The Glade 4.0

Cost-control plan for health care could cost you

WASHINGTON (AP) — You just might want to pay attention to the latest health insurance jargon. It could mean thousands of dollars out of your pocket.

The Obama administration has given the go-ahead for a new cost-control strategy called "reference pricing." It lets insurers and employers put a dollar limit on what health plans pay for some expensive procedures, such as knee and hip replacements.

Some experts worry that patients could be surprised with big medical bills they must pay themselves, undercutting financial protections in the new health care law. That would happen if patients picked a more expensive hospital — even if it's part of the insurer's network.

The administration's decision affects most job-based plans as well as the new insurance exchanges.

Other experts say reference pricing will help check rising premiums.

A recent policy ruling from the administration went to unusual lengths to acknowledge concerns, saying the pricing strategy "may be a subterfuge" for "otherwise prohibited limitations on coverage."

Nonetheless, the departments of Labor and Health and Human Services said reference pricing could continue. Plans must use a "reasonable method" to ensure "adequate access to quality providers." Regulators asked for public comment, saying they may publish additional guidance in the future.

HHS spokeswoman Erin Shields Britt said in a statement that the administration is monitoring the effects of reference pricing on access to quality services and will work to ensure that financial protections for consumers are not undermined.

One way the new approach is different is that it sets a dollar limit on what the health plan will pay for a given procedure. Most insurance now pays a percentage of costs, and those costs themselves can vary from hospital to hospital. Now if you pick a more expensive hospital, the insurance still pays the same percentage.

The new strategy works like this:

Your health insurance plan slaps a dollar limit on what it will pay for certain procedures, for example, hospital charges associated with knee and hip replacement operations. That's called the reference price.

Say the limit is $30,000. The plan offers you a choice of hospitals within its provider network. If you pick one that charges $40,000, you would owe $10,000 to the hospital plus your regular cost-sharing for the $30,000 that your plan covers.

The extra $10,000 is treated like an out-of-network expense, and it doesn't count toward your plan's annual limit on out-of-pocket costs.

That's crucial because under the health care law, most plans have to pick up the entire cost of care after a patient hits the annual out-of-pocket limit, currently $6,350 for single coverage and $12,700 for a family plan. Before the May 2 administration ruling, it was unclear whether reference pricing violated this key financial protection for consumers.

Some experts are concerned.

"The problem ... from the patient's perspective is that at the end of the day, that is who gets left holding the bag," said Karen Pollitz of the nonpartisan Kaiser Family Foundation.

Previously a top consumer protection regulator in the Obama administration, Pollitz said the administration ruling amounts to a substantial change for consumers.

It's not on the radar yet for most people, but the new approach is gaining ground. The Mercer benefits consulting firm said 12 percent of the largest employers were using reference pricing last year, nearly double the 7 percent in 2012.

It's been pioneered in California by CalPERS, a giant agency that manages health and retirement benefits for public employees.

CalPERS started with knee and hip replacements in 2011, steering patients to hospitals that had been vetted for quality and charged $30,000 or less.

Ann Boynton, the agency's health benefits director, said the program has been a success, with patients able to choose from about 50 hospitals.

"People do not feel like we went to bargain-basement hospitals where the quality is not good," she said. "The quality is the same, and in some instances, better."

Economist James C. Robinson of the University of California at Berkeley studied the CalPERS experiment and found not only that many patients shifted to lower-cost hospitals, saving money, but that expensive hospitals responded by cutting their prices.

Although insurers don't appear to be using reference pricing on the new health exchanges, Robinson said he thinks it's only a matter of time.

However, the strategy appears to be suitable only for a subset of medical care: procedures and tests that are frequently performed, where the prices charged vary widely but the quality of results generally does not. In addition to knee and hip replacements, that could include such procedures as MRIs and other imaging tests, cataract surgery and colonoscopies.

Your health insurance plan slaps a dollar limit on what it will pay for certain procedures, for example, hospital charges associated with knee and hip replacement operations. That's called the reference price.

Say the limit is $30,000. The plan offers you a choice of hospitals within its provider network. If you pick one that charges $40,000, you would owe $10,000 to the hospital plus your regular cost-sharing for the $30,000 that your plan covers.

The extra $10,000 is treated like an out-of-network expense, and it doesn't count toward your plan's annual limit on out-of-pocket costs.

In comic strips the person on the left always speaks first. - George Carlin

Facism is not a school of thought, it is a racial slur.

In comic strips the person on the left always speaks first. - George Carlin

The only surprise to me is that the reference pricing strategy will be allowed through private carriers outside the exchanges. This means my employer sponsored plan which previously did not have anything like this will be free to introduce it next year (and within a minimum of 3 years I guarantee they, along with 90+% of other employers will). I guess tort reform was just too painful for politicians.

Facism is not a school of thought, it is a racial slur.

In comic strips the person on the left always speaks first. - George Carlin

I meant if they really wanted the "Affordable" Care Act to lower medical costs they could have started with tort-reform, then again maybe it was intended to make healthcare costs more affordable for insurers by shifting more of the costs to the consumer.

The United States Federal Government is trying to price you out of health care.

By allowing more room for the market to operate freely? This seems to allow insurers to differentiate themselves from one another and compete on the basis of their approach to reference pricing. It also more closely links what providers charge with what consumers pay, thus strengthening the price-signaling function of the market. I mean, I have objections to reference pricing as well, but it seems like it's designed to open the market to more competition and efficiency, not less.

Facism is not a school of thought, it is a racial slur.

Tort reform is pretty much irrelevant to controlling health care costs. Outside of a few specialties, malpractice premiums are not a significant cost driver. Also, it's worth noting that if 100-200,000 Americans a year were dying due to pilot error, I doubt many people would be arguing that we should make it harder to sue pilots and airlines in order to lower ticket prices.

Wooed north by his wife, who is originally from Prince Edward Island, Dr. Bannon said: “I’m happier here than I’ve ever been. I’ve done so much better here financially.” When he left Florida, his malpractice insurance cost $50,000 annually. On Prince Edward Island, thanks to a provincial government subsidy, his annual cost of $8,000 is reduced to just $1,000 a year.

As a general surgeon still in practice, Dr. Bannon knows Canada’s medical system firsthand.

In comic strips the person on the left always speaks first. - George Carlin

For private plane pilots, their final terrifying, twisting view of earth that leads to a crash is all too common and devastating, but that could be avoided with proper training, the National Transportation Safety Board tells ABC News.

Facism is not a school of thought, it is a racial slur.

In comic strips the person on the left always speaks first. - George Carlin

Facism is not a school of thought, it is a racial slur.

Hopwin:

I was pointing out that they don't use the real data; they just set standards based on what feels right.

In comic strips the person on the left always speaks first. - George Carlin

Of course, no one has said word one about the fact that medical licensing in the US now requires you accept Medicaid/Medicare.

Khross, there's some serious logical disconnect going on here, some key piece of information is missing. You have just argued that the government removing a restriction on insurers will drive private medical providers out of business. Insurers are not required to implement a reference pricing scheme. If they do so, it's because it makes economic sense for them to do so. Given that, why haven't insurers implemented this reference pricing scheme in the past? Did the ACA prohibit it before this point, or was it some other regulation that the Obama administration is now changing? Because the way I see it, you are essentially arguing that the government exerting less control over health insurance (by removing whatever regulation prevented insurers from implementing this scheme beforehand) directly results in the government having more control over health insurance. Uhm, so, is single payer completely inevitable no matter what the government does?

The fact that the reference pricing is indexed to Medicare is irrelevant, even if this were not mandated by law, the insurers would just do that themselves if they would make money off it. If implementing reference pricing indexed to Medicare doesn't make economic sense for insurers, then they won't and this new regulation will have no effect. If it does make economic sense, then they would do it even if Medicare indexing wasn't mandatory.

Even if the government is otherwise determined to force us into a single-payer system, it is logically impossible for the regulation change outlined in the original post to contribute to it.

Also, you've made this point a lot:



....how does this even work? The majority of doctors are employees and work for a salary, they do not have their own practices. They have absolutely no control over what forms of payment their employer will accept, in fact they are not involved in this decision making process at all. If one of these employers doesn't accept Medicare, are all of his physician employees required to quit their jobs or lose their medical licenses?

It figures the Obama administration would wait for a three-day weekend to announce its latest executive rule change to Obamacare (aka the “law of the land”).

This one is a doozy. The implications are so far-reaching that the official White House newspaper, the New York Times, buried the story by Robert Pear on page A12 of the New York edition. Here’s the gist of it:

Many employers had thought they could shift health costs to the government by sending their employees to a health insurance exchange with a tax-free contribution of cash to help pay premiums, but the Obama administration has squelched the idea in a new ruling. Such arrangements do not satisfy the health care law, the administration said, and employers may be subject to a tax penalty of $100 a day — or $36,500 a year — for each employee who goes into the individual marketplace.

The ruling this month, by the Internal Revenue Service, blocks any wholesale move by employers to dump employees into the exchanges.

Many employers — some that now offer coverage and some that do not — had concluded that it would be cheaper to provide each employee with a lump sum of money to buy insurance on an exchange, instead of providing coverage directly.

In comic strips the person on the left always speaks first. - George Carlin

Facism is not a school of thought, it is a racial slur.

Hopwin:

It's all good; just remember, this is about saving everyone money on health insurance according, Xequecal.

Xequecal:

There's no logical disconnect. You don't understand what reference pricing is, so I'll explain in short words.

Providers bill you based on their costs, labor, and overhead for a procedure.

Medicare says that said procedure, regardless of real costs and liabilities, can only cost X dollars.

Insurance companies are now only required to paid X dollars, increasing patient liability for out of pocket expenses, because the prices exceed reference pricing.

This does not increase competition; this increases the cost of health care for the end-user and eliminates the ability for service providers to actually break even on their procedures. And in the case of for-profit entities, which are most private physicians and a large number of hospitals, it's a back-end mechanism of eliminating profits from health care.

We're already subsidizing the rest of the planet with our government, now we're going to subsidize our own government expenditures with end-users dollars and further government price fixing.

Facism is not a school of thought, it is a racial slur.

In comic strips the person on the left always speaks first. - George Carlin