The average out-of-pocket expense per working household is expected to rise to over $50,000 by 2030. The Vizient Research Institute takes a fresh look at why healthcare costs so much and examines whether high insurance deductibles and price transparency in healthcare influences consumers’ purchasing behavior.

The US health delivery system is on a collision course with unaffordability for the middle class. In 1992, a working family of four spent 9200 dollars on the combination of health insurance premiums and out-of- pocketcket expenditures. By 2016, that figure had grown to 25800 dollars, and by 2030 it is projected to exceed 50 thousand dollars per working household aging. Baby boomers are swelling the ranks of Medicare beneficiaries, putting unprecedented financial pressure on the active workforce to pay for retiree medical care. In addition to shouldering the medical expenses of their parents and grandparents. American workers now pay a larger portion of their own health costs. Deductibles over 1 thousand dollars per person are common, and outof-pocket expenses for a family can easily reach 5 thousand dollars or more. 

High deductible health plans were designed around the assumption that savings would arise from consumer shopping based on price. It's common to find a threefold price variation within a metropolitan market for shopable services like CT scans or maris. The same test that cost 600 dollars in one location might cost 2 thousand dollars or more elsewhere in the same city. Prices for elective surgeries like hip or knee replacements can vary by 10 thousand dollars or more within a market. 

Online tools are available today that estimate a patient's out-of-pocket cost based on their own deductible and co-insurance benefit plan. With so many middleclas households struggling to make ends meet, it was natural to assume that patients would jump at the opportunity to compare prices before choosing their providers. As it turns out, patients rarely shop for providers based on price for urgent or unexpected illnesses. Price comparisons are not practical for complex medical conditions or complicated tests or procedures. Expecting patients to understand the technology and terminology is unrealistic, but even for relatively simple services, when there is time to compare, patients typically do not shop on price. Why not the answers may surprise you for starters, healthcare is not a normal economic good. More is not better than less for the typical consumer. Before hitting their deductible, consumers don't shop, they stop, they avoid the healthcare system for as long as they can. 

When avoiding the system isn't possible. Price still doesn't seem to matter. Many patients have no idea what individual services cost until after they receive them. Healthcare is one of the only markets where prices are not generally known and where consumers rarely ask. 

One reason may be that prices are simply too high a matter. By the time they had their CT or MRI scan, 83 percent of insured patients had already met their deductible. Almost two-thirds of all patients having major imaging will reach their maximum out-of pocketcket limit during the year, meaning the price of the test was irrelevant. 

There are two types of healthcare consumers, those who avoid the system for as long as possible, and those whose ongoing illnesses have acclimated them to predictable spending. Avoiders tend to be younger and healthier. They focus on insurance premiums, not the price of services. They only occasionally reach their deductibles and rarely hit their out-of-pocket limits. Their health spending is low to moderate and unpredictable. They have relatively little experience with the system and are not price sensitive. Patients with longitudinal episodes of complex or chronic care often become acclimated to significant annual expenditures. They tend to be older and they monitor progress toward deductibles and aggregate out-of-pocket spending, not prices. They regularly meet their deductibles and often hit their out-of-pocket limits. Their spending is predictably high. They have considerable system savvy, and as a result they too are insensitive to unit prices. 

Despite the best intentions, price transparency as a saving strategy has not panned out for most people. Serious unpredictable expenditures are ill-suited to price shopping. The small subset of the population with significant recurring expenses has learned that out-of-pocket limits, not unit prices, are what really matter. 

Discounting individual services to encourage price shopping is like tossing coins into a fountain and wishing for savings. The intention is good, but there's little payoff. A higher yield strategy would focus on more efficient episodes of complex care, with incentives that resonate with consumers. 

Payers and providers can work together to design programs that would alleviate the financial burden on chronically ill patients while saving money. Overall, patients with chronic illness who received almost all of their medical care from a single health system had average episode costs of 27400 and 33 dollars over two years, compared with 58900 and 64 dollars for similar patients whose care was spread over multiple health systems. By reducing fragmentation, increasing care coordination, and improving patient satisfaction, we can save as much as 31 thousand dollars per chronically ill patient, more than enough to afford incentives for patients to stick with a comprehensive health system without meaning to do so. Efforts to encourage price shopping for individual services actually increase care fragmentation and in the process, risk doubling episode costs. 

Another unintended consequence of higher deductibles is the chilling effect on early detection and essential services. Consumers avoid not just non-essential services, but also highly valuable services like mammograms, blood pressure control or insulin. 

In what would be a radical shift from traditional and unsuccessful efforts to slow the pace of healthcare spending, policymakers, payers, and providers should focus on taking better care of the sickest cohort of the population, on providing more comprehensive and better coordinated episodes of chronic and complex care, on reducing care fragmentation and its associated avoidable utilization and spending, and on relating to what really concerns consumers, their premiums, deductibles, and out-of pocketcket exposure, not individual prices. 

Better care for our most vulnerable patients at lower cost. An opportunity for providers and payers to do well by doing good. It's time for new ideas.