02 Jun 2014 Health Care Odds & Ends: Good News Edition

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Let’s start this Monday with good news on the health care front.  (Back to your regularly scheduled commentary on ObamaCare exchanges and Veterans Affairs tomorrow.)

1. Reference Pricing.  A few years ago the health care plan that services CalPERS workers decided to try a practice known as reference pricing for hip and knee replacements.  A study in Health Affairs found that prices for those procedures dropped considerably for CalPERS employees.  Now an article in Health Data Management reveals even more good news:

A reference pricing policy for elective surgeries, implemented by Anthem and the California Public Employees’ Retirement System (CalPERS) returned $5.5 million in aggregate savings and a 26 percent reduction in price paid for the first two years of the policy’s existence.

The model, used by CalPERS’ self-funded preferred provider organizations and highlighted by the Agency for Healthcare Research and Quality’s Innovation Exchange, was originally put in place for elective knee and hip replacements and has since been expanded to outpatient elective cataract surgeries, colonoscopies, and arthroscopy procedures. For each procedure, CalPERS sets a maximum allowable charge (the reference price) at a level that ensures enrollee access to an array of high-quality, low-price providers.

The reference price is based on a review of hospital pricing and outcomes, with the threshold chosen to ensure that the vast majority of enrollees have multiple high-quality, low-price providers from which to choose. For example, with hip and knee replacement surgery, CalPERS adopted a reference price for the facility fee of $30,000.

Ultimately, the price for joint replacements for CalPERs employees fell from an average of $42,000 in 2010 to  $27,148 in 2012—a drop of 35 percent.

There is one thing that should be added to reference pricing to improve it:  Let the patients share in the savings. If a patient chooses a hospital that charges less than the reference price, he should, say, receive 10 percent of the difference.  That will put even more pressure on health care providers to reduce prices and improve quality.

2. CIGNA’s Choice Fund.  Insurer CIGNA has just released its 8th Annual Choice Fund experience study that examines the experience of the 2.6 million enrollees in CIGNA’s consumer-driven plans.  Here are some of the results:

-Choice Fund customers increase their compliance with recommended care in the second year, even more than in the first year;

-They improve their health-risk status by six percent;

-Medical cost trend goes down 12 percent versus traditional plans;

-The improvement persists over time, up to $7.900 savings by fifth year;

-The improvement occurs in low-risk, medium-risk, and high-risk patients; and

-Because employers contribute to HSAs and HRAs, employees spend less money out of pocket than peers in traditional plans!

3. House GOP Holding Firm In Virginia Medicaid Expansion.  Republicans in the Virginia House of Delegates have adjourned their session without passing a budget because Government Terry McAuliffe  insists on having a budget that includes the Medicaid expansion.  McAuliffe, of course, isn’t going to let a little thing like separation of powers get in his way: “The governor has also signaled an interest in expanding Medicaid without General Assembly approval, but that, too, remains an

open constitutional question for the same reason.”

House Republicans, though, don’t seem intimidated: “Republicans have hinted that they will sue if McAuliffe tries.”

Rule of law may not prevail much at the Federal level these days, but Virginia shows there may be hope for the states.