With the bungled roll-out of the Federal Healthcare Exchange, HealthCare.gov, attention has moved to examples of state-level success at enrolling uninsured individuals in health care plans. In this respect, Connecticut stands out as a leader: since the state’s healthcare exchange opened last October, CT has enrolled 170,021 residents , a number that includes 105,571 residents in Medicaid. In fact, CT is considering serving as a consultant to other states that have been less successful in enrolling their uninsured populations.
One aspect of CT’s healthcare exchange that has gotten relatively little attention, but has the potential to be quite revolutionary is its all-payer claims database, which will serve as a repository of health insurance claims data that can be used to make the cost of health care more transparent. At least 12 other states are doing the same.
How can this seemingly mundane, bean-counting feature of the healthcare plan be revolutionary? It is revolutionary because it has the potential to move CT’s health system down a path that could lead to more universal health coverage. This news may be unwelcome to those opposed to more universal health coverage systems, but it is a step that is embraced by most health policy wonks, regardless of their political views.
An increasing consensus has emerged in the health policy field that a primary reason that health care costs are so high in the US is the decentralized way that prices are set for standard health procedures and the wide variation in rates that providers are able to charge different payers (i.e., the government versus private, commercial insurers). Medicaid in particular has been accused of “under-reimbursing” for care, which has led many providers to turn away Medicaid patients in favor of patients with private insurance. For those providers that service large numbers of Medicaid patients or provide unreimbursed “charity” care (for instance to undocumented immigrants), they have been able to get away without cutting costs by charging private insurers more for the same set of services, a phenomena known as the “cost-shift”.
The all-payer claims database threatens to make this cost-shift, which largely occurs under the radar, more transparent by publishing exactly what each provider pays to each payer for each service. While this system in itself will do little to address costs, it has the potential to lead to the next logical step, which is to create the impetus to adopt an all-payer rate setting system, which would charge the same price across providers for a set of services and could be an effective lever of cost control.
Why is this potentially radical? Other multi-payer universal health care models, such as Japan’s, have successfully used all-payer rate setting to control costs. This has enabled Japan to provide universal coverage to its population, who utilize more health services per capita than virtually any other nation, for a fraction of what the US spends, and without fundamentally altering its fee-for-service reimbursement system (and thereby raising the ire of physicians). Within the US, Maryland adopted an all-payer rate setting system for hospitals in the 1970’s and evidence suggests that since its adoption, Maryland has controlled costs considerably more than other states.
Theoretically, under an all-payer system providers will no longer have the incentive to “price discriminate” against Medicaid and Medicare and favor private health insurance. This could also reduce the tendency of Medicaid reimbursed care being segregated from providers accepting private insurance. Reduced costs also mean reduced insurance premiums, which mean more coverage for all. The savings from having an all-payer rate setting system could also be used to insure more people through Medicaid, wider subsidies in the Exchanges, a public option, or by reducing the age of Medicare.
Sound too Utopian? Perhaps, but one small step towards price control could generate a giant leap towards universal health coverage.
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