Introducing price transparency and direct incentives into the U.S. healthcare system

The Problem with Healthcare in the United States

The United States spends $3.5 trillion dollars annually on healthcare, which comes out to $10,700 per person (CDC). The most dollars are spent on hospital care (33%), physician and clinical services (20%), prescription drugs (9.5%), and nursing and continuing care (4.8%).Despite spending this much, our healthcare system is not ranked highly. The U.S. has the highest rates of avoidable deaths due to people not receiving timely, high-quality care (source).Part of the problem is cost. Healthcare is the only market in the country where the patient is unaware of the cost of the service they are receiving. Our current system is synonymous with a maze of insurance stipulation and legal paperwork.Think about purchasing a home, a car, or even a new television. Would you feel comfortable walking into a negotiation without having any budget? Without having a reference for the cost or the payment methods?In addition to high costs, there is no direct link between the individuals providing the healthcare services and those paying for the services.Data from Kaiser Family Foundation finds that 49% of Americans receive healthcare from their employers. And, unfortunately, this means there is no direct link between the healthcare provider, patient, and payment.

What if we completely rethought the U.S. healthcare system?

We do not mean a 5% or 10% change. We do not mean incremental new legislation to help healthcare at the margins.What if we completely rethought how healthcare was facilitated? To accomplish this, we would need to focus on two areas.First, we need to introduce price transparency.A recent New York Times report found that the same blood test can range from $11 to $440 in the city of Tampa, Florida and in nearby Miami the prices range from $149 to $725. This 65x price delta between low and high value is avoidable.And we are not advocating for reducing costs purely from an economic standpoint. Today, 38% of Americans have gone without medical treatment due to high costs (CBS News SSRS Poll Conducted 2019). Americans deserve accessible, affordable healthcare.Second, the new system needs to provide a direct incentive to save money.Today, you would not directly benefit from going to a more affordable healthcare provider unless you pay with cash. If you have private insurance or employer group insurance, you are completed insulated from the cost of service.However, there is a novel way of providing direct incentives to consumers.As Sidecar Health CEO Patrick Quigley says, “We give our members an allowable budget for all medically necessary care – like doctor visits and lab work – and let them shop for price and quality. This mechanism is working today across thousands of users in 11 states. The result is a huge reduction in the cost of care.”Sidecar Health is reimagining health insurance. Consumers can sign up or cancel at any time and customize plans to fit their specific needs. For example, each consumer can select the amount of coverage they want and whether they want to add a deductible.The big departure is that Sidecar Health members can see any healthcare provider they want without the restraint of networks, and utilize the Sidecar Mobile App to shop for care they would with any other product. Payment is handled at the time of care with the Sidecar Health Visa card, which pulls from the member’s claims account and allows them to pay the discounted self-pay rate. This eliminates the possibility of surprise bills and provides complete cost transparency.Healthcare providers get their money instantly, without having to negotiate with insurance or wait 90 days for payment, and consumers get control over who to see and how much they can spend against their benefit amount.The company launched in 2019 and is already providing members a 40% savings in monthly premiums versus traditional plans. Moverover, if member shops for care and finds a price that is less than the benefit amount, Sidecar Health will refund the difference.Let us say you find a doctor’s office that will administer a blood test for $50, and the benefit amount in the app for that blood test is $120. Because you used the app to compare pricing and made an educated decision on where to go, the $70 difference goes in your pocket.

Conclusion

Sidecar Health is not alone. Studies from Vanderbilt professor and economist Larry Van Horn have found that families would save $11,000 per year if they purchased healthcare like they did other items (source).That per capita figure translates to a $1.375 trillion dollar savings per year for the United States.We are making steps in this direction, but we believe more needs to be done. Healthcare is a giant market and requires action from governments, providers, insurance companies, and consumers.Reimagining healthcare has tangible personal benefits, like saving thousands of dollars per year. But there are also larger impacts that can happen across the nation.The prospects of saving over $1 trillion per year and opening access to healthcare by making it more affordable are exciting. In particular, Kauffman Fellows partner Collin West stated: “We think there can be a boom in small business activity once they are no longer saddled with such high healthcare costs.”