Many models are being put forth to reduce the cost of healthcare in the United States right now. Two of these models include the reference-based pricing healthcare system and the value-based pricing healthcare system. Let’s briefly discuss each of these models.
Reference-Based Pricing Healthcare
In a reference-based pricing healthcare system, insurers define a reference price for medical procedures and allow their members to choose a healthcare provider that offers that service under that reference price. The price of a procedure is often determined by some percentage, usually around 120 percent to 300 percent, of what Medicare would pay. An increase of 20% – 200% may seem like a lot, but it’s important to consider the fact that Medicare typically reimburses hospitals at a much lower rate than other insurers do. This can sometimes be as low as ¼ the amount other insurers must pay.
When this model is implemented, prices tend to fall as hospitals in the area compete to maintain or gain market share. However, it is important to note that this system will have little to no effect on the cost when the patient doesn’t have the luxury of shopping for the best price. This includes emergency medical attention, locations that have little or no competition between hospitals, and areas where hospitals are not transparent about their pricing.
Value-Based Pricing Healthcare
Under the value-based pricing healthcare system, healthcare providers are paid for the quality of the care they provide rather than the number of services they provide. This system would emphasize the organization of a medical facility and its ability to maximize the value it provides its patients. Value-based pricing would also make the innovation of new technologies at lower costs a must as healthcare providers would ensure that patients received the most efficient therapies available.
For this system to work, a significant amount of work on the infrastructure of the healthcare system needs to be done to monitor both the outcomes of treatment and what factors caused those outcomes. A physician or drug manufacturer should not be held responsible for the outcome of treatment if the patient decides not to take their treatment as prescribed. Unfortunately, without the requisite infrastructure to ensure that treatment is being administered properly, determining their pay based solely on the outcome of treatment can do just that.
There are many more models that could potentially reduce the cost of healthcare being proposed and tested today. Keep yourself updated on the future of healthcare by continuing to read our content, and feel free to contact us if you have any questions.