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.
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.”
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.
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.