When it comes to health care, soaring costs are top-of-mind for policy-makers and citizens alike. A concept called an “All-Payer Claims Database” (APCD) has caught on nationwide, with many hoping it will lower health care costs. It works by pooling data about prices, out-of-pocket costs, and quality of care from all third party payers (both public and private) into one online portal, revealing trends and deviations within the market.
Since the establishment of the first APCD in 2003, most states have at least explored the idea of implementing their own. Attempts to create a functional APCD in Washington during the 2014 legislative session failed, despite support from most major insurers. However, this legislative session, Washington became the 18th state to create an APCD.
Proponents argue that APCDs help solve the U.S. health care sector’s biggest problem: the lack of pricing and quality information that makes it nearly impossible for consumers to shop around as they would for another product or service. This information gap is one of the underlying factors contributing to exorbitant health care costs.
More on APCDs
The idea behind APCDs is pretty simple. They leverage big data in the health care market to increase transparency, drive down prices, and boost quality– an idea most people can get behind.
The theory is that reliable, accurate and complete cost and quality information will empower consumers to make better decisions about their care. They may decide, for example, not to use high-priced hospitals and other health care providers unless their quality and customer satisfaction ratings are equally high. These signals, in turn, could force providers to either lower their prices, improve care, or both.
The opacity of the U.S. health care market is illustrated by the fact that Americans spend nearly three times more per person on health care than other developed countries. In Washington, health care was the second largest expenditure driving up costs for four-person families in Washington, increasing 68 percent between 2001 and 2014. Just for reference, housing costs only went up by 40 percent.
A National Movement
APCDs are a relatively new concept, but they’ve caught on quickly. Until the early 2000s, not a single state was collecting data from each insurer within their borders. But, beginning in 2003, Maine, Maryland, Massachusetts, New Hampshire established all-payer claims databases (APCDs), requiring all commercial insurance carriers within their borders to input claims data, including out-of-pocket costs.
Today, nineteen states have APCDs in varying stages of development and at least 21 states are considering laws to create them, according to the APCD Council, which assists states in setting up claims databases. Given that both the Catalyst for Payment Reform (CPR) and the Health Care Incentives Improvement Institute (HCI3) awarded Washington an “F” grade in cost transparency last year, it appears Washington could benefit from a database of its own.
Something needs to be done to improve Washington’s health care system. A report released by the Center for Medicare and Medicaid Services (CMS) in April 2014, revealed that payments for the same procedure in Washington can vary substantially–between 200% and 400%. This degree of variation is clear evidence of a market that’s not functioning properly, plus price ambiguity can deter people from seeking care.
The problem gets even more complicated considering that out-of-pocket costs aren’t solely dependent on the cost of services and procedures but also the structure of the insurance plan. Because more out-of-pocket costs are being shifted to consumers and because unpaid medical bills have become a leading reason for personal bankruptcy, it’s important for consumers to understand the financial risks they might face as patients― whether they have insurance or not.
Prioritizing Cost Control
This year’s bill trumps previous efforts at cost control.
, a statewide claims database was created, but it only included data about public employees and Medicaid patients, as well as whatever data insurance companies offer voluntarily, rendering it ineffective. The Washington Health Alliance, a multi-stakeholder nonprofit, has also been administering a voluntary APCD since 2008. Additionally, each insurance company is required to offer their own online tool by 2016. While beneficial, these tools don’t allow for comparison across insurers which limits their effect on pricing and quality.
During last year’s debate, Premera claimed that its opposition was rooted in questions about the effectiveness of APCDs and whether or not consumers will actually use them. Because APCDs are relatively new, there is little evidence about their effectiveness. But projections and the limited research are positive.
According to a study published by the Center for Studying Health System Change (HSC), the nationwide adoption of the databases could save up to $55 billion over a decade. The study includes the potential savings from policy initiatives that would likely follow the implementation of an APCD, such as requiring electronic health record systems to provide prices to physicians when ordering diagnostic tests.
In addition to projected benefits and savings, a study by the University of Chicago provides evidence that transparency empowers the market to drive down costs, stating, “Overall, our evidence indicates that price transparency regulation leads to a reduction in health care prices for patients with incentives to consider costs.” The researchers found that price transparency regulations reduce the price charged for common, uncomplicated, elective procedures by an average of approximately 7%.
Implementation is Key
Even with APCD’s, consumers are still being asked to do a lot of due diligence when making health care decisions. Whether APCDs will empower consumers within the health care market depends partially on the navigability of the digital platform and making sure quality is measured.
Judith Hibbard, a senior researcher at the Institute for Policy Research and Innovation, claims that the type of information available on APCDs will ultimately determine the project’s efficacy. She says, “It could be counterproductive if quality and cost are not reported effectively [because] people may choose higher-cost providers assuming they are the higher-quality providers.”
Hibbard’s comments stem from research she conducted showing that consumers behave as if cost and quality correlate positively. Dr. Hibbard recently studied how different presentations of cost and quality information affect the likelihood that consumers would make high-value choices. The study, which involved 1,421 consumers, found that a significant numbers of respondents “used higher cost as a proxy for higher quality.” This was true even when respondents had high-deductible health plans that would expose them to a higher share of costs. However, when cost and quality information was reported side by side in an easy-to-interpret format, respondents were more inclined to make high-value choices, weighing both cost and quality.
This is Big
Washington’s APCD is an opportunity to make the health care market work better for consumers, mirroring the way that other markets function. The database will also bring a wealth of information into the policy-making space. Ideally, this will open the doors for data-driven policy in health care in the coming years.