By Phil Galewitz November 19,
2019
In the
Byzantine world of health care pricing, most people wouldn’t expect that the
ubiquitous flu shot could be a prime example of how the system’s lack of
transparency can lead to disparate costs.
The
Affordable Care Act requires health insurers to cover all federally recommended
vaccines at no charge to patients, including flu immunizations. Although people
with insurance pay nothing when they get their shot, many don’t realize that
their insurers foot the bill — and that those companies will recoup their costs
eventually.
In just
one small sample from one insurer, Kaiser Health News found dramatic
differences among the costs for its own employees. At a Sacramento, Calif.,
facility, the insurer paid $85, but just a little more than half that at a
clinic in Long Beach. A drugstore in Washington, D.C., was paid $32.
The
wide discrepancy in what insurers pay for the same flu shot illustrates what’s
wrong with America’s health system, said Glenn Melnick, a health economist at
the University of Southern California.
“There
is always going to be some variance in prices, but $85 as a negotiated price
sounds ridiculous,” he said.
Flu
shots are relatively cheap compared with most health services, but considering
the tens of millions of Americans who get vaccinated each year, those prices
add up.
Health
plans pass those expenses to consumers through higher premiums, economists say.
“The
patient is immune from the cost, but they are the losers because eventually
they pay a higher premium,” said Ge Bai, an accounting and health policy
professor at Johns Hopkins University’s campus in Washington, D.C.
Bai
said the variation in payments for flu shots has nothing to do with the cost of
the drug but is a result of negotiations between health plans and providers.
Typically,
health insurers’ reimbursements to private health providers are closely guarded
secrets. The insurers argue secrecy is needed for competitive business reasons.
But
there’s one place those dollar figures appear for anyone to see: the
“explanation of benefit” forms that insurers send to members after paying a
claim.
KHN
reviewed forms that one of its insurers, Cigna, paid for some colleagues to get
flu shots this fall in Washington, D.C., and California.
Cigna
paid $32 to CVS for a flu shot in downtown Washington and $40 to CVS less than
10 miles away in Rockville, Md.
In
Southern California, Cigna paid $47.53 for a flu shot from a primary care
doctor with MemorialCare in Long Beach. But it paid $85 for a shot given at a
Sacramento doctors’ office affiliated with Sutter Health, one of the biggest
hospital chains in the state.
Health
experts were not surprised insurers paid Sutter more, though they were stunned
just how much more.
“Sutter
has huge clout in California, and insurers have no other option than to pay
Sutter the price,” Bai said.
For
years, Sutter has faced criticism that is uses its market dominance to charge
higher rates. In October, it settled a lawsuit
brought by the state attorney general, employers and unions that accused the
hospital giant of illegally driving up prices.
The $85
was not just far more than what Cigna paid elsewhere but also more than triple
the price Sutter advertises on its
website for people without insurance: $25.
How
does Sutter justify its higher prices as well as different prices for the same
shot at the same location?
Sutter
officials had no simple explanation. “Pricing can vary based on a number of
factors, including the care setting, a patient’s insurance coverage and
agreements with insurance providers,” Sutter said in a statement.
Cigna
also said many issues are considered when determining its varied payments.
“What a
plan reimburses a pharmacy/clinic/medical center for a flu vaccine depends on
the plan’s contracted rate with that entity, which can be affected by a number
of factors including location, number of available pharmacies/facilities in
that area (a.k.a. competition), and even the size of the plan (a.k.a. potential
customers),” Cigna said in a statement. “It is important to keep in mind that
hospitals and pharmacies have different economics, including the cost to
administer.”
It’s
also noteworthy that Medicaid, the state-federal health insurance program
covering more than 72 million low-income Americans, pays providers far less for
a flu shot. In Washington, D.C., Medicaid pays $15. In Connecticut, $19.
Nationally,
self-insured employers and insurers paid between $28 and $80 for the same type
of flu shot administered in doctors’ offices in 2017, according to an analysis of more than
19 million claims of people under 65 years old by the Kaiser Family Foundation
in partnership with the Peterson Center on Healthcare. (Kaiser Health News is
an editorially independent program of the foundation.)
“Your
health plan could end up paying more than double the cost for the same flu shot
depending on where you get it,” said Cynthia Cox, a vice president at the
foundation.
“We see
the same pattern for more expensive services like MRIs or knee replacements,”
she said. “That variation in prices is part of what’s driving insurance
premiums higher in some parts of the country.”
The
wide discrepancy in costs for the same service highlights a major problem in
the U.S. health care system.
“We
don’t have a functioning health care market because of all this lack of
transparency and opportunities for price discrimination,” Melnick said.
“Prices
are inconsistent and confusing for consumers,” he said. “The system is not
working to provide efficient care, and the flu shot is one example of how these
problems persist.”
An
unintended consequence of the health law making flu shots free for insured
patients is that health plans have little ability to direct patients to
providers that offer the vaccine for less cost because patients have no reason
to care, Bai said.
Around
the country, retailers like Target and CVS offer various incentives such as
gift cards and coupons to entice consumers to come in for their free flu shots
in hopes they shop for other goods, too. Some hospital systems such as Baptist Health in South Florida
have also started providing free flu shots for people without insurance.
Bai
said that while hospitals like Baptist should be praised for helping improve
the health of their communities, there are other factors in play.
“There
is a hidden motivation to use free flu shots as a marketing tool to improve the
hospital’s reputation,” she said. “If people come to the hospital for a flu
shot, they may like the facility and come again.”
Phil
Galewitz: pgalewitz@kff.org,
@philgalewitz
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