For most of us, our healthcare is paid for by someone else; either our employer or a government entitlement program. When someone else is paying, why bother shopping around for the best price? Now an innovative new company has found a way to make patients cost-conscious and lower prices.
Since World War II, employer-sponsored insurance has remained an untaxed benefit. Companies began offering health insurance to attract workers after the Roosevelt Administration imposed wage freezes. These benefits became so popular that large employers successfully lobbied the IRS to exempt health coverage from taxation in 1943. This allowed businesses to compensate workers through untaxed benefits. And workers enjoy untaxed compensation in the form of health insurance.
Unfortunately, employer-sponsored insurance has led to exploding costs in our healthcare system. Workers have zero incentive to shop for discounts when their employers are paying the tab. Government magnified these distorting incentives by paying for the healthcare of low-income people through Medicaid and the elderly through Medicare.
However, one company has forged a path to affordable healthcare; paying patients to find lower prices. Vitals SmartShopper is a company based in Bedford, New Hampshire that allows patients to comparison shop online for medical services. When patients find a lower price than the one offered by their doctor, they’re cut a check through the savings they generate for their insurer or employer. Just last year, 16,000 SmartShopper patients earned $1.3 million for saving their insurers $11 million on medical services.
Wyoming is in dire need of SmartShopper’s savings. According to Wyoming’s Hospital Association, the average price for a hip replacement here is over $53,000. But doctors in Colorado perform them for as little as $21,000. There is no reason why Wyoming patients shouldn’t demand the same prices from their local hospitals. And they’ll be paid thousands for doing so.
This payment model could also save taxpayers money. Wyoming pays more for public employee health benefits than any other state, about $25,000 per worker for family coverage. And when Obamacare’s Cadillac Tax hits in 2018, we’ll be paying even more.
State employees in Kentucky and New Hampshire are already delivering better value to taxpayers by using SmartShopper. State health plans on average save $500 on CT Scans and $780 on MRIs when their workers hunt for discounts. According to a SmartShopper spokesman:
“Providers have learned about what we’re doing, and are looking to lower their costs to stay competitive.”
Paying patients to shop for lower prices could even be applied to Medicaid. Like individuals with traditional insurance, Medicaid enrollees have no reason to shop for lower cost procedures when only the government enjoys in the savings. But paying Medicaid’s low income recipients to find discounts won’t just save taxpayers money; it will also provide them additional cash assistance.
Every year patients order trillions of dollars of tests and procedures and are completely indifferent to their costs. Now SmartShopper and other entrepreneurs have discovered that patients will actively seek lower prices if the savings are passed on to them. These are innovations Wyoming cannot afford to ignore.