Breaking the Choice Habit?

Marcus Merz, the President and CEO of MN-based health plan PreferredOne, recently described his company's narrow network strategy to The New York Times by saying "we have to break people away from the choice habit that everyone has."

That may be the best quote I've read this week.  Maybe this month, or even this year.  By "best" I don't mean most insightful or most eloquent, but I do mean most memorable -- and maybe most misguided.

I have to wonder: if we're trying to make our health care system be more patient-centered, more consumer-driven, why in the world would we possibly want to break the choice habit?

I do not mean to pick on Mr. Mertz or on PreferredOne.  After all, they are hardly alone in pursuing a narrow network strategy, especially among exchange health plans.  And, hey, it worked for them, winning a larger-than-expected chunk of the Minnesota exchange market.  There has been extensive coverage of this trend over the past year, especially as it became clear that narrowing the networks was an integral part of health plans' exchange strategies, but the consumer and regulatory backlash is only beginning.

I mentioned narrow networks in my last post, and wrote a longer piece on it last fall (It's a Narrow World After All), and I didn't intend to revisit the topic quite so soon.  But, after all -- break people away from their choice habit?  That's hard to resist.

Last month CBO optimistically updated their ACA projections, citing in particular that "the plans being offered through the exchanges this year appear to have, in general, lower payment rates for providers, narrower networks of providers, and tighter management of their subscribers’ use of health care than employment-based plans do."  These restrictions helped lower their estimates of premiums for those plans.


Indeed, a Kaiser Family Foundation tracking poll found that, overall, consumers preferred higher premiums in return for broader access, but among the young, the lower income, and the previously uninsured, they were quite willing to give up such access.  Whether we like it or not, price can trump access, especially among people not getting much care already.

One way to think about narrow networks is to use the analogy of a restaurant which offers a buffet, and which decides to hold its prices by putting out fewer options.  If all you care about is getting some food, that might be all right.  If you are a gourmet and aren't worried about cost, you're probably not eating at the buffet anyway.  But if you are on a more restricted budget and have some critical food-related needs (perhaps peanut allergies, for example), then the restaurant cutting back on your options could have a big impact on your health.  It could mean life or death.

So it is with narrow networks.

Their advertising campaigns aside, no hospital is the best at everything.  No city -- or state, for that matter -- has all the best care.  So narrow networks are going to end up with some patients not being able to get the (in-network) care that is the best for their conditions.  Those patients might not have tried to find the best providers in any event, but for the ones who are that empowered, I hate that narrow networks make that decision more difficult.

Let's go back to the choice habit that Mr. Merz refers to.  The second part of his quote referred to consumers' "fixation on open access and broad networks."  That is, after all, the aftermath of the attempts in the 1990s to offer narrow, tightly managed networks (and, in the interest of full disclosure, I ran such a health plan at that time).  Big networks became virtually required for health plans, with few visible restrictions.  Mr. Merz is absolutely right in this regard.

But I think we're looking at the problem wrong if we think it is choice itself that is the problem.  The problem is lack of discerning choice.

According to Pew Research Center, only 17% of internet users consulted online reviews of physicians or other providers, and only 14% did so for hospitals.  The Altarum Institute similarly found that 27% used online quality ratings of physicians, but only 16% for cost information.

Many proponents claim that consumer-directed health plans will spur consumers to shop more effectively, but EBRI has found that people in CDHPs use quality information at about the same rate as those in other types of plans, and use cost information only slightly more.  Still, no more than one in three used this kind of objective data in their decisions, and usually not even that high.  They seem to be more likely to avoid care than to shop for it.

We've blundered our way into a system where we offer consumers broad networks, but with few incentives to pick the best or most cost-effective providers.  We've allowed consumers to think of health plan spending as OPM -- other people's money -- when, in fact, it is their own money and that of healthier people covered by the health plan.  We've persuaded consumers that they should pay as little as possible for their care, especially for preventive care. 

Yes, we've trained consumers to frequent in-network providers to an astonishing level -- often 90% or higher -- but have done a pitiful job of training them how to weigh potentially higher out-of-pocket costs against better health outcomes.  Even the many transparency solutions still focus mostly on differentiating in-network providers, not helping consumers search for the best match for them regardless of network participation status.

Now we're squeezing down the number of in-network options.  I suspect health plans and their regulators will work to ensure those networks provider adequate access, if access is measured by simple standards like distance to hospitals or to a certain number of physicians and other providers, but that's different from ensuring the highest quality providers are accessible.


Worse than that, consumers still often have no compelling reasons to question the value of some of the treatments they are receiving.  A new study in JAMA Internal Medicine found that up to 42% of Medicare beneficiaries may be getting services that they don't need.  The authors caution that these services only account for less than 3% of Medicare spending, but may also only be the tip of the iceberg.  And, of course, 3% of Medicare spending is still a lot of money. 

Think about a health plan that has identified a surgical practice and a health system that does, say, bypass surgery very cost-effectively.  They do enough procedures to have it all run very efficiently, and their outcomes are best-in-class.  The health plan negotiates a favorable bundled payment with them.  Now, why should they ever pay more to other surgeons or health systems? 

If it sounds like reference pricing, that's because it is.  EBRI recently did an analysis and concluded that we could save close to $10b by adopting reference pricing for just a handful of tests and procedures.  They refer to it as another form of defined contribution for health care, but at a more service-level approach than the movement by employers that puts workers in private exchanges which is also often considered defined contribution.

Reference pricing is still in an early stage of development and needs to have a lot of kinks worked out, not the least of which is getting consumers to approach it as empowering them rather than abandoning them.  Choice has consequences, including the possibility that some people will make bad choices or not want to have the responsibility.  Welcome to life.

I've written on the following idea before (20th Century Health Plans in the 21st Century), but I think we should scrape the idea of networks entirely -- and negotiated payment rates as well.  Health plans should be assisting consumers search for the best/most appropriate providers, and paying a market-based amount towards their care.  Consumers will have to make their own choices about out-of-pocket costs versus reputation, convenience or other factors. 

Narrow networks are a paternalistic approach to solving the wrong problem.  Instead of trying to manage costs by restricting consumers' access, let's instead open up that access and help them make smarter choices. 

It can't be any worse than what we've already tried.