Guiding the Invisible Hand: Practical Policy Steps to Limit Provider Prices in Commercial Health Insurance Markets<\/a>, Urban Institute. Although U.S. policymakers have historically preferred an \u201cinvisible hand\u201d approach to regulating health care prices, commercial insurers make high and rising payments to providers rather than negotiating to slow growth in health care costs. Researchers at the Urban Institute reviewed the evidence regarding the high and varied cost of health care in the U.S., and assessed the benefits and consequences of implementing either price caps or price growth limits to constrain provider prices commercial health insurance markets\u2014policies currently viewed as a \u201clight touch\u201d alternative to rate setting.<\/p>\n\n\n\nWhat it Finds<\/strong><\/p>\n\n\n\n\n- Provider prices are rising at a faster pace than service utilization\u2014a 2022 CBO study found that service use rose 0.4 percent per year between 2013\u20132018, while prices paid to providers increased 2.7 percent per year during the same time period.<\/li>\n\n\n\n
- Prices for physician and hospital services vary widely across geographic locations. A 2020 RAND study determined commercial insurer payments for hospital services in Indiana at nearly twice the rate of commercial insurer payments for the same services in the nearby state of Michigan.<\/li>\n\n\n\n
- Price caps pose operational issues, such as whether the caps should be applied to each individual service or the weighted average of all services. They also raise compliance issues.<\/li>\n\n\n\n
- Existing research suggests that using Medicare prices to set the benchmark rate is more effective than pegging the rate to commercial prices. However, given the population covered by Medicare, some adjustments will be required for services that are not frequently used by the Medicare population, such as maternity care.<\/li>\n\n\n\n
- Price growth limits, despite their ability to prevent the sudden shocks of price caps, could worsen existing disparities in payment that currently exist in the healthcare industry. Some research suggests that growth limits should vary based on existing provider prices to avoid perpetuating the wide and often irrational variation in provider prices.<\/li>\n\n\n\n
- Price growth limits also run the risk of incentivizing providers to up their service volume. This is one of the factors that led Maryland, a state that previously set a price growth limit, to instead establish hospital global budgets.<\/li>\n\n\n\n
- The most successful contemporary adoption of price growth limits is in Rhode Island, which utilizes insurer rate review and approval processes to constrain provider rate increases by limiting annual premium increases and annual changes to contracted provider prices.<\/li>\n<\/ul>\n\n\n\n
Why it Matters<\/strong><\/p>\n\n\n\nThe rising cost of health care in the U.S. is a nearly evergreen issue. While many have looked to price caps and price growth limits as an alternative to the \u201cblunt instrument\u201d of rate setting, the authors of this study assert that implementing these policies will not be as simple as some proponents have suggested. They will require significant commitment from policymakers and implementing officials to reduce spending (improving affordability) and lessen payment disparities between providers (fostering competition based on care quality and access). The authors also note that, because the federal government may not be able to act on this issue any time soon, tackling health care costs is a task that will likely continue to fall to states. Regardless, the evidence is clear that continuing to defer to market forces alone is not likely to bend the cost curve.<\/p>\n","protected":false},"excerpt":{"rendered":"
April showers bring May flowers, and May was abloom with health policy research. Last month, we read about the impact of ending pandemic-related coverage policies, consumer awareness of the resumption of Medicaid renewals, and approaches to tackling rising health care costs in commercial health insurance markets.<\/p>\n","protected":false},"author":38,"featured_media":7166,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[8,478,1],"tags":[16,13,156,18,809,810,705,559,665,796],"_links":{"self":[{"href":"https:\/\/chirblog.org\/wp-json\/wp\/v2\/posts\/7280"}],"collection":[{"href":"https:\/\/chirblog.org\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/chirblog.org\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/chirblog.org\/wp-json\/wp\/v2\/users\/38"}],"replies":[{"embeddable":true,"href":"https:\/\/chirblog.org\/wp-json\/wp\/v2\/comments?post=7280"}],"version-history":[{"count":4,"href":"https:\/\/chirblog.org\/wp-json\/wp\/v2\/posts\/7280\/revisions"}],"predecessor-version":[{"id":7295,"href":"https:\/\/chirblog.org\/wp-json\/wp\/v2\/posts\/7280\/revisions\/7295"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/chirblog.org\/wp-json\/wp\/v2\/media\/7166"}],"wp:attachment":[{"href":"https:\/\/chirblog.org\/wp-json\/wp\/v2\/media?parent=7280"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/chirblog.org\/wp-json\/wp\/v2\/categories?post=7280"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/chirblog.org\/wp-json\/wp\/v2\/tags?post=7280"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}