The pain (and pleasure) that comes from paying more of our health care bills

I celebrated two momentous events this week.

My son Arthur turned one year old on Tuesday.

And just two days before he did, I sent in the final payment on the hospital bills from his birth.

I tell you about these events for two reasons: 1) hospitals deserve praise, I think, for offering such generous terms on which to make payments over time; and 2) paying off medical debts over time is now a common experience for families with health insurance and becoming more so. And that is inducing big changes in the marketplace.

I can’t be certain that all hospitals and doctors are as easy to work with as St. Vincent Health, which provided the delivery care for Arthur and my wife, Christina. But here is the deal St. Vincent offers: No interest up to 24 months. It does this by transferring any bill for which a patient needs more than four months to pay over to California-based Torrey Pines Bank.

I have now worked with Torrey Pines twice. First, for a 2012 outpatient surgery Christina underwent to remove a painful ovarian cyst and the ovary it had enveloped. Total cost after Anthem's discounts: $13,872. Total we had to pay: $4,116. I paid $2,000 initially and then paid the other $2,116 over time.

Arthur’s birth—including all the prenatal care and the delivery—cost $17,819, again, after Anthem's discounts. That included two false alarm trips to the hospital due to preterm contractions. But Arthur arrived without a C-section, without complications and only a token apperance by the NICU team. We had to pay $5,947 of the overall bills. (IBJ contributes $2,700 per year to our health savings account, so that helps cover some of these large bills.)

I know I’m not the only one in this boat. According to a 2013 survey by the Commonwealth Fund, 75 million Americans were either paying off medical debt or having problems paying their medical bills in 2012, up from 58 million in 2005. I’ve even talked to local attorneys—whose annual earnings are many times mine—and they have had to pay off high-dollar surgeries over time.

Obamacare will lead to a lot more of this.

First, with increasing numbers of Hoosiers getting the individual policies offered on the Obamacare exchanges—which often feature family deductibles of $12,700—more and more folks with insurance will still face huge medical bills they have to pay off over time.

Second, Obamacare’s Cadillac tax on employer health plans, which will hit in 2018, is causing many employers to switch to lower-cost high-deductible plans. That tax will lead a huge chunk of employers to adopt defined-contribution health plans—which will give a pre-set amount of money to employees to buy health coverage, creating a huge incentive for them to buy cheaper plans with high deductibles.

This will be a hardship for many, and an insurmountable problem for some. But the shift to high-deductible plans is already leading health care prvodiers to make change that should benefit consumers.

Hospitals are trying to reduce their costs and their prices like never before. As Matt Neff, the former CEO of CHV Capital, the venture capital arm of IU Health, put it: “Health care reform is driving a near-panic search for solutions in terms of efficiency.”

Specifically, health systems are lowering prices on imaging and other diagnostic services, and trying to find a way to do the same on surgeries.

And they are doing this while also trying to boost quality and convenience. IU Health’s ubiquitous Internet ads about its same-day primary care appointments—which up the ante on Community Health Network’s longstanding promise of access in 48 hours—are a prominent example.

Independent physician groups are also playing along, trying to offer package deals with upfront prices to employers and insurers.

“Hospitals are trying anything they can to get patients in the door,” said Elizabeth Walker, a longtime Indiana hospital consultant now working for Deloitte.

In other words, providers are starting to compete with one another in what looks more and more like a real marketplace. A marketplace that features falling prices and rising quality and convenience.

That’s the benefit that comes from the pain of folks like me footing much larger portions of the bills.

While I was paying off my son’s hospital bills, our family also suffered through a terrible winter of colds, sinus infections, ear infections and strep throat. So what did we do? We took lots of trips to Walgreens to visit its retail clinics and fewer trips to our family physician.

That was for convenience as much as price. But the nurse practitioners at Walgreens are cheaper than our physician: $62 vs. $75, respectively, for a typical visit. (To the credit of our family physician, she makes extensive use of nurse practitioners and a physician assistant to handle medication refills, immunizations and other routine things, so she can—and does—spend significant chunks of time with us during our visits.)

When my older son developed digestive problems after two rounds of antibiotics, we skipped the expensive diagnostic tests recommended by his pediatrician and instead just used over-the-counter probiotics to get his gut back to health.

In short, we found cheaper and more convenient ways to keep ourselves healthy.

Again, we're not alone. According to the Commonwealth Fund survey, 80 million Americans skipped care due to cost in 2012, up from 63 million in 2003.

So you can understand why hospitals are concerned. And why employers and insurers are trying to spur more of this kind of behavior. Combine all three, and you have, for the first time in decades, the makings a real market for health care.