KELSEY CHALMERS and LESLEY RUSSELL. The National Strategy to Reduce OOP costs: will price transparency work?

Jun 25, 2019

Reducing patients’ out of pocket (OOP) costs is a major issue for the health policy agenda. But what are the chances that solutions to provide real relief for patients will emerge?

Tackling this wicked problem was a feature of Labor’s budget response and election campaign. But the Morrison Government does not seem galvanised by patients’ concerns and to date has offered only small reparations: a website that will provide information about specialists’ fees, and the slow unfreezing of the indexation of Medicare rebates (with no guarantee this will lead to a reduction in OOP costs).

In fairness to the Minister for Health, Greg Hunt, the Ministerial Advisory Committee on Out-of-Pocket Costs which he set up to provide recommendations on this issue didn’t give him lots of advice. The Committee’s 2018 report made only two very limited recommendations: a Government-funded website to provide information about individual medical specialists’ costs for most common services and the range of specialists’ costs for these services; and education for consumers, GPs and medical specialists to improve their understanding of OOP costs and aid in the referral process.

While price transparency is an important factor in reducing OOP costs, it cannot provide the sole remedy. It’s worth exploring why.

We have a fairly clear idea why price “opaqueness” exists. The healthcare system is complex with public and private providers and public and private payers. Australian doctors are free to set their own fees without constraint. These fees can vary for different patients as some doctors’ fees are based on what they believe the patient is able to pay. In addition, some surgeons and obstetricians charge “booking fees” or “administration fees”, payable before hospitalisation.

Hospital patients with private health insurance (PHI) too often encounter unexpected costs that arise from failure to understand what their policy covers and a slew of costs beyond those of the specialists they see – costs for medical devices and services such as diagnostic imaging, pathology and rehabilitation. Patients’ care is typically provided by more than one doctor (eg anaesthetist, surgeon, assisting doctors) who charge separately. All this complexity makes it difficult to predict a patient’s total OOP costs for an episode of care.

Add to this the following facts: that too often patients don’t have informed financial consent, often because they are too afraid to ask; that they must rely on their GP for guidance about the relative skills of their surgeon; and that it is difficult to access and understand the evidence supporting the necessity and likely outcomes of the treatment they are offered. Moreover, price is no guide. There is no relationship between the fees charged and the outcome and the most expensive doctor does not necessarily deliver the best care and results.

In April 2018, while the Ministerial Advisory Committee was still in consultation, the Consumers Health Forum released the results of their survey on OOP costs. This survey highlighted the pain of OOP costs for patients battling life-threatening illness. More than one quarter of cancer patients in this survey reported OOP costs of more than $10,000. Well over one third of respondents said that no-one had discussed with them the possibility that they may face significant OOP costs and that they had the right to shop around.

In late May 2018, the TV program Four Corners aired their investigation of OOP costs, Mind the Gap:

“You live in this world where you have Medicare, a universal health fund, and you’ve got a private health fund, you’re paying into that substantial fees, and low and behold, you’re $18,000 out of pocket when you have one operation.” – patient

The program called for price transparency and mechanisms to ensure informed financial consent. This was echoed in the following days in media releases from PHI funds, most of which have developed their own online tools on average OOP costs for procedures.

Four corners urged patients to shop around and negotiate fees. That’s the principle behind the website the Health Minister has promised. Patients and their referring GPs could use this website to make financially informed choices. It could potentially lead to competition on price between specialists and help to drive down some of the more outrageous fees.

But buying healthcare is not the same as buying a car. The Australian Healthcare and Hospitals Association summed it up this way:

“While commentators on the 4 Corners program urged patients to “shop around” and negotiate on fees, it can be very difficult for people to negotiate fees with their doctors, particularly when they are very unwell and with the limited information currently available about what might be a reasonable fee.”

Furthermore, there is no information available on the price of quality care and no ability to assess this for individual doctors (although the MyHospitals website does provide some quality and safety indicators and other relevant data for hospitals).

The proposed new government price transparency website may achieve an ethical goal where the system is currently failing: patients knowing the cost of their care prior to receiving treatment (although it is unlikely capture all costs for more complex care). The proposed templates in the Ministerial report (developed by a consulting group and updated with specialist and consumer feedback) would provide a specialist’s charges for the most common MBS items they use, with a description of the service, and a list of the usual colleagues they work with so patients can additionally find out what anaesthetists’ charges will be and so on.

But there are very real risks that this website will not fulfill even this limited mission. One risk the Committee identified in their report is that specialists won’t participate in entering their data. The Committee recommended an opt-out or mandatory system as a last resort and suggested that specialists will feel like they need to compete with others that have listed their data.

Another risk is the extent to which GPs and patients will use the website – which is probably why an “education campaign” has been proposed.

There is evidence from the United States to show very little uptake of some price transparency tools. New Hampshire’s HealthCost website was accessed by less than 1 percent of the state’s residents, and the cost information websites of two insurance groups were accessed by only 10 percent and 3.5 percent of their members. One large survey of American patients found that, of those with OOP costs, only 13 percent reported seeking information on OOP costs, and only 3 percent compared costs across providers. There is little reason to believe that Australians will behave dramatically differently.

The willingness of busy GPs to use the website as part of their referral decisions is likewise suspect. GPs have their own networks and beliefs about who the “quality” specialists are. Their referral decisions may not be based on the resultant OOP costs for the patient – although there is anecdotal evidence that these are taken into account, especially if the patient raises the issue. But GPs are notoriously time poor and comparing specialists’ fees may be asking too much of them. There were no representatives from the Royal Australian College of General Practitioners on the OOP costs Advisory Committee, a serious omission considering that the success of the proposed website appears to rest substantially on its use by GPs.

A further risk is that the website will not actually reduce costs. New Hampshire’s HealthCost program delivered no reduction in price variation between hospital outpatient departments. Program directors believed this was because of weak provider competition and the unwillingness of patients to travel further for a cheaper price. It is not hard to picture similar things happening in Australia where the density of specialists is low outside metropolitan areas. Additionally, in Australia there are substantial OOP costs involved in seeking a second or third opinion from a specialist and often delays in getting an appointment.

The provision of information which may or may not facilitate the ability to shop around for specialist care will not automatically lead to reductions in OOP costs across the board (although this does appear to the be the goal of the Health Minister’s National Strategy to Tackle Specialist Out of Pocket Costs).

Will price transparency drive patients away from the most expensive doctors? Will it lead to naming and shaming and peer pressure to reduce the outrageously high fees that rogue surgeons are charging? The evidence for this is lacking. Indeed, it is possible that some specialists will increase their fees when they see what others are charging and what the market will bear.

“Price transparency” is a noble goal in itself, because patients have a right to be informed about their costs. Unexpected bills and a lack of informed financial consent (and no information about alternatives) harm patients and trust in the system. But all the evidence suggests that achieving sustained reductions in OOP healthcare costs will require a multifaceted approach that includes substantial reforms in what Medicare pays for and how, and the development of a social contract between doctors and Medicare that requires due consideration of the cost of their fees to their patients.

Kelsey Chalmers has recently completed her PhD at the Menzies Centre for Health Policy at the University of Sydney.

Dr Lesley Russell is an Adjunct Associate Professor at the Menzies Centre for Health Policy.

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