Reference-based pricing seems like an attractive option. Basically, health insurers pay some amount (e.g., the lowest price, median price, average of lowest X prices) for a given service. If patients want a higher priced option, they must pay the difference. The approach assures patients have access to care but makes patients responsible if they don’t shop for lower priced services. This approach, however, assumes that (i) the bundles being referenced are comparable and (ii) patients have good insight into prices and value, and (iii) there are a number of options from which to choose . If different providers offer fundamentally different services, reference pricing could amount to simply shifting cost to enrollees–and typically the enrollees that need higher priced care. Further, if individuals don’t clearly observe prices, they have limited ability to make informed decision. Finally, if there is a single provider of a given type in town, reference pricing would amount simply to cost shifting (or compelling individuals to drive long distances to get a lower price).
A paper by Sinaiko and Mehrotra (2020) aims to determine how reference-based prices (RBP) for affects cost and patient choice. Using data before and after a 2014 RBP initiative among 3 self-insured employer groups, the authors found that:
In the first post‐RBP year (2015), there was no change in choice of facility; by the second year, RBP‐exposed enrollees were 21.9 pp (95% CI: 18.5, 25.3) more likely to choose a lower‐priced facility and net prices were $101.05 (95% CI: −$130.65, −$71.46), a difference of 8.1 percent lower. RBP was associated with higher patient out‐of‐pocket spending in the first post‐RBP year ($31.82; 95% CI: $10.91, $52.73). There was no change in utilization, and higher‐priced providers did not lower prices in the postperiod. Net savings represented 0.3 percent of outpatient spending.
In short, while prices declined, the impact on overall payer spending was small and significant costs shifted to patients.
- Sinaiko AD, Mehrotra A. Association of a national insurer’s reference‐based pricing program and choice of imaging facility, spending, and utilization. Health Services Research. 2020 Mar 10.