Relative Value Health Insurance

June 16, 2014

Interesting post in The New York Times blog The Upshot on the notion of relative value health insurance.

Consider the latest technology for treating prostate cancer: the proton beam….Per treatment, this therapy costs at least twice as much as alternative approaches, but is no more effective. Many health plans cover it and other therapies of low or uncertain value because they pay for anything that physicians deem medically necessary even when evidence suggests otherwise. And, without even knowing it, Americans pay for it in higher premiums.

It doesn’t have to be this way.  If plans could compete on the basis of the therapies they cover, consumers could decide what they wish to pay for. This sounds complicated, but it need not be.

Health plans could define themselves at least in part by the value of technologies they cover, an idea proposed by Professor Russell Korobkin of the U.C.L.A. School of Law….

Someone who wanted proton-beam cancer treatment coverage could have it by selecting a platinum policy and paying its higher premiums. Someone who did not want to pay higher premiums for lower-value care, in turn, could choose a bronze or silver plan. This gives a different, but more useful, meaning to the terms “gold,” “silver” and “bronze” than they have in the new insurance exchanges today.


Premiums Rose Before, Will Rise After ObamaCare

June 6, 2014

CNBC’s coverage of a Commonwealth Fund study says:

Individual health insurance premiums in the years before President Barack Obama signed the Affordable Care Act into law had large average increases and a high variability in rate hikes across different states and insurers, a study released Thursday found.

It’s the kind of thing that absolutely true, but hard for people to fully appreciate when they’re being hit with hefty 2015 premiums increases.

In Reference to Reference Pricing

May 21, 2014

Nicholas Bagley of The Incidental Economist does a good job of outlining the possibilities and concerns surrounding reference pricing, which the Obama Administration will temporarily allow for self-insured groups until it issues final regulations on the topic.  His view:

The administration is right to give it a shot. But the federal government has no experience with enforcing network adequacy laws and I fear it lacks the resources to enforce them effectively. Should reference pricing take off, preventing employers from abusing it will present a formidable regulatory challenge.

The idea appears to have merit, but imagine the headlines as the first reference pricing horror stories emerge.  “Man gets hip replacement and $20,000 bill.”

More Good News on Healthcare Costs

October 3, 2013

They are up just 3.5% through May 2013, according to a new index from S&P Dow Jones Indices.  The index tracks health insurance claims data for 60 million fully funded commercial members.  The data include medical costs, which are up 4.2%, and prescription drug costs, which are up 0.6%.  “While the rate of increase of medical care expenditures in the U.S. is slowing, it is still rising faster than disposable personal income,” says David Blitzer, who heads up the index committee at S&P Dow Jones Indices.



Medicare Controls Price, Health Plans Control Utilization, Medicaid Controls Both

September 24, 2013

Via The Incidental Economist:


Medicaid Cost Trends

‘Cautious Optimism” on Healthcare Costs

May 7, 2013

From Health Affairs:

During and immediately after the recent recession, national health expenditures grew exceptionally slowly. During 2009–11 per capita national health spending grew about 3 percent annually, compared to an average of 5.9 percent annually during the previous ten years. Policy experts disagree about whether the slower health spending growth was temporary or represented a long-term shift. This study examined two factors that might account for the slowdown: job loss and benefit changes that shifted more costs to insured people. Based on an examination of data covering more than ten million enrollees with health care coverage from large firms in 2007–11, we found that these enrollees’ out-of-pocket costs increased as the benefit design of their employer-provided coverage became less generous in this period. We conclude that such benefit design changes accounted for about one-fifth of the observed decrease in the rate of growth. However, we also observed a slowdown in spending growth even when we held benefit generosity constant, which suggests that other factors, such as a reduction in the rate of introduction of new technology, were also at work. Our findings suggest cautious optimism that the slowdown in the growth of health spending may persist—a change that, if borne out, could have a major impact on US health spending projections and fiscal challenges facing the country.

The Pros and Cons of Price Transparency

April 17, 2013

I found this article by Peter Ubel, M.D., in The Atlantic on the potential unintended consequences of healthcare pricing transparency to be interesting.  Maybe it’s because I recently read Dan Ariely’s Predictably Irrational–a behavioral economist’s fascinating look at why we don’t make financially rational choices.

Ubel, who is also a behavioral scientist says, “Patients often don’t shop for health care in the kind of rationally defensible way that economic theory expects them to.”  One reason is that insurance pays the bill for a lot of us; so why pick the cheaper option?  Another is that people often assume that higher cost means better quality.  For example, Ubel notes, “studies show that expensive pain pills reduce pain better than the same pills listed at a lower price.”  Ubel adds:

Measuring health care quality is no simple task. But if we are going to push for greater price transparency, we should also increase our efforts to determine the quality of health care offered by competing providers. Without such efforts, consumers will not know when, or whether, higher prices are justified.


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