What's It Gonna Cost, Doc?

If you don't know, you're not alone. Almost no one knows the answer to these questions. Millions of Americans have no idea how much they pay for insurance, let alone what their insurance pays to the hospital, doctor, and X-ray tech.

When asked in a recent survey by Harris Interactive to guess the price of a four-day hospital stay, patients were off by an average of $8,100. The survey also found that 63 percent of those who received care in the last two years didn't know the price until the bill came, and another 10 percent never knew the price.

This is a big part of why our health-care system has the problems it has. It's a huge industry - about a sixth of our economy - and it operates with so little price pressure that we rarely even ask what treatments cost.

That may be changing. Americans have discovered Health Savings Accounts (HSAs), and with them, some appreciation for not just the cost but the value of medical services.

HSAs, created as part of the Medicare Modernization Act, allow individuals, employers and employees to invest tax-free dollars in health accounts to pay for routine health care. The accounts must be accompanied by insurance policies to cover larger medical bills.

More than 3 million Americans have enrolled in HSAs, which have been available only since 2004. Enrollment more than tripled the last 10 months.

Critics have charged HSAs are just another tax break for the rich, but the early data suggest the demographic is more Target than Nordstrom. Two in five HSA-plan purchasers earn less than $50,000 a year. More than half are families with children. And 37 percent were uninsured before they enrolled.

And, thanks in part to HSAs, price pressure has come at the health-care industry from all directions. The price of the health insurance plans bought to accompany HSAs dropped by 15 percent between 2004 and 2005, according to one study, and in another, nearly two-thirds of HSA enrollees paid less than $100 per month for their insurance.

According to a study by Deloitte's health group, the average cost of consumer-directed plans increased by less than 3 percent last year, as opposed to double-digit increases for traditional plans.

Enrollees make their health-care dollars work harder, too. According to Aetna, the health insurance giant, those in its branded HSA-type product have increased use of preventive services by as much as 23 percent and decreased use of expensive inpatient, lab and primary-care physician visits.

Companies also are instituting programs to provide better-coordinated care for those with chronic conditions, such as diabetes, heart disease and asthma. And those who participate in those programs are 20 percent more likely to comply with treatment regimens.

Critics say nobody wants to do battle with the marketplace when they're ill, but HSA participants are learning to ask questions. They are 50 percent more likely to ask about cost and three times more likely to have chosen a less-expensive treatment option. They're also much more likely to opt for the far-less-expensive urgent care center over a hospital emergency room.

They cut costs by taking care of their own wellness and prevention. They are 25 percent more likely to engage in healthy behaviors and 30 percent more likely to get an annual physical. More than half said they attempt to "catch an issue early" so they can "save money in the long run."

This is no accident. Now that individuals own the accounts from which health services are paid and have an interest in building them up, they are far more interested in making the system more efficient and saving themselves money by taking control of health care decision making. They like the choice and the portability of the plans, and they like being able to keep the money they deposit in HSAs.

It's a new day in health care, thanks in part to HSAs. Suddenly, people are willing to take steps on their own to live healthier lives, to better comply with treatment programs. They want to compare providers and treatment options. Instead of "easiest availability," they seek "best value." Instead of neither knowing nor caring what health care costs, four in five HSA plan-holders want more information on costs.

That's why before long, everyone will know what a broken arm costs. And what it ought to cost.

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Grace-Marie Turner is president of the Galen Institute, a non-profit research organization in Alexandria, VA, that focuses on free-market ideas for health reform. She can be reached at galen@galen.org.