. Cost simply usually can’t be a factor in the health care decision making process, and so the bills can spiral without much consequence to anyone save regular people like you and me.

That creates a problem for groups like the Utah Health Data Committee, and the State Auditor’s aforementioned Health Care Price Transparency Tool. You see, the state Legislature has slated both to sunset on July 1, 2024. While this sounds harsh, this seems to be a relatively standard procedure where committees and projects have to show effectiveness to continue receiving funding.

In the Legislature’s most recent Health and Human Services committee meeting, these programs’ proposed end was largely glossed over, but I’m told the committee’s June meeting will further address the issues. In their last meeting, the experts on the Utah Health Data Committee seemed relatively certain they’d be getting funding again — and I certainly hope so, too. It’s good to collect this data so that we understand the state of healthcare in Utah. The Utah Health Data Committee also does much more than just its transparency initiatives.

But we also have to understand the limitations of the free-market approach to reducing health care costs. Put simply, it isn’t working, and doesn’t seem likely to work moving forward. In order for health care costs to become reasonable, our current system simply has to significantly change.

Progress hasn’t been made on this issue in a long time, nor does it seem to be top priority for our lawmakers. I figure our newly increased deductibles are here to stay. So, too, will health care costs keep spiraling.

Will we stop the cycle and make real change? I’m not holding my breath. After all, that might cost me a trip to the hospital — and I can’t afford that.

Andy Larsen is a data columnist for The Salt Lake Tribune. You can reach him at alarsen@sltrib.com.

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