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Saturday, August 30, 2014

Who Should Be the Buyer?

If market forces are to be used to control the cost and quality of health care, there will be a need to decide whether patients or insurance companies should play the role of buyer.
The pros and cons of selecting insurance companies are currently being played out in Nebraska where Nebraska Blue Cross Blue Shield is locked in a contract dispute with CHI Health, formerly called Alegent Creighton Health/Catholic Health Initiatives Nebraska.    As discussed in an earlier posting, CHI has managed over the years to get payment rates from Blue Cross that, according to Blue Cross, are ten to thirty per cent higher than it is paying anybody else for the same services.   CHI admits to receiving somewhat higher rates, which it justifies by claiming that its high quality services save money by reducing complications, readmissions, etc.   As indicated in my earlier posting on this subject, attempts by others to confirm that claim have not been successful.
Based on what one can tell from the newspapers, the two sides to this dispute appear to be about evenly matched.  The absence of a contract will undoubtedly cause CHI to lose some patients and cause Blue Cross to lose some subscribers and each seems to think that the other will be hurt more.
The current contract between Nebraska Blue Cross and CHI expires at the end of August and according to reporting by the Omaha World Herald it does not appear that an agreement will be reached by that time.  The result will be that Blue Cross subscribers obtaining care from CHI will have to pay out-of-network levels of copays, which will be much higher than they have been paying up to now. 
It seems clear that Blue Cross is able to put more pressure on CHI than any individual patient or group of patients could.  On the other hand, the absence of a contract will result in some inconvenience and added cost to individuals, to which at least some of them will object and put the blame on Blue Cross.
My own leaning is to assign the buyer role to well-regulated insurance companies.  But there is certainly ample room for others to come down in favor of assigning it to patients.

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