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FOR SALE: Used Parachute. Never Opened. Half-Price or Best Offer.

April Seifert

Updated: June 22, 2017    Published: November 26, 2014

We’ve all heard the saying you get what you pay for. As a consumer, you make countless decisions about which products or services to buy, and one rule-of-thumb many of us use is that the price of a product or service is a pretty good indication of its quality. In many cases, this is fairly accurate.

Let’s look at hotels as an example. A simple search on for hotels in four major U.S. cities for the same night with the same number of people shows a pretty reliable relationship between cost and quality. Hotels with a lower number of stars cost less than hotels with a higher number of stars.

Travel Costs

You Get What You Pay For…Or Do You?

The healthcare industry is in the middle of very rapid change. Consumers are gaining power in a way they have never had it before, for a few reasons:

  • High deductible health plans force consumers to pay out-of-pocket for a larger portion of their medical care before their insurance plan kicks in.
  • Coinsurance (paying a percentage of the cost of a healthcare service, for example, 20% after deductible) is becoming more common, and copays (paying a set price for a health care service, for example $25 after deductible) are becoming less common. This should make consumers more conscious of the price of their healthcare because 20% of a $500 medical procedure is a lot less than 20% of a $1500 medical procedure.
  • Technology is emerging that allows consumers to shop for health insurance (, the state and federal health exchanges), and medical services like Consumers can now be armed with information to help them make informed choices.

More than ever before, consumers are able to shop for doctors, hospitals and health insurance carriers using information than they have never had access to. This begs the question: Does our rule-of-thumb still work when we apply it to healthcare? Do you truly get what you pay for? To answer this question, we should turn to the research.

Cost is typically measured as the average cost of a patient, episode of illness, or medical procedure, after adjusting for the age and health risk of the patients being measured. Quality is typically measured as the percent of patients receiving care that follows evidence-based guidelines (higher percentages = higher quality) or the percent of patients who experience an adverse outcome or readmission after a procedure (lower percentages = higher quality).

Research looking at the cost and quality of health care providers and hospitals has shown that there is not a reliable relationship between cost and quality.

Studies looking at the experiences of both Medicare[1] and commercially insured[2] patients show that cost is not a good proxy for quality. The relationship looks more like the graph below. Unlike the reliable cost and quality relationship that we saw with hotels, in the case of medical care, higher cost does not indicate higher quality. Some lower cost physicians and hospitals have high quality scores, and some higher cost physicians and hospitals have lower quality scores.

You Get What You Pay For on Health Insurance

Consumer Tips

To make the best possible health care choice for you and your family, it is important to seek out both cost and quality information. Luckily, it is becoming easier to do so. Many health insurance carriers are now offering cost and quality ratings of the doctors in their networks. Look for these programs and ones like them as you search for providers in your plan’s network:

  • United Healthcare – Premium Designation Program
  • Blue Cross Blue Shield – Blue Distinction Program
  • Cigna – Care Distinction Program
  • Aetna – Castlight (3rd party company)

You can also search a growing number of websites designed to provide cost and quality information such as and Additionally, non-profit organizations at the state and federal level also publish this information. In my home state of Minnesota, Minnesota Community Measurement publishes useful data at their website.

Before you make an appointment with a high-cost provider assuming it means you’ll get “5 star” care, take a minute to look for published quality ratings. In healthcare, you don’t always get what you pay for.





[1] Hospital Cost of Care, Quality of Care, and Readmission Rates: Penn Wise and Pound Foolish? Archives of Internal Medicine, 170, Feb, 2010.

[2] Wide Variation in Episode Costs within a Commercially Insured Population Highlights Potential to Improve the Efficiency of Care, Health Affairs, 9, Sep, 2012.

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