Should you save for health care the way you save for retirement?
Well, the folks selling flexible spending accounts, health reimbursement arrangements and other such products wish you would. Alegeus, one of the companies doing so, issued a report noting that 20% more workers are considering health care alternatives before undergoing a major procedure. In a survey of 1,000 customers, Alegeus found that while 76% of consumers want to get the best value for their health care costs, more than 50% don’t know the cost of a service or procedure until their bill arrives. Roughly 59% research procedure success rates, 54% research their doctor’s quality ratings and 54% seek a second opinion.
However, only 34% know what the annual costs of their health care will be and what their insurance will cover. Beyond that, only 23% save “aggressively” for major health care issues.”It’s clear that consumers will need significant education, tools and support as they assume more financial responsibility for health care costs,” said Steve Auerbach, chief executive at Alegeus.
But that’s from the head of a company banking on U.S. workers having just about no other options for paying their health care costs. Currently, the Centers for Disease Control and prevention put the rate of uninsured U.S. citizens at 9.1%, down from 15% in 2011. According to the Health Care Cost Institute (HCCI), a Washington-based research group of medical professionals and economists, just 43% of annual health care spending comes from services that consumers can shop for based on price. Of that, just 7% of the total cost of those services is paid for by consumers out of pocket.
“There is not that much savings to be gained from consumer shopping for many non-emergency services,” says Amanda Frost, an HCCI researcher. “While we strongly believe that consumers are entitled to price information and to know what they are going to pay prior to any health care service, we shouldn’t rely on price transparency as a way to create savvy shoppers to save health care dollars.”
That said, it doesn’t mean that consumers shouldn’t shop around when possible. HCCI looked into the cost of “shoppable” items including flu shots, non-emergency hip or knee replacement, colonoscopies, urinalysis and blood and strep tests (but not prescription drugs). While shopping around could influence about 65% of all out-of-pocket payments, roughly 44% of all out-of-pockets payments boiled down to those knee and hip replacements and related care. As HCCI discovered, a knee replacement in Palm Bay Fla., for example, costs $16,822 more than the same surgery 180 miles away in Miami. The prices of those procedures also varied widely in Kentucky, Texas and Georgia. That said, the prices of the procedures that folks aren’t paying for out of pocket tend to vary far more.
“Consumers are entitled to price and quality information,” says Lynn Quincy, of consumer advocacy group Consumers Union. “But we need to be realistic about how much having this kind information can drive changes in the market.”