Consumers Need Education on Health Care Costs: Survey

Published March 1, 2007

A survey released in late November reveals consumers know little about health care costs, but that’s information they’ll need if consumer-driven health care plans are to succeed at lowering costs and premiums, analysts say.

According to the survey, while many consumers know prices may vary, they do not appreciate how pronounced those differences can be. For example, when told the lowest cost in the nation for a knee replacement is $22,000, 83 percent of the respondents underestimated the highest price ($77,239).

Only 1 of 10 respondents correctly guessed the high-price range for a tonsillectomy. More than 70 percent stated they had little or no idea of how their providers’ costs compare to other providers’.

The survey of 1,028 American adults was conducted by telephone as part of a national omnibus survey by Opinion Research Corp. The research was sponsored by HealthMarkets, a health insurance company based in Texas.

“Most Americans have no idea how much health care costs or how much it varies from one provider to another,” HealthMarkets President and CEO William J. Gedwed said in a November 28 statement. “If consumers are going to effectively manage their health care dollars, they need to know how much things will cost them.”

Insulating Consumers

Many analysts believe this ignorance stems from the modern health insurance model, in which a third party insulates consumers from cost differences.

The survey illustrates a need for better-educated consumers, especially as costs are increasingly being passed on to patients, said Devon Herrick, a senior fellow at the National Center for Policy Analysis in Dallas.

“The findings confirm the need for patients to be diligent when comparing prices for physician services,” Herrick said. “Consumers already understand prices can vary tremendously from one doctor to the next. But the reality is far worse. Actual charges varied four- to six-fold for some procedures.”

Driving Down Costs

Insurance companies and analysts who are trying to give consumers financial reasons to keep health care prices down paid close attention to the survey.

“If everyone begins asking for better information, we will all be better informed and costs will drop or not rise as fast,” explained Roy Ramthun, an advocate of consumer-driven health care and a former senior health policy advisor to President George W. Bush.

Ramthun cites LASIK surgery as an example of educated consumers with a stake in health care costs taking control of health care prices. Though the procedure was prohibitively expensive a few years ago and not covered by most insurance, its price has dropped into a more affordable range thanks to the competition generated by price-conscious consumers.

Shopping for Deals

Unsurprisingly, 58 percent of those interviewed said health insurance was “not too [affordable]”or “not affordable.”

As a growing number of insurance companies nationwide attempt to control health care costs through consumer “shopping” components–encouraging members to compare prices for procedures and providers–the survey illustrated consumers will require more education for those components to be effective.

HealthMarkets is working on that by coupling plans that encourage “shopping” with online transparency tools that help members better educate themselves about provider costs. The tools provide detailed information on more than 430,000 medical professionals, 4,000 hospitals and medical centers, and 26,000 other resources, including labs and radiology centers.

Learning Online

But the survey also indicates online health care cost-education tools might not be effective for all consumers.

Even as costs are being passed on to patients more often, the survey indicates older Americans, who consume the lion’s share of medical services, are not comfortable with self-education via the Internet. According to the survey, two-thirds of respondents said they would find those tools very or somewhat useful, but only 45 percent of those ages 65 and older said they would.

The uninsured had a mixed response to the prospect of online cost-comparison options. While 54 percent stated they would find online tools very helpful (compared to 34 percent of the insured), only 20 percent said they would find them somewhat useful (compared to 32 percent of the insured).

“There’s no one-size-fits-all answer to the problem with uninsured people, because there are many reasons why people lack insurance,” Ramthun said. “However, rapidly rising premiums are one factor for why people lack insurance. Restoring free-market competition to health care will help keep costs in check.”

Alan C. Abbott ([email protected]) writes from Louisville, Kentucky.

For more information …

“The Price is Wrong: Most Americans Significantly Underestimate Health Care Costs, Survey Shows,” issued by HealthMarkets on December 14, 2006, is available through PolicyBot™, The Heartland Institute’s free online research database. Point your Web browser to and search for document #20544.