You Paid What?: Improving Transparency About Health Care Costs

Human beings are naturally curious. We like to look at each other’s Facebook pictures and see inside each other’s homes (the rise of HGTV certainly proves that). We also like to know what other people pay for their cars, what our coworkers earn and how much our neighbors and friends pay for their health care.

Those instincts aren’t just about being nosy: financial transparency helps us figure out what’s fair. Having an accurate idea of the going rate for services and goods keeps people from being exploited and overcharged. That’s a mission all average Americans can get behind, especially if it helps keep down health care costs.

In 2012, Massachusetts lawmakers made a commitment to create a fairer health care marketplace by passing into law Chapter 224 of the Acts of 2012. One of the goals of the law (called “An Act Improving the Quality of Health Care and Reducing Costs Through Increased Transparency, Efficiency and Innovation,”) was to give consumers access to more data about health care costs. Under Chapter 224, all health plans and third-party administrators in Massachusetts must give consumers the estimated cost of a procedure or other medical service in advance, when the consumer requests it.

The law makes a few other provisions related to transparency, but it didn’t create the sweeping change that some patients and advocates wanted. Consumers can find out how much their services will cost, but don’t have an easy way to find out how much those services cost in neighboring counties or in other parts of Massachusetts. So while your friend in Barnstable county might be able to find out that a given test will cost her $600 out-of-pocket, she probably won’t realize that the same test would cost only $150 if she lived in Worcester.

A recent study done by the Pioneer Institute for Public Policy Research and compiled by Scott Haller demonstrates just how great the cost disparities are across Massachusetts. Pioneer surveyed 23 hospitals around the state to find out the cost of an MRI of the knee at each one. The maximum allowed amounts – how much a plan will agree to pay for a given service – ranged from $744 in Franklin to $4,724 in Suffolk. Out-of-pocket maximums – how much of the allowed amounts that the patient was responsible for – ranged from $744 to $4,479.

These results shed a bright light on just how inconsistent medical costs are across the state. (One interesting tidbit? Nantucket is not the place to be if you need an MRI of the knee – the average allowed amount there was 367% higher than the next most-expensive county!) It’s disheartening to find out, after paying a hefty bill for a procedure, that you paid more than was truly necessary.

So what’s a cost-conscious consumer to do? For one thing, take advantage of the Chapter 224 provision that requires your health plan to provide a cost estimate for any services before you get them. Self-funded insurers should be educating plan members about the options available to them and encouraging them to seek out price transparency from their health care providers.

The health care market is confusing and complicated, but any steps we can all take to make things easier and more affordable are steps worth taking. Contact us with any questions!