Smart tiers

Last night I posted a brief comparison on the MA cost control bills. In the comments, Mike asked about “smart tiers”

First of all, let’s just acknowledge the marketing. Who wouldn’t want socks made with “Smart Wool?” Why eat plain popcorn when you can have “Smart Food?” And now we have “Smart Tiers” in health plans.  Brilliant idea (or, dare I say, smart?)

Second, who gets credit?  It appears that this term was invented right here in Boston (the relevant Google results are all local). Our friends at WBUR’s  CommonHealth attribute the term to House Rep. Steve Walsh and Harvard KSG economist Amitabh Chandra.  (prior “dumb tier” coverage here)

Third, what does the House Bill do?  (full pdf here)

  • Health plans can offer differential co-pays, based on the cost and volume of the service
  • The hope is that consumers will vote with their feet and go to the less expensive facility for that MRI
  • In time, this undermines BigHealthSystem market power and partially unbundles their services
  • All of the above with actual market forces instead of government diktat

Fourth, who does it apply to?

  • Most of the Smart Tier provisions are limited to the small group insurance market
  • MassHealth (Medicaid),  the Connector, and other state plans can also use Smart Tiers
  • ERISA plans don’t need the State’s permission to try Smart Tiers
  • Short answer:  potentially, everyone except Medicare (for now)

Expect BigHealthSystems to attack this idea. Cautious Boston Globe editorial here; previous TIE coverage on insurance market power here (FAQ) and here (Academy Health blog).

Other smart things:  water; guns; toilets, and candy.


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