North Carolina’s largest health insurer is proposing a solution to control runaway health care costs: paying people to use cheaper doctors and procedures.
Blue Cross and Blue Shield will offer customers between $25 and $500 per medical procedure for more than 100 procedures. The amount of the rebate depends on the procedure’s complexity and the cost savings of the cheaper option.
A Blue Cross spokesman pointed out that picking a cheaper option is more valuable than just the cash rebate.
“There is also the big cost-saving potential where you can shop, find a high-quality provider, and really reduce your out-of-pocket costs,” said Blue Cross spokesman Austin Vevurka.
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Insurers have for years sought to influence patient decisions through co-payments and high deductibles as a shared financial responsibility for medical costs. Blue Cross is taking the concept further by offering to share savings with the customer as a thank-you for reducing costs. In the past, this approach has been tried by financially rewarding doctors and hospitals for achieving cost savings.
Some health care experts are excited at the prospect of pulling back the veil on health care costs, saying that pricing transparency is long overdue. But others warn that using money to influence private medical decisions can be harmful, noting that not all doctors are equal.
“I would caution patients to be careful,” said Raleigh orthopedist Dr. Bradley Vaughn who operates at UNC Rex Hospital. “If someone saves $500 from a hip or knee replacement and suffers a serious complication, that $500 will be a drop in the bucket compared to all the misery they’ll experience.”
Blue Cross is offering the SmartShopper only to companies that pay for their employees health insurance and health care. In these instances, Blue Cross only administers the plan. There are nearly 400 such employers in North Carolina administered by Blue Cross and their plans cover nearly 1 million employees.
So far, 10 of those companies have opted to offer SmartShopper to their employees. Blue Cross, which covers 3.8 million people in the state, is not offering SmartShopper to patients on individual plans and other employer-sponsored policies at this time.
The State Health Plan, the largest Blue Cross customer in the state, has opted not to buy the SmartShopper service for the 727,000 state employees, teachers, retirees and dependents it insures. State Health Plan spokesman Frank Lester said the service “did not add any value.”
Nationwide, SmartShopper has generated more than $56 million in savings for employers and has paid out $6.7 million in cash incentives to employees in the United States in the past four years, according to Vitals, the New Jersey company that launched the technology in 2015. It’s used by 230 employers and more the 20 health plans with 2.5 million members around the country, company spokeswoman Rosie Mattio said.
Is it ethical?
Several medical ethicists praised SmartShopper as a technology that empowers the public on health care costs that have for far too long remained hidden in a black box.
“I like the idea of paying people to pay attention to what they’re doing because of the principle of responsibility — pay attention to the cost of your choices,” said Lance Stell, a retired philosophy professor at Davidson College who taught medical ethics to residents at Carolinas Medical Center. “We want patients to be empowered.”
And Dr. Peter Ubel, a physician and health sector management professor at Duke University’s Fuqua School of Business, made a different ethical point. “When a gastro-enterologist charges way more than another one down the street, nobody was raising ethical concerns about that, and yet you may be responsible for 20 percent of the cost.”
But others said that paying people to choose one doctor over another raises concerns of improperly influencing vulnerable patients.
Some ethicists have said that financial inducements are relative to one’s income and giving poor patients a financial incentive can amount to a form coercion. Len Fleck, a medical ethics and philosophy professor at the Center for Ethics at Michigan State University, cited a well-known 1980s study that looked at the effects of increasing a patient’s share of the medical costs through high deductibles. In that study, he said, half the people made bad health care decisions by avoiding medical treatment to save money.
“This approach has serious ethical deficiencies because the individuals who assume these risks are generally financially less well off,” Fleck said. “My concern is that this BCBS program might be vulnerable to some of the same ethical concerns. The financially less well off will take more risks,” if they see the chance for a $500 check.
Cost vs. quality?
Like other insurers that offer SmartShopper, Blue Cross will notify patients that rebates exceeding $600 a year count as taxable personal income. Currently no other insurers in North Carolina offer SmartShopper.
Blue Cross also advises patients to consult with their doctor on their medical decisions. There is no penalty for overriding SmartShopper and choosing a more expensive doctor.
One of the aspects of SmartShopper that makes health care professionals wary is that it lists all doctors in Blue Cross’s network as “high quality.” The claim doesn’t distinguish between a new and experienced doctor, or take into account the track record of surgeons who replace knees and hips.
“I know of surgeons on their plan who have lost their [practicing] privileges at hospitals but still were on the [health insurance] plan, how does that define quality?” said surgeon Dr. Michael Haglund, who specializes in spinal fusion procedures at Duke University Medical Center. “Still sounds pretty odd to me, just a way to pressure policy holders to choose to roll the dice with less qualified and not as highly ranked surgeons.”
Blue Cross defended its standards:
“While many studies have shown there is no correlation between cost and quality when it comes to health care, all doctors listed meet strict standards required to be part of the Blue Cross NC network, including verification of their credentials being in good standing and meeting state licensure requirements,” spokesman Vevurka said in a statement. “The costs listed also take quality measures into account as they represent the entire cost of the procedure, including such factors as efficiency, the length of hospital stay and the number of medical professional involved in the procedure.”
SmartShopper might make some employers balk, too. Employers and organizations like the State Health Plan have to pay between $2 and $4 per employee per month to give their employees access to SmartShopper, regardless of whether those employees use SmartShopper or not.
Blue Cross claims that employers will recoup $5 in savings on every $1 they invest in SmartShopper.
But many employees don’t use SmartShopper even if they have access to it. An undisclosed number of employees doesn’t bother to register on SmartShopper, and of those that do register, about 60 percent use it, said Mattio, the spokeswoman for Vitals.
In some cases a patient may not care how much health care costs, because the health insurer pays the bill. That’s where the cash rebate comes in — to give patients an incentive to choose the cheaper option even if they don’t directly benefit.
SmartShopper pays cash rebates on more than 100 medical procedures, including colonoscopies, angioplasties, hernia repairs knee and hip replacements, and a variety of MRI scans and CT scans.
Blue Cross’s data shows that costs can fluctuate wildly on routine procedures in the Triangle. For example, the cost of a colonoscopy with biopsy can range from $1,180 to $6,658 locally. Within a 25-mile drive of Raleigh, the cost of a knee replacement can range from $18,469 to $30,412. Blue Cross posts these prices online on its health care cost calculator, which the insurer introduced in 2015.
SmartShopper cash bonuses are not available for life-and-death conditions, like cancer treatment or advanced heart procedures.
“The range of procedures that SmartShopper covers are considered routine services and procedures,” Mattio said by email. “Imaging services, like MRIs, mammograms and Xrays, don’t differ much from one facility to the next. Same for infusion drugs. The exact same drug is administered whether it is at a hospital or infusion center or even in the comfort of a member’s home.”