I asked Brian Klepper why private insurers are such slaves to the Medicare’s relative physician payment rates and if anyone has interviewed plan executives on the subject? Here’s his answer, posted with his permission:
I doubt there is much academic literature, mostly because the plan execs aren’t all that interested in being scrutinized, and its difficult to do the work without their cooperation. I would argue that, broadly, health plan reimbursement was rooted in Medicare and still follows it for many things.
But its important to remember that, contrary to the mythology that they want health care costs to be low, health plans make a percentage of total cost, passing the excess along into higher premiums in subsequent years. They want health care costs to be higher. In the case of primary care, low reimbursement mitigates against complexity, translating into shorter visits that encourage specialty referrals at the drop of a hat. Primary to specialty care referrals have doubled in the last decade, and a traditional primary care case that is now in a specialist’s hands will almost certainly cost 10x what it would have if it had remained. […]
The issue is that, over the past 40 years, the health care industry has found many ways, mostly hidden, to extract large amounts of money that they’re not legitimately entitled to. This is why primary care medical homes, while important, aren’t enough. It takes a more comprehensive approach. I wrote about this somewhat here
My recent, relevant posts are here.