according to a 2022 CBO ReportPer capita health care spending for commercially insured individuals is much higher than for Medicare-insured individuals, and this difference is primarily driven by price differences.
Why does the salient research question relate to the prices commercial insurers pay providers?This is a recent topic health affairs Article by Chernew and Berquist. According to that article, the key questions are:
- Will the missetting of public prices distort commercial prices? If public prices are set too low, it may result in cost shifting leading to higher commercial prices. On the other hand, if public prices are high, this may give the health system more leverage to negotiate higher prices for commercial insurers. vice versa. Market dynamics are complex and may vary from market to market.
- How should services be defined? Usually this is done at a granular level (eg CPT codes, DRG codes). The authors write: “Detailed service definitions help ensure minimal variance in delivery costs within any given service category. However, having many codes creates an opportunity for providers to choose more profitable codes. Number of codes and codes Constant updating of definitions incurs administrative costs.” The authors suggest that more generic service codes may be more useful for improving provider efficiency. At the same time, these broader norms can encourage stinginess in care and reduce incentives to adopt innovative new technologies and services to improve patient health.
- How does quality respond to pricing changes? The author points out that there are evidence Patients who receive care from more expensive providers are advised to receive better care; however, cross-national studies have shown that price and quality are not always correlated. Can we lower the price and keep the quality? The authors make an important point: “The relationship between price and quality may not be linear, and lowering the price of a high-priced supplier may have a different effect than lowering the price of a low-priced supplier…[also] Quality is multidimensional, and different people may weigh different dimensions in different ways, making it difficult to draw broad conclusions”
- How should we price new digital services? A key question is whether digital technologies complement or replace “analog” care. For example, telehealth visits can replace in-person care in many cases. On the other hand, the ability to email your provider may increase patient satisfaction and quality, but paying for a doctor’s email response may increase costs because it is in addition to analog services.
- How much spending goes outside of the claims system? While claims data can help measure overall costs, much or payer reimbursement to providers is through alternative payment model mechanisms such as shared savings payments, Hospital Readmission Reduction Program (HRRP) bonuses, and other value-based payments not included in the claim.according to HCP-LAN Report 2022only 40.5% of services were paid for through standard fee-for-service (FFS); the other 59.5% were paid for by value or through per head, bundle or global budget.
- Is it worth paying for a performance system? Much of the Affordable Care Act aims to link reimbursement to quality through pay-for-performance (P4P).However, there is a growing body of evidence P4P systems do not improve quality. Additionally, these programs add cost and complexity to the supplier’s management. Paying for value is good in theory; but is it feasible in the real world to measure quality in an efficient manner and link reimbursement in a way that does not burden payers, providers, and patients?
- To what extent do high prices reflect higher production costs in the United States, and why? Wage costs in the U.S. are higher than in other countries, which partly explains this difference. Further prices paid for medicines and diagnostics are also higher. Multiple stakeholders in the U.S. healthcare system add complexity and administrative costs. What other reasons are there for higher health care costs in the United States?
you can read the full text here. The article concludes by pointing out that any policy choice will involve trade-offs between spending, access and quality. There is no silver bullet, but we can continue to work to provide patients with better healthcare in the United States and around the world.
