The High Price of Hospital Care


Several states have implemented forms of reference pricing for public plans…………..

Center for American Progress – The High Price of Hospital Care

Excerpts from Article:

The Medicare Payment Advisory Commission (MedPAC) notes in its March 2019 report to Congress that Medicare payments exceed the marginal cost of caring for Medicare patients by 8 percent.

Reference pricing

Short of broad-based government action on hospital rates, individual payers can take steps to cut the cost of hospital care through reforms such as reference pricing. Under reference pricing, a payer sets the maximum it will pay for a service or bundle of services, which could be tied to a percentile in commercial claims or to Medicare rates. Providers that decline to accept the reference price are either excluded from the payer’s network, or patients who choose that provider take responsibility for paying the difference out of pocket. Reference pricing incentivizes patients to visit lower-cost providers and puts pressure on providers to lower costs in order to keep their business.

Several states have implemented forms of reference pricing for public plans. The California Public Employees’ Retirement System was among the first payers to adopt reference pricing for a limited set of scheduled procedures, including cataract surgery and joint replacements. Montana took a broader approach for its state employee plan by setting a reference price for all hospital services that average 234 percent of Medicare rates. In Oregon, the state legislature passed a bill to set provider reimbursements for the state employee plans at 200 percent of Medicare. And in Washington state, a new public option to be offered through the state’s health insurance marketplace will cap aggregate provider payments at 160 percent of what Medicare pays.