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How Much Should a Knee Replacement Cost?

On March 10, 2016, I presented to a group of health plan marketing professionals at the World Congress Health Plan Conference in Orlando, FL. My audience was filled with people who work at insurance carriers throughout the country and whose responsibilities are to translate health insurance language to consumers.  I have to say that this is an incredibly challenging position to be in.  First, health insurance language is not like regular English.  It is filled with idioms, jargon, and concepts so confusing that it would make a CPA blush.  Second, consumers have never been trained to care about health insurance.  If you were covered, you were good. In fact, that was the strongest messaging that came from the roll-out of the Affordable Care Act.  The ACA extended coverage to an entire population of Americans that could otherwise never have afforded health insurance, which is great. However, it never prepared these people with the knowledge of how to use that coverage.  How to deal with a $1,500 deductible.  How to budget for an emergency.  How to shop for care.

My presentation was focused on “Health Transparency” which is a jargon-y word in health care circles that essentially means consumers understand how much they would have to pay for getting care.  Transparency has become the new hotness in health care, as a solution to the problem of pricing variation, having a procedure cost $200 at one location and $5,000 at another for the exact same thing.  The idea is that if a smart consumer did a bit of price comparison shopping online or via a phone app that they would simply just pick the option with the best value.  Here value means a balance of price and quality of care.  I believe that this is simply not the case.

Consumers are currently unable to make this type of buying decision for a few reasons.  1) It is easier to find instructions on how to perform a knee replacement than it is to find the price you’d pay for it. 2) Price is not standardized and how it is presented to a consumer is extremely confusing.  For example, a knee replacement would not just include the price for the surgery, it would also include the price for the facility, the anesthesia, the post-care, and physical therapy.  3) Quality is an ambiguous word.  Does it mean hospital safety? The surgeon’s expertise? Customer reviews? These are all equally valid ways to measure quality and there are many more.  What combination of these factors would best help a patient make a decision?

I believe that health transparency can be a game-changer in the buying and delivery of care. It has potential to reduce price variation, encourage providers to focus on quality, and truly put the power of buying into the hands of the patient.  However, health plans, vendors, and employers need to help educate and define what the right pathway is for a patient.  Not only how do I use transparency, but how do I optimize it? We all make bad purchases from time to time, like my last car which was a recall machine.  However, for health, we finally have the tools to make better purchases.  Now we need to educate the consumer on what that means for them.