Legislative Document 1305, “An Act To Encourage Health Insurance Consumers To Comparison Shop for Health Care Procedures and Treatment,” is sponsored by Senator Rod Whittemore.
If you’ve been paying attention to the news, or your own medical bills, you know that health care in Maine is exorbitantly expensive. In 2013, the average monthly premium in the individual market was $335.61, a 12 percent increase since 2010. In 2014, per capita health expenditures in Maine — including hospital, dental, paramedical, and nursing home care — reached $7,289, ranking us 9th in the country.
In addition to overall cost, a great deal of price variation exists between medical care providers in Maine. Data made publicly available last year by the Maine Health Data Organization (MHDO) revealed that different facilities often charge vastly divergent prices for identical services. For instance, a CT scan of the head or brain costs between $363 and $1,405, depending on where it is done. Similarly, the cost of a Cesarean delivery can range from $13,746 to $27,515. Virtually every procedure for which the MHDO collects data exhibits similar variation.
Unfortunately, because of the dizzying complexity of health care financing and the indirect nature of patient involvement, very few people pay attention to these price disparities. Nearly all privately insured Mainers have access to price transparency tools through their carrier; they just don’t use them. Since insurance companies bear the brunt of medical costs, enrollees have little motivation to seek affordable care. Yet those additional costs, inevitably, are passed down to the consumer in the forms of ever-increasing premiums and deductibles.
Policymakers of every political stripe agree that something must be done to curb medical costs. If health care cost inflation continues to outpace the growth of personal income, Mainers will increasingly be forced to choose between medical care and other basic necessities.
Legislative Document 1305, which has earned the support of both Republicans and Democrats, promises to hold providers accountable for high prices by empowering consumers with the knowledge and incentives to comparison shop for medical care.
The bill would enact two simple but powerful reforms to our health care system.
First, it would require insurance carriers to provide financial incentives to enrollees to shop for high-quality, low-cost care. The payment to the enrollee would be at least 40% of the difference between the average amount paid for the medical service by the carrier and the cost of the enrollee’s procedure.
For example, suppose that a particular lab test costs, on average, $400. An enrollee, using her insurance carrier’s price transparency tool, might discover a provider that charges only $200. By choosing that provider, the enrollee would earn at least $80 (40 percent of the $200 saved) and the carrier would economize the remainder, or $120.
As consumers become more alert to cost variation, and as competition is fostered between providers, overall medical costs will decline, as well as insurance premiums. The Office of Fiscal and Program Review, the nonpartisan research arm of the Maine Legislature, predicted that “any savings would accrue to insurers, participants and eventually the State through lower premiums.”
Nor is this an untested idea. Though Maine would become a national leader by establishing shopping incentives, shared savings programs – which have been adopted by self-insured companies in Maine and by employers across the country – have operated successfully for years, saving patients millions of dollars.
LD 1305 would also allow patients to visit out-of-network providers who offer lower cost care without losing the cost sharing benefits of their insurance plans. In other words, expenses for out-of-network providers that cost less than average would be processed in the same manner as expenses for in-network ones, and enrollees would benefit from their usual copayment and coinsurance rates. This provision will help low-cost, high-quality independent practitioners while expanding patients’ options.
Sensible healthcare reform doesn’t have to be complicated or contentious. LD 1305 represents the basic principles that help any economic system thrive: transparency, consumer protection, and healthy competition.