Experts Split on Obama Administration’s New Cost-Control Policy
The Obama administration recently approved a new cost-control strategy called "reference pricing," which allows insurers to set a limit on how much they pay for certain medical procedures, the AP/Sacramento Bee reports (Alonso-Zaldivar, AP/Sacramento Bee, 5/15).
The decision affects most employer-based coverage, as well as plans purchased through the Affordable Care Act's exchanges. According to the AP/San Francisco Chronicle, the strategy does not apply to all medical procedures and tests, but instead is suitable for frequently performed treatments for which costs vary widely but results do not.
Some of the medical procedures that the new policy will or could cover include:
- Cataract surgeries;
- Hip replacements;
- Knee replacements; and
- MRIs and other imaging tests.
According to the AP/Chronicle, some experts say the strategy could help reign in rising insurance premiums (Alonso-Zaldivar, AP/San Francisco Chronicle, 5/16).
Provision Could Mean Large Out-of-Pocket Costs for Consumers
However, the strategy could "surprise" patients who choose treatment at more costly providers, according to the AP/Bee.
For example, if a health plan sets its limit for a knee replacement surgery at $30,000 and a consumer chooses an out-of-network hospital that charges $40,000 for that procedure, the consumer will owe:
- $10,000 to the hospital; and
- Whatever share of the $30,000 that the health plan does not cover.
Further, the strategy could "undercut" financial protections for consumers under the ACA. According to the AP/Bee, the extra $10,000 will be treated as an out-of-network expense and will not count toward the consumer's annual limit on out-of-pocket costs. Under the ACA, the majority of health plans are required to cover the entire cost of health care after a patient has reached the annual out-of-pocket limit, currently $6,350 for individuals and $12,700 for families.
Karen Pollitz of the Kaiser Family Foundation said "the problem" with the cost-control strategy is that "from the patient's perspective at the end of the day, that is who gets left holding the bag" (AP/Sacramento Bee, 5/15).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.