The healthcare cost-control toolbox


How would economists lower healthcare spending while maintaining quality? Two prominent health economists and a fiscal expert looked into their economic toolboxes and recommended value-based purchasing reference pricing and defined contribution, The Hill reported.

James Robinson, a professor at the University of California, Berkeley, pointed to value-based purchasing contracts in which Medicare and private insurers allow providers to share in savings for delivering higher-quality, lower-cost care. Payers can use value-based strategies to encourage cost conscious consumers by offering a rebate for choosing a lower-cost provider from a list of qualified facilities, Robinson said at American Society of Health Economists' biennial conference in Los Angeles.

The health economists also promoted reference pricing between insurers and employers, where patients pay the difference if the costs goes above the maximum amount an insurer will pay for a procedure, according to The Hill. They noted consumers will perceive reference pricing as a penalty for picking an expensive provider and shared savings as a reward for good behavior.

Reference pricing was a cost-control lever highlighted by Meredith Rosenthal, Ph.D., associate professor at the Harvard School of Public Health, said at AHIP Institute in Seattle. She cited the success of CalPERS and Anthem Blue Cross' reference pricing for hip and knee replacement, which saved $5.5 million over two years.

Premium support for Medicare also can act as a powerful cost-control lever, according to Alice Rivlin, former director of the Office of Management and Budget and former vice chair of the Federal Reserve Board. She recommended giving beneficiaries a fixed dollar amount to purchase private insurance--beneficiaries would pay out-of-pocket for plans that cost more than Medicare's defined contribution. This would allow private insurers to compete for beneficiaries, thereby driving down premiums.

The House Budget Committee in April supported a budget resolution that would shift Medicare to a premium support program in 2024, giving workers currently under the age of 55 a choice between a traditional fee-for-service plan through a new Medicare exchange and a private plan, according to the article. The plan would create $129 billion in net Medicare savings over 10 years.

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