Over the weekend, I was listening to some health policy podcasts while gardening, as one does, and the surgeon and medical waste researcher Dr. Marty Makary was interviewed on Freakonomics. He mostly didn’t talk about surgical techniques or hardcore quantitative measures of wasted health care dollars, though. Instead, he outlined his mother’s strategy in grocery shopping. Mrs. Makary is a bargain shopper. While I might just grab a couple of lemons from whichever store I’m in when I think of it, she carefully compares prices between stores and buys the cheapest option. People like Dr. Makary’s mom make up only 10-20% of all shoppers, he said, but they hold down the price of lemons for the rest of us. Economists call them “proxy shoppers.” Just like proxy voters, they make decisions about the cost of lemons for all of us.
Dr. Makary shared this vignette to illustrate how price transparency may help contain costs in medicine. It got me thinking: Who are the proxy shoppers in medicine? Price transparency is increasing, after all, but patients still don’t use it as much as one might expect. And while there are ways to encourage patients to use price transparency, especially as it relates to their out-of-pocket expenses and deductibles, ultimately, the contract they’re working with barely involves them. As Larry Van Horn says in the Freakonomics episode, business-to-business contracts in medicine between a payer and a health system include a third party (the patient) who has no say in the contract at all.
So the proxy shoppers in medicine mostly are not patients. The actual proxy shoppers are the people most likely to be reading this blog post, like the HR professionals and benefits specialists who plan, coordinate, and pay for their employees’ health care. And we should use our power as proxy shoppers carefully.
That’s it. That’s my post. I don’t mean to be a downer. I know you have a lot on your plate already, trying to manage the benefits of dozens or hundreds or even thousands of employees’ benefits. But the next time you sit down to negotiate a contract, I hope this is in the back of your mind: You have a power like almost no one else’s to hold down the cost of medical care in a country where it’s genuinely out of control. You can pick up the lemon that’s closest to you and pay whatever it costs, or you can check the price of that lemon in the grocery store down the street.
As the Medical Director of the Kansas Business Group on Health I’m sometimes asked to weigh in on hot topics that might affect employers or employees. This is a reprint of a blog post from KBGH.