Reference pricing

The most common cost-moderation strategy pursued by employers in recent years has centered on consumer cost sharing: 41 percent of large employers now offer high-deductible plans, and 31 percent of employees are now in plans with a deductible of $1,000 or more.  Annual deductibles sensitize consumers to the cost of primary care. However, they have no effect on forms of care for which prices are above the deductible and the annual out-of-pocket maximum. In contrast, reference pricing and centers-of-excellence contracting target price variation among providers—even for high-price procedures that exceed the deductible and annual out-of-pocket maximum. […]

Both reference pricing and centers-of-excellence contracting can be used by Medicare Advantage health plans because they have the ability to impose differential cost-sharing requirements and exclude providers altogether from their contractual networks. However, the new benefit designs will be applicable to traditional Medicare only if the program becomes willing and able to use consumer cost sharing to channel patients to particular providers based on quality and efficiency

Count me as a fan of reference pricing and targeted, tiered cost sharing, of which centers-of-excellence contracting is a variant. (See also smart tiers.) There’s more by James Robinson and Kimberly MacPherson (ungated PDF), the source of the quote above. It’s worth your time.


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