A move to let government set health-care prices

Massachusetts wants to allow government to fix health-care prices in some cases. We’re watching closely.

“Here’s a pretty simple explanation for all the price variation: hospitals negotiate specific rates for specific insurance companies,” Sarah Kliff writes on Wonkblog at The Washington Post. “They gauge the size of the insurance company and how many patients it would be expected to bring in, and then set a price. Insurers and hospitals alike closely guard those pricing agreements as proprietary information, with neither party wanting to see their pricing agreement undercut by a competitor.

“Massachusetts wants to do away with all of that. In a proposal released Wednesday, the Massachusetts Special Commission on Provider Price Reform recommends allowing a panel of state regulators to reject rates charged by hospitals and providers if they’re too high. The report, which you can read here, also proposes the creation of a claims database, which would allow the public to see how much their health care actually costs.”

The comment stream on this is particularly interesting.

A commenter adds: “Maryland has a hospital rate setting mechanism where everyone who gets a procedure done in a hospital pays exactly the same price. This has had the effect of controlling costs and keeping them below average national increases.

“The system has largely reined in hospital costs. In 1976, Maryland hospital costs were 25% more per case than the national average; by 2007, the latest year for which data are available, Maryland’s costs were 2% less than the national average. Maryland also saw the nation’s second-slowest increase in hospital costs during the same period, said Robert Murray, the commission’s executive director.”
Wall Street Journal
Monday, September 14, 2009
http://online.wsj.com/article/SB125288688445707403…

And then another commenter chimed in:

“I’m torn on this one. On the one hand, I think that the lack of transparency on pricing is a problem. I should know how much my procedure costs. On the other hand, I don’t have a problem with the same procedure having a large variance in cost between providers. The fact of the matter is some doctors are better than others. There is a variance between the cost of services in all other markets, so I don’t expect healthcare to be different.”However, a market can’t function if the the prices aren’t known. I’m thinking an incremental approach, starting first with the publication of rates, would be a good first start. Once those results start to become apparent, other steps can be taken.”

A few more exchanges, and then this:

“As far as Aetna vs Cigna they all know what each of them pay and in general its the same as BCBS, United. There’s very little difference in my experience (and i have a good amount of it) in one insurance company vs another).The only variation you see is when one carrier has more market penetration than another and can bargain a bit better. And by a bit I mean by 2-5%.

The problem is that you get hospitals that threaten to leave insurance networks and then drag their doctors along with them if insurers don’t agree to a 15-20% increase in reimbursement rates because Medicare and medicaid rates are down and charity care is up with the recession. And no one takes the insurer’s side because well they’re evil. That’s a good reason why rates go up every year although over-utilization is a greater reason.”