Friday, October 26, 2018

Something old, something new [UPDATED]

[Scroll down for Update]

So back in April, we blogged on a medical insurance reimbursement model called reference-based pricing:

"Briefly, this is where an employer enters directly into a contract with a hospital (or other health care provider, one supposes, including DPC) ... but can carry additional risks, as well, namely balance billing"

In that post, I really defined the concept way too narrowly, because it doesn't have to be contractual with the provider. Indeed, as FoB Jeff M alerts us, it can be in relationship with one's insurance company:

"MyChoice is a less expensive option for families and small businesses who may not be able to afford other, higher-priced ACA plans ... This isn't a reduced-coverage plan, however. The cost savings are achieved through reference-based pricing. The plan reimburses customers directly for medical procedures at rates that are up to 40 percent higher than what the doctor or hospital would receive for providing the exact same services to a patient on Medicare."

Which seems fair, and also touches the sacred Price Transparency button. The challenge, of course, is two-fold (at least):

As noted in our April post, this opens up the very real possibility of balance-billing; that is, it's not a network issue, so the provider is free to charge more than the reimbursement value. Which leads to the second, related issue: sure, this may be great for non-emergency services, but who's shopping for the cheapest ER when having chest pains?

And the balance billing issue on this could be huge. remember last month's post on the $100,000 heart attack? A key passage notes:

"His insurance did what it was supposed to do, it made a fair and reasonable offer for the care received."

Kinda like 140% of Medicare pricing?

And how did that work out?

"St. David's stuck to their guns and refused to budge."

So, is this the future?

UPDATE: Co-blogger Patrick explains how this will work in practice:

"Essentially the member gets reimbursed for the cost of the service at 140% of the Medicare rate, so if a doctor charges $100 the member pays $100. If Medicare contract says the provider gets $40 then BCBSNC will reimburse the member at $56 (140% of $40).

If that isn't enough reimbursement for the doctor then they can balance bill the difference
[ed: as noted]. Think about how much of a nightmare this will be for members: Every code has a different charge and reimbursement. If you have ten codes from your ER visit then you could be balance billed for each line item. Aspirin at $8 Medicare pays $0.20. 140% of $0.20 is $0.28. Does the hospital balance bill the difference of $7.72 or do they eat it? How ticked is the member if they have to pay $7.72 for an aspirin?"

Indeed. Thanks, Patrick!
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