Price levels by payer

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.


4 replies
  1. 1
    Marcia says:

    I’ve heard many people — in person, on the radio, online — say that they don’t need insurance because they take care of their health. Heed this morality tale:

    For my whole life I’ve been the proverbial poster child for people who rarely get sick — and I was the kid in my family who wouldn’t eat those vegetables no matter what the Parental Units threatened. When I was in my early 40s I had bunion surgery and the clinic people kept asking me if I’d left things out of the medical history form I’d filled out; it was the shortest history for someone my age they’d seen in a long time.

    Nevertheless, 3 years ago I woke up in the middle of the night by the worst pain I’d ever experienced, at the base of my neck and my right shoulder. After a few false starts (including a “clinic” run by a hateful woman who told me flat out I was faking), some X rays and an MRI, it was diagnosed as a herniated disc at the base of my neck; not an unusual thing among 60-somethings. The doctor prescribed two medications and it was soon under control.

    At the time, I had medical insurance with my employer. The out-of-pocket charges totaled about $650, which we put on the credit card and paid off via a do-it-yourself payment schedule. Without the insurance it would have been about ten times that, somewhere between $6,000 and $7,000.

    And at that, $6-$7K would be a modest bill compared with what one car accident or cancer diagnosis would produce.

  2. 2
    Nougat says:

    Hey David, DOL rule on association plans is out. It’s a…doozy. I expect lawsuits on the interpretation they’re advancing.

  3. 3
    maryQ says:

    @Marcia: Thanks for sharing. I have a young teenage daughter who was born the healthiest kid on the planet, and had an uneventful childhood as far as illness and injuries. Last year she passed out at a soccer game. When I mentioned it to her pedi a few weeks later (routine visit), we followed up. Several high end diagnostics, two surgical procedures, two new daily prescriptions, one implanted device, and a home INR monitoring device later, she broke her arm in a bike accident and had to get an orthopedic plate. All this happened in 365 days. We have excellent employer provided insurance. Our out of pockets (not counting hotel stays so we could go to the best kid’s hospital for cardio procedures) totaled less than $2K. Our insurance paid an amount approximately equal to one third of our annual household income. That is pretty much my whole salary (and I’m in my 50’s and it took me a fuck of a long time to work up to this), half of what we still owe on our house, and twice the cost of attending one year at a selective private university. I suspect more of this down the road, though thankfully not every year.

  4. 4
    James says:

    We’re in new plan/coverage hell. Husband got a gold HMO plan this year, needed a new doctor. Doctor 1, the reason for picking this plan, left plan 01/01/18. Doctor 2 doesn’t return phone calls for 3 days. A stop at his office and we find out he is not accepting new patients (plan insists otherwise and assigned him as PCP.) Doctor 3 needs for the insurance system to make him PCP before scheduling an appointment and is unwilling to accept the insurance Company’s reference # for the PCP change. Husband needs a prescription refilled soon which will probably only be given after test results after waiting for an initial appointment.
    This is not a civilized system.

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