Rep. Abraham Rafie is seeking a solution to drive down healthcare costs. U.S. health care costs will outpace economic growth for the foreseeable future, according to a report from U.S. Department of Health and Human Services actuaries. Health care spending is estimated to consume $5.7 trillion eating up 19.7 percent of the economy by 2026, the report projects. Meanwhile the costs of Medicaid expansion and employee healthcare is eating up more and more of state budgets.
Rafie, an Overland Park doctor, says the debate about Medicaid expansion and the Affordable Care Act, or Obamacare, is really just about cost-shifting, while his legislation, HB 2575, is about lowering costs.
“The reason people are clamoring for government insurance is because premiums are unaffordable,” he says.
The Overland Park Republican proposed Right to Shop legislation that would allow patients to shop around for health care and reap some of the savings when they choose lower cost providers for services. Rafie described how it would work in his written testimony to the House Health and Human Services.
If someone needed an MRI on a knee, he would be able to find out how much his insurer was willing to pay different providers for it. Rafie explained one provider may receive $500 for the MRI while another one would receive $1,500 from the insurer. If the average insurance payout for an MRI is $800, and the patient chooses a $600 provider, he would receive half of the insurer’s cost savings. In the above scenario, the patient would receive $100. Choosing a $500 provider would save his insurer $300 and net the patient $150.
It provides the patient an incentive to find the best value, while giving providers an incentive to provide cost-effective services. Officials estimate that about $9 billion of medical spending in Kansas is for shoppable services like MRIs. However, consumers often have no idea the cost of a medical procedure before the work is complete.
The lack of cost transparency is a structural inefficiency in the current healthcare system, according to Rafie.
“An individual person has a hard time knowing if he is getting a good quality service for the cost he’s paying or for what the insurance is paying,” he says.
That limits competition and inflates costs, according to Rafie. However, William Sneed, who represents the America’s Health Insurance Plans, says Right to Shop laws do nothing to lower costs. In his written testimony, Sneed told the House committee that the proposal would limit the ability of health plans to negotiate cost for services with providers and could actually increase premiums. There’s also a danger in encouraging consumers to make healthcare decisions based on monetary gain, he says. That’s counterproductive, because it could lead to less than optimal care and higher future costs.
“This dangerous scenario could lead to higher priced follow-up care down the road,” Sneed’s testimony reads.
Rafie counters most consumers decide which healthcare providers to use based on a doctor’s recommendation, and those are often based on relationships instead of who is able to provide the best service or value.
Other states have implemented similar right-to-shop legislation, according to Gregg Pfister, government affairs director at the Foundation for Government Accountability. He said Kansas’ bill reflects some of the best practices of other states like Arizona, Florida, Kentucky, Maine and New Hampshire.
“New Hampshire’s tiny program has already resulted in $14 million-plus in savings and $1.2 million-plus in patient incentive payments or shared savings, and they are just scratching the surface,” he said in written testimony.
Maine state Sen. Rodney Whittemore says the legislation he helped pass in his state will be the most important piece of legislation he worked on during his time in office.
“Our bill took an important first step to combine individualized transparency with shared savings for patients, while protecting patient access to high-value providers,” Whittemore said. “It is a workable method to tackle costs by engaging patients rather than a top-down solution.”
Kansas public employees will soon have a shared savings healthcare program. Rafie says that should roll out late this spring. Virginia offers a similar program for its employees. The state studied the results last year and concluded the program is a “no-risk tool for lowering costs without sacrificing quality.” Virginia officials project it will save the state $4.5 to $6 million each year, according to Pfister.
“So if it holds potential for public employees and is no risk, why should it be denied to small businesses and individuals in your district now?” Pfister said.
Rafie admits there may be a few things in his proposal that require tweaking. Some insurance companies had concerns about medical tourism and worried the legislation could cost insurers significantly if there weren’t some changes to ensure individuals meet their deductibles before shared savings kick in.
“The general concept is, I think, what we need to do,” Rafie says. “It does disrupt the status quo, but the status quo is not working. Everyone supporting Medicaid expansion knows that the status quo is broken…There is a better way, and here’s what it is.”