Health Affairs has a new article out that looks at relative prices paid by a variety of insurers for common primary care office visits.
Third party means the insurer and out of pocket is the combined co-insurance and co-pay that the patient pays. There are a few big take-aways.
The three private programs (Employer, Marketplace/Exchange and other (underwritten) individual market) look a lot alike in what they pay the docs. Government programs pay docs less. Cost sharing paid by the patient is a lot less as well for the government programs. Medicare pays docs more than Medicaid. Medicare has higher cost sharing than Medicaid.
This paper is not a revelation. It is confirmation of plenty of previous work on relative pricing of different payment mechanisms. The useful addition is the information that the Exchange payment levels looks a lot like other private insurance options and not like Medicare or Medicaid. From here, this leads to the obvious insight that insurers that can offer networks priced like Medicare or Medicaid will have significant pricing advantages over insurers that pay their docs like they are part of a group network.
Last July, I wrote that many proposals are attempts to get a larger wedge of services paid at near Medicare rates:
Most liberal health policy goals have a very simple summary: get more people on insurance that pays providers rates that are closer to Medicare rates than commercial large group rates. Large group rates pay providers between 40% and 100% more than Medicare for physical health service. Moving the entire employer sponsored coverage universe to paying Medicare like rates would knock 30% off of the current bill.
We see this in Exchange. There is significant configuration convergence caused by both the subsidy formula and the risk adjustment formula. Plans that are profitable tend to be paying providers Medicare plus a little bit while offering narrow networks. We see this in the proposal to move the Medicare buy-in age to 55. We see this in the proposal to have a public option. The 2009 House public option was pricing out at Medicare plus a bit. All of these efforts are just different ways to achieve an underlying goal of reducing provider compensation by lowering the average payment per service by having more people move from high payment to provider coverage to Medicare based pricing.
This figure shows why that is the case.