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By Michael Bielawski
The Green Mountain Care Board, Vermont’s health insurance regulator, says substantial health insurance savings were available in recent years that went unrealized. The announcement comes as Vermont health insurance premium rates are set to climb by 20% next year.
The December 16 report analyzed commercial medical claims covering inpatient and outpatient services from 2018 to 2023. The findings “indicate significant opportunity for cost savings” through a cost-setting device called ‘reference-based’ pricing.
Vermont hospital payments for VSEA and VEHI members ultimately averaged 289% of Medicare rates during the study duration.
The report states, “Vermont hospital payments for VSEA [Vermont State Employees Association] and VEHI [Vermont Education Health Initiative] members averaged 289% of Medicare rates during the study period. Adjusting these payments to 200% of Medicare could have saved the VSEA/VEHI health plans approximately $400 million during the study period, with $79 million of savings estimated in 2022.”
Reference-Based pricing
“Reference-based pricing” occurs when hospitals adjust their rates using Medicare reimbursement rates as a reference point. At least five other states are said to use the model: Colorado, Montana, North Carolina, Washington, and Oregon.
“We are talking about millions of dollars that can be saved by moving to this system,” said Don Tinney, president of the Vermont National Education Association to NBC.
The report suggests that ultimately such a move would alleviate the tax burden.
“Reference-based pricing could reduce the financial pressures on VEHI and VSEA by lowering prices paid on services, thereby reducing the need to increase taxes or reduce benefits to ensure the future solvency of the funds,” it states.
Reducing Medicaid reimbursement obviously would impact hospitals’ and health care providers’ bottom lines. The report also cautions the new savings should not mean providers should charge more.
“Important implementation considerations include Vermonters’ ability to absorb further property and other tax increases to pay for healthcare, the financial health of the plans, and the impact of rising healthcare costs on school and State budgets,” it states.
Positive track record
According to Faster Capital, a Dubai-based economic news media outlet, reference pricing generally means “a strategic pricing technique that businesses use to set prices that attract customers while maximizing profit margins. It involves setting a price point based on a reference point, such as the price of a competitor’s product or the average market price.”
According to the progressive think-tank The Century Foundation, a move to this system is not all benefits.
“While reference pricing has the capacity to meaningfully lower health spending, it can also result in significant gaps in health insurance networks via provider nonparticipation if states do not implement the reform carefully,” they state.
In other words, health insurers might look at individual state’s too-stingy reference pricing and just opt out. However, Century Foundation reports that the strategy has worked well in California.
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Categories: Health Care
The Green Mountain Care Board also provided a cautionary note, recommending reading the full report that was the basis for the findings. Referenced-based pricing is a potentially valuable tool and under active consideration here, but there are critical caveats. A recent national financial report said 107 community hospitals are in jeopardy of closing, including 8 in Vermont, of which 4 are at risk within the next 2-3 years; some are losing money, which is not sustainable. The projected savings of reference-based pricing comes from reducing revenues to hospitals. Where would that lead us? There are massive complexities involved in our crisis in health care, and reference-based pricing is not a silver bullet. Reading the underlying report makes that clear.
Voters and taxpayers are tired of the scare tactics that go hand-in-hand with the outrageous cost of health insurance and healthcare (and education, while we’re at it). “A recent national financial report.” That tells readers nothing. I could call my cousins in another state and call it a “national survey.” It’s far past time for the bamboozling and fleecing to end.
When upwards of 40% of healthcare is touched by government I know where to look to cost cut! Stop putting things especially government between you and your provider. The government creates nothing, makes nothing only takes….
Don Tinney, president of the Vermont National Education Association, is starting to sound like a mafia boss. “Let’s fix prices, guarantee our capos a margins and votes. Then they we will force them to pay us protection money in the form of forcing union membership for all companies with greater than 5 employees.”
This reeks of racketeering.
$400 million is what cost shifting looks like. Are we forgetting that the All Payer Waiver was supposed to combine Medicaid, Medicare, and private insurance to pay providers? Also , if our hospitals are already going bankrupt how will reducing their income by $400 million going to help?