Is Crowdfunding The Future Of Lowering Health Care Costs?

The U.S. Department of Health & Human Services released a report touting the national uninsured rate reached an all-time low of 8% with only 26.4 million Americans still lacking coverage. This sounds like good news, but a deeper dive shows an enormous shift from private to taxpayer-funded government-subsidized coverage that has a lackluster history of containing health spending and delivering good health outcomes.

Thanks to the pandemic and the American Rescue Plan Act, Medicaid enrollment surged with 24 million new enrollees as states have not been able to remove individuals that no longer qualify, and another two million opted into ObamaCare exchange plans.

It is important to remember that having an insurance card is not the same thing as having access to care. And the incentives for traditional health insurance plans are not set to lower the cost of healthcare in the long run. As a result, innovative companies are emerging that are introducing new ways to both contain healthcare spending and also ensure positive outcomes.

America needs to encourage patients to be smart healthcare consumers. We need communities that leverage their combined consumer power to get better deals. Crowdfunding offers a potential solution that can do just that.

Traditional health insurance does not function like any other kind of insurance. Auto and life insurance are designed to compensate a policyholder in the case of an unlikely event like a car crash or unexpected death. By contrast, health insurance often pays the first dollar for routine, preventive services as well as more expensive catastrophic treatments.

Health care prices have gotten so out of hand that most patients want a third-party health insurance plan to pay for basics like a prescription or lab test. Essentially, when Americans opt into a traditional health plan they are pre-paying their healthcare spending to a middle-man to pay an even larger sum of money to providers, which gets collected in the form of higher premiums the next year. The economics only spur health care price inflation.

American annual health spending has eclipsed $4.1 trillion, with the government spending the majority of that sum. The nation finds itself on this unsustainable course because patients are not incentivized to shop on price and instead must trust insurers to negotiate prices.

The sad reality is traditional insurers are not always haggling down rates. They face their own set of perverse incentives created by the Affordable Care Act (ACA). Under the ACA, insurers get to keep more money when more is spent, so if prices or premiums go up, the cost falls on patients or employers, not insurers.

If traditional health coverage, in the private sector or government, is not containing health spending, what can? Fortunately, there is a new company breaking away from old school health coverage and helping uninsured patients pay more affordable medical bills⸺their name, CrowdHealth.

CrowdHealth’s success starts with helping patients make direct cash payments to providers. Members make a monthly contribution to their personal “Generosity Accounts.” When members need care, care coordinators scour the nation for the right doctor, best facility, and negotiate the cash price with the provider. Then the coordinators crowdfund the resources to pay for the procedure.

One patient in Wisconsin was suffering from supraventricular tachycardia, a heart condition that needed a corrective procedure. His local hospital quoted $83,655, but a care coordinator found a higher quality provider at a much lower price in Oklahoma City. CrowdHealth sourced funding, and covered first-class airfare and three nights’ stay at one of the nicest hotels in town. The final bill, including travel costs, was around $30,000, over $53K less than his local hospital was going to charge for the procedure.

Doctors love getting paid in cash because they can skip the administrative cost of filing an insurance claim, fighting over prior authorizations, and oftentimes waiting 90 or 120 days to get paid. These administrative costs can take up to 25% of the final medical bill.

Crowdfunding is a game changer because it can encourage those skipping care now over concerns of cost to seek the care they need. The avoidance of wasteful overspending when they do seek care can lower the price of healthcare for everyone.

The nation needs more innovators like CrowdHealth who can unite patients into a community to secure better rates and offer an alternative to unaffordable traditional health insurance. States can further help patients and innovators by optimizing recent federal rules to require all providers, regardless of setting, to share their direct cash rates. Crowdfunding may not be for everyone, but health spending will drop once patients are equipped with the right tools to make shopping a painless process.

*************************************

Tanner Aliff is the Healthcare Policy Manager at the Cicero Institute. Follow him on LinkedIn or Twitter (@taliff5). The Cicero Institute has no financial relationship with CrowdHealth.

Josh Archambault (@josharchambault) is the Founder of President’s Lane Consulting, and a Senior Fellow at Cicero Institute (@InstituteCicero) and Pioneer Institute (@PioneerBoston). Follow him on Twitter or LinkedIn.