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Dr. Eric Bricker is the medical director at Compass, a Dallas-based company that helps individuals with high-deductible insurance plans. In a previous job, Bricker was a finance consultant for hospitals, giving him firsthand knowledge of how health insurance drives up prices. "When insurance companies and hospitals negotiate," says Bricker, "it's an exercise in horse trading." For example, an insurance company might let a hospital get away with charging $2,000 for an MRI, says Bricker. In exchange, the hospital agrees to charge the bargain price of $2,000 to deliver a baby. "You do that mixing and matching," says Bricker, "and at the end of the day it works out about even."
According to Bricker, this horse-trading method provides an opportunity for hospitals to earn windfall profits: If the hospital gets $2,000 for MRIs, it will start encouraging patients to get more MRIs.
Given how prices are set, it's no mystery why in health care high costs often correlate with low quality. Bricker cites one facility in Dallas, where a 3-tesla MRI (the more teslas, the higher the resolution) can be had for $860, while a nearby facility offers a 1.5-tesla MRI for $2,500. The latter facility stays in business only because many of its customers don't know the difference. They pay the same $20 co-pay wherever they go for an MRI.
So Bricker co-founded Compass, which works with about 1,200 firms to guide their employees to those doctors and testing facilities that offer both high quality and low prices. These employees have an incentive to seek out value because they're responsible for paying a large portion of their own routine medical costs before their insurance coverage kicks in.
High-threshold plans are exploding in popularity, which is a promising trend. According to a 2012 report by the Kaiser Family Foundation, about 31 percent of firms now offer health plans in which patients pay most routine costs out of pocket, like a Health Savings Account (HSA) or Health Reimbursement Arrangement (HRA), and 19 percent of covered workers have one of these plans. High-deductible plans go a long way towards unbundling our "payment plans for routine expenses" from the catastrophic coverage that should be the sole function of health insurance.
"These plans offer hope," says Scott Atlas, "because they drive patients to care about what things cost. High deductible policies also eliminate much of the administrative cost of insurance because there's no need to file claims for routine charges."
Obamacare imposes new mandates on high-deductible plans, but it doesn't outlaw them. "The most devastating thing Obamacare could have done is to say it's illegal to have a deductible of more than $200," says Bricker. "So within the existing confines we can still have a successful business and help people."
Americans with high-deductible policies still have the misfortune of shopping for services in a health care market dominated by traditional health insurance. Since insurance companies and the government still pay the vast majority of medical bills, it's nearly impossible to find doctors who offer competitive and transparent prices.
A Houston-based start up called Snap Health is trying to remedy that by signing up doctors to list their prices on its website. Currently, there are 290 tests and about 100 doctors to choose from. You can buy an EKG (about $35), have a kidney stone analyzed ($250), or get a heart check up (about $400). Patients choose the procedure they want, pay online with a credit card, and then show up for their appointments. Snap Health's CEO and Co-founder Dr. David Wong says the biggest obstacle to building up a menu of offerings is that doctors accustomed to getting paid by insurance companies have no idea how to price their services for direct-paying clients.
Wong says he launched his business partly on the belief that Obamacare will drive up health care costs, causing more and more companies and individuals to drop out and start paying their own health care bills. Neuhofel agrees that Obamacare could be good for business. "I expect some real unintended consequences after Obamacare is implemented. There could be more uninsured people."
Lisa Davidson plans to enter the state-based exchanges that Obamacare will put in place. She cites a provision in the Affordable Care Act that explicitly allows direct primary care practitioners to marry their services with a catastrophic plan and enter the exchanges, although the details of what will be permitted under the law haven't been hammered out yet.
Eric Bricker also sees opportunity to work within the Affordable Care Act. "Compass is trying to make lemonade out of lemons," he says. "I think you can incrementally make improvements within Obamacare, and the situation will change over time."
The efforts of these doctors and others will undoubtedly help constrain exploding health care costs and improve care. But it's hard to fathom how within the legal constraints of Obamacare we'll see the sort of innovations that could solve the very problems that, ironically, were used to justify Obamacare's passage. As economist John Cochrane puts it, without government meddling, health insurance would be "individual, portable, life‐long, guaranteed‐renewable, transferrable, [and] competitive." And going to the doctor would be as simple and straightforward as eating out. What needs to be done to get there is painfully obvious.