Here are Lisa’s recommendations on things every consumer should do.

1.        Always review your medical bills. They’re notoriously riddled with errors. Be mindful of even minor charges, especially when it comes to hospital care. For example, one person reported that her grandfather was alone in the ICU and intubated (had a breathing tube and was unable to speak) when he was billed for making phone calls at 4 in the morning. Make sure you’re billed only for the days you were in the hospital, and that there are no duplicate charges for things such as doctor visits and tests and medicine you didn’t receive. If you find errors or discrepancies, immediately contact your doctor’s office manager or billing department, or the hospital where you received care.

2.        Confirm that your insurer paid the provider(s). If doctors or hospitals fail to bill the insurance company, if they do so improperly and/or you have more than one type of insurance, confusion can reign. Before paying anyone, find out if your providers have billed the proper insurance company for the procedure you received, and then determine how much the insurer paid.

3.        Don’t accept an insurance company’s denial of coverage without a fight. “No” doesn’t always mean “no”; sometimes it means “How willing are you to fight?” Thanks to the national health care reform of 2010, everyone has the legal right to appeal coverage denials. If the insurance company rules against you, it must explain why and provide information about how to obtain an independent review of your case. This right does not apply to grandfathered health insurance plans, which are explained hereThere’s evidence that appeals work: The Government Accountability Office (GAO) found that nearly 6 in 10 health insurance appeals were decided in favor of the patient. About 4 in 10 independently reviewed appeals were reversed in the patient’s favor.

4.        Negotiate. Most people are uncomfortable haggling over prices, whether it’s for heirloom tomatoes at the farmers’ market or health services from your doctor. But prices for medical care are not rigid. If you need a break, if you believe the cost is too high and especially if you have a high deductible or lack insurance altogether, seek financial relief directly from the source. Your case is stronger if you research in advance fair prices for the relevant medical service in your area.  Many health insurers have website pricing features. The Healthcare Blue Book is another pricing resource.

5.        Make sure you are using providers that are in your insurance network.  Using out of network providers can cost you a lot more in health care expenses.  Even though a PPO plan gives you the freedom to seek care outside of your insurer’s network, most people understand that doing so costs more money than seeing a doctor who holds a contract with your health plan, and who has agreed to treat patients at negotiated rates.  You can check the network status of a doctor or hospital with your insurance company – most allow you to access their list of providers online or distribute benefit booklets containing the information – but to be safe, you should call the provider directly to confirm that they are, indeed, in-network with your insurance company.  The key to receiving care from a provider that is contracted with your insurance company is in the questions you ask so be sure you ask the right question, “Are you contracted with my insurance company, or are you considered an in-network provider?”  What you want to determine is whether the doctor holds a legal contract with your insurance company that requires him or her to provide medical services at specific, agreed-upon rates.

If you receive health insurance from your employer, you may already have access to useful tools that help you understand health care costs, enable you to comparison shop for prices, and assist you with finding the best value ----before you visit a provider.  If this does not describe how you shop for health care services, you will know what I am talking about after you read this article.

AMERICANS spent $2.6 trillion on health care in 2010, a staggering 18% of GDP. Yet few of them have the faintest idea what any treatment costs or how it compares with any other treatment. Prices vary wildly and seemingly without reason. Insurance terms require a dictionary. For most Americans, buying a procedure is akin to choosing a house blindfolded, signing a mortgage in Aramaic, then discovering the price later. Slowly, however, this is changing.

The past decade has seen a shift in how people pay for medicine. Americans’ health spending is growing at a slower pace. This is partly because of the downturn, but not entirely. The rate of growth fell every year between 2002 and 2009, note David Knott and Rodney Zemmel of McKinsey & Company, a consultancy. There are many reasons for this—for example, many costly drugs have lost their patents. But spending habits also seem to be changing.

Most American workers receive health insurance through their employers. They typically shoulder the costs without realizing it. The more a company spends on health insurance, the less is left over to pay wages. Now employers are trying to give staff an incentive to think hard about costs.

Under “consumer-driven health plans”, workers must cough up part of the price of any treatment before their insurance coverage kicks in. Most have an untaxed account to spend on health; they think twice before depleting it. In 2006 only 10% of workers had to pay at least $1,000 before their insurer picked up the rest of the bill. By 2010 that share had more than tripled.

General Electric (GE) shifted its salaried employees into consumer-driven plans in 2010. It urged them to shop around for bargains, but they found this nearly impossible due to a lack of information. “People started saying: ‘If you want me to be an active consumer, I need to know prices,’” explains Virginia Proestakes, the head of GE’s benefits program. When employees asked doctors for prices, the doctors were baffled. They had no clue how much different insurers paid for the same procedure, or what share a patient would pay. A recent study by the Government Accountability Office (GAO), a public watchdog, reported similar problems.

Barack Obama’s health reform requires hospitals to list standard prices each year, and more than 30 states have either proposed or passed laws to promote price transparency, according to the GAO. None of these measures has come close to solving the problem. Few provide enough data to allow people to shop around.

So private firms are having a go. GE, for example, hired Thomson Reuters, an information firm, to show employees the cost of different services. Thomson Reuters analyses prices from prior purchases—by workers at GE and other firms—to show the cost of a given procedure at different hospitals and clinics.

Another company, Castlight Health of California, has made transparency its sole mission. Working with big firms, Castlight assembles data from past transactions so that employees can shop for doctors online and read reviews posted by patients. Castlight wants to do for health what Travelocity did for air travel, explains Giovanni Colella, the founder. Mr Colella’s co-founder is now the chief technology officer for Mr. Obama’s health department.

These plans face several obstacles. Health care is more complicated than flying. A traveler knows she wants to get from A to B, and that more or less any airline will get her there in one piece. So it is easy to rank air tickets by price. By contrast, someone with a heart problem may be unsure whether to pop pills, operate, change his diet or do nothing. Informed medical decisions require a ton of information.

To make matters worse, health insurers are reluctant to share data about costs, says Bobbi Coluni, who leads Thomson Reuters’s consumer-health unit. If an insurer has a contract to pay one hospital $7,000 for a caesarean and a contract to pay another hospital $10,000 for the same service, and this information leaks, the first hospital will lobby for a higher price. GE’s contracts with insurers stipulate that GE owns the data from workers’ past health purchases. But such agreements are rare.

Despite this, greater transparency seems inevitable. Smart insurers are hawking their own tools. Cigna uses Thomson Reuters’s technology to support its “cost of care estimator”. Aetna, another insurer, offers a sophisticated web tool that patients use more than 67,000 times a month. Meg McCabe of Aetna hopes that consumers will soon be able to use their smartphones to enter symptoms, find doctors, compare prices and schedule an appointment.

Such experiments will serve insurers well. If Mr. Obama’s health law stands, millions will soon shop for insurance on new exchanges. The easier the plan is to understand, the more people may pick it. A fully transparent market is years away. But a bit of sunlight is creeping in.

Health reform won’t stop providers from overcharging for care, only consumers can do that. Here’s my story of how I could have paid tens of thousands of dollars more for two minor outpatient surgical procedures, had I not understood how the healthcare system worked. It illustrates just how much we need a healthcare system with price transparency built in – something we will not get under the Affordable Care Act (ACA).

I am a doctor and the father of a 12 year old boy who has cerebral palsy. My son is fortunate to be healthy and active with minor medical needs. But as he has grown, he experienced some issues with contractures in his right lower leg which recently required a minor two hour outpatient surgical procedure.

When my son’s surgery was scheduled, I started getting price estimates from the surgeon, anesthesiologist and the facility, since we have a high deductible insurance plan. The physician’s fees were straight forward and relatively easy to obtain.

Not so with the facility. My son’s surgery was scheduled at the local hospital’s outpatient surgical facility which sent the procedure codes to an external reviewer. Three days later the reviewer came back at $37,000. The hospital referred me to my insurance company. The PPO network said that they could not reveal the prices until after the case was performed.

The hospital said it expected to discount the price, which would be in the range of $15,000 to $25,000.  Then I asked my son’s surgeon if he ever operated at any independent Ambulatory Surgical Centers (ASC). One phone call and 10 minutes later, I have the exact price for his surgery: $1,515.

Five years ago, there were virtually no tools that could help consumers figure out what they should pay for a healthcare. Today, with the availability of new technology and new methods to analyze claims data, service providers can develop tools that will help companies examine what different providers in their network charge for tests, procedures, treatments and services in their market.  With that knowledge in hand, they can find a fair price for what is needed. The better educated people are about what a fair price should be, the better equipped they are to talk with providers and facilities about fees before a procedure is done.

Customized tools are available for self-funded employer plans, so employees can search provider pricing within their own networks. We have found that even within the same plan the price for a routine test can vary by thousands of dollars.

ACA and Consumerism: No Price Transparency

Even after the Affordable Care Act, large gaps which cost consumers and self-funded employers a lot of money, must be addressed. The ACA does not address the wide disparity in healthcare pricing or encourage, much less mandate, pricing transparency.  While my case was an extreme situation of potential overcharge, there is still an enormous amount of price variability in the health care system, even within individual health plans. Employers and their employees will continue to pay way too much for common healthcare services, often as much as five times more than they should.

The ACA will also impact the ability to encourage consumerism in plan design.  Some of the provisions may foster consumerism such as the excise tax on rich benefits plans and the increased threshold for medical expense itemized deductions.  Other provisions will limit an employer’s ability to foster consumerism, such as the elimination of lifetime limits, the requirement to provide certain services at 100 percent coverage, and the limitations on Flexible Spending Accounts.

The ACA does not help employees or employers learn the real costs of care. The Massachusetts Attorney General report entitled Investigation of Health Care Cost Trends and Cost Drivers from January, 2010, provides a good overview of the wide variation in healthcare pricing and the factors that lead to it.  It says price variations are not correlated to quality of care, the sickness of the population being served, volume of Medicare or Medicaid patients, whether a provider offers services at an  academic teaching or research facility, or differences in hospital costs of delivering similar services at similar facilities. 

The report concluded that price variations are correlated to market leverage, as measured by the relative market position of the hospital or provider group, and then compared with other hospitals or provider groups in the local area.

Congress has considered other legislation (HR 4700, HR 2249, HR 4803) which would have addressed the transparency issue, but these bills did not make significant progress in passage. Employers are left to find their own solutions to these challenges.

Turning Employees into Educated Healthcare Consumers

Most employees don’t realize that if they use in-network providers the cost of their care could vary by over 500 percent depending on which in-network provider they choose.  If they need an MRI, they could get it for $500 at one imaging center and pay over $3,000 at another center.  Their colonoscopy might cost $950 at one location and over $3,500 at another.  The same holds true for almost every service they need. 

Why don’t they know? First, they don’t have any idea how much healthcare services should cost or what is the fair price they should pay.  Second, they are rarely told how much the service will cost before they get their care, and many times they don’t even realize that they can ask. Finally, many benefit designs with fixed co-payments remove patients need to know or care.

Even when employees have access to insurance company portals, these portals are rarely used and most don’t provide clear pricing information. 

When reviewing employee purchasing behavior, it is clear that the current system is not producing favorable results.  Most employees pay too much for care.  And this occurs regardless of employer location, insurance company or provider network.

Employers are consistently spending 4 to 15 percent more on healthcare than they would if their employees made value based care decisions. It is important to note that this spending is not for higher quality care.  Numerous studies have shown that higher healthcare prices do not indicate high quality care. Health reform has the potential to make this situation even worse as the push to create Accountable Care Organizations (ACO) encourages providers to consolidate.    Employers will need to carefully consider the value offered by new provider network arrangements, and ensure that they come with transparent offerings with respect to both quality and cost.

Effective Ways to Reduce Costs and Still Deliver Quality Care

Think of it as a cost/value gap. People would never knowingly overpay for a car or home. They would do research ahead of time, find out what current market rates are and approach the buying process as knowledgeable consumers. In healthcare, that’s unusual. Employers and employees can deliver the same value at a lower cost, if they approach the situation as educated consumers.

Employers are the key to solving the cost/value gap in healthcare.  Employers make the ultimate decisions regarding benefit designs that encourage consumerism, the networks that direct patients to high value providers, and the education and tools to support employees in selecting healthcare services.

Many employers have implemented wellness and disease management programs often with incentives for participation or even penalties for failure to engage in healthy behaviors.  However, when it comes to encouraging employees to make better choices about buying healthcare services, most employers have not supported or encouraged real consumerism. Here are a three methods that can help.

1.    Put consumerism into all health and wellness programs.    Every nurse or member of a call center support staff should have access to pricing and transparency tools needed to fully educate a patient on cost of care. There are tools available that show the range of prices charged by the health plans and providers in their network, so employees can make educated choices about which providers they should use. Why recommend an employee get a colonoscopy but not also suggest where they might get a high quality study at one-third the cost of some locations?  Employers could triple their cancer screening rates without spending any additional money if they design their programs correctly. 

2.    Make sure employers understand their network prices and quality variations. Employers should look at their data. They may be surprised at the variations and opportunities in price.  At a minimum, it may affect how benefits are designed. Some employers are even taking additional steps, such as setting up narrower networks to ensure their employees get the best care at the best price.

3.    Don’t be satisfied with just a provider directory.  Employers may want to rethink the traditional approach of the provider directory that places the providers first and may not even include pricing information.  To be effective consumers, employees must first know how much care should cost. Then they must have the ability to find providers who offer fair pricing.  Make sure this information isn’t hidden on a little used portal; put it at the employee desktop. Make it available in their hands in the doctor’s office by way of their mobile phones.  Make sure every nurse or health coach they talk to can support them.

The Affordable Care Act may not address health transparency issues, but there is no reason why, with t technological tools in hand, employees or medical professionals like myself for that matter, have to overpay for care. Employees that are given the chance to understand healthcare pricing, particularly under Consumer Directed Health Plans (CDHP), are often very appreciative of the results. More importantly, employers can achieve substantial savings that allow for continued health benefits at affordable rates.

About The Author

Dr. Jeffrey Rice is CEO of www.healthcarebluebook.com.

The Healthcare Blue Book provides employers with analytics to help them understand their provider network costs and comprehensive programs to support employees with healthcare consumerism.  The Healthcare Blue Book is a leader in supporting employers with high deductible health plans, consumer directed health plans and reference pricing.