Sunday, September 08, 2013
A Remedy for Cost
We claim to be highly concerned about the high and rising
cost of health care, but we are slow to do anything about it.
The August issue of the journal Health Affairs included an
article reporting on a program in California in which Calpers, the insurance
company serving government employees and retirees, offered beneficiaries a
health insurance policy that classifies providers into two groups – one
charging higher prices and the other lower prices. For
services obtained from the low cost group, the regular co-pay and deductible provisions
of the policy apply. For the high cost
group, patients also pay the difference between amounts set by the policy and
what the provider charges. The goal was
to reduce cost by providing patients with a financial incentive to seek out providers
that charge the lower prices. In the
article, two researchers at the University of California at Berkeley reported
the results of a study they had conducted to see whether and to what extent the
program had achieved its objective.
The results were significant. The study focused on hip and knee
replacements and each year studied the more than 400 patients who participated
in the program and obtained those treatments.
During the first year after the program was implemented, services
obtained from the low price group increased by over 20 per cent compared with
the previous year. Prices charged by the
low price group went down 5.6 per cent and by the high price group 34.3 per
cent. The researchers calculated that
the program saved Calpers $2.8 million in 2011.
I have long believed that threatening high cost providers
with a loss of patients would be an effective way to get them to become serious
about cost reduction – more so than offering them financial rewards for doing
so, as Medicare is doing. The Calpers
experience seems to bear that out.
One would think that others would be quick to adopt the
Calpers program, but apparently the fear of market forces in health care
remains strong enough to prevent taking advantage of them – or at least to slow
down the process to a crawl.
