Stateline Story

Let There Be Light

  • April 29, 2005
  • By Raymond C. Scheppach

The new catch phrase for health care reform is "consumer-driven health care." This conceptual approach puts power in the hands of consumers rather than providers. Will it work? Time will tell. Studies show about 70 percent of an individual's health condition can be attributed to environmental and behavioral factors, such as smoking and drinking, over which individuals have control. Meanwhile, individual out-of-pocket expenses are a growing share of health care costs due to increasing deductibles, co-payments and tax-favored health savings accounts. Thus, the theory holds that consumers can reduce costs by effectively managing their own health care. For example, a recent Rand experiment showed consumers actually reduced their utilization by 20 percent when there was a 25 percent co-pay for certain services, such as routine doctor's visits.

For this consumer-driven theory to work effectively and fairly in the real world, it requires transparency in the health care marketplace. What do I mean by transparency? Let me offer some relevant examples. Before ever setting foot in a grocery store or a car dealership, individual consumers know, or at least have the ability to unearth, the actual or suggested retail price on the product they want to purchase. Moreover, more often than not, these consumers can determine the quality of the product by checking with independent and knowledgeable third-party sources, companies like Consumer Reports, cnet.com and J.D. Power. Those really savvy shoppers can even check out the technical specifications for the computer, television or digital camera they have had their eyes on before actually making the purchase. As the saying goes, "knowledge is power."

Unfortunately, almost no such transparency exists in the health care marketplace. An individual can, at least most of the time, determine the cost of his or her health care insurance plan. However, most Americans have no sense of the price of a routine doctor's office visit or the average cost of heart by-pass surgery. Perhaps more importantly, there is virtually no accurate or easy way for consumers to measure the quality of their local hospitals. Even critical information maintained by state medical societies regarding physician's medical schools, residencies and certifications is often not complete, let alone up to date. All of these factors severely limit the transparency of even the most basic health care information.

Over the last several years, states, the federal government and even hospitals have begun to shed more light on prices and quality measures. For instance, Maine Gov. John Baldacci signed the Dirigo Health Reform Act into law in 2003. The act has not only increased access to health care, it also has reduced health care costs while enhancing quality. A simple but critical part of this act is it requires hospitals and providers to disclose average charges for 15 different in-patient and 20 different out-patient services. The act also created a Maine Quality forum to better disseminate quality information to the public.

Recently, the federal government has also displayed important leadership in this area. Two years ago, the U.S. Department of Health and Human Services (HHS) required all nursing home inspectors to report eight measures of chronic care, including, such as accidents and patient abuse. More recently, the Center for Medicare and Medicaid Services (CMS) created a new Web site that enables consumers to compare hospital's performance on 17 clinical measures for heart attacks, heart failure and pneumonia. Building on the initial success of this project, CMS hopes to expand its scope with additional quality measures in the future.

The Wall Street Journal recently reported on the Dartmouth-Hitchcock Medical Center's decision to disclose their success rates for medical treatments. To their credit, Dartmouth is publishing these rates despite the fact some of their success rates fall below national averages. Dartmouth Medical School pioneered the concept of "shared decision making" as a way to offer unbiased information on quality, costs and patient satisfaction. Common sense and consumer friendly health care -- imagine that.

Now that Maine, HHS and a select few hospital systems have elevated the transparency issue in the health care market place, it is critical for states to meet the challenge and become the driving forces this issue. States should not only require publication of price information, quality measures for all providers and patient satisfaction information as well. In today's Internet age, all this information can and should be on a state-operated consumer-friendly Web site.

Given the states' fiscal crisis over the last several years, states have focused on managing the rate of increase in the Medicaid program. While this remains critical, it is now important for states to focus on slowing the rate of increase in all health care costs while enhancing quality of care. Given the regional nature of health care, it is important for providers and states to work together to develop tailored and targeted approaches that meet the needs of all affected parties. At a time when employers continue to shift more of the cost to their workers, it is vital consumers have objective information to make thoughtful and informed decisions that will reduce utilization as well as costs. While no one knows for sure whether a market system will work in health care, it is vitally important for states to fill their traditional roles as "laboratories" for change and innovation. We do know, however, that without transparency no market will ever work. Let there be light.

Raymond C. Scheppach, Ph.D., is the executive director of the National Governors Association. The views expressed here are his own and do not necessarily reflect those of the National Governors Association.