NCPA - National Center for Policy Analysis

Reference Pricing for Health Care Likely in Future

April 13, 2011

President Obama's health care law will bring a major transformation of the nation's health care over the next decade in the form of a large migration of patients, doctors, facilities and services out of the third-party payer system, says John C. Goodman, president and CEO of the National Center for Policy Analysis.

  • Millions of people will soon be forced to buy a health plan whose cost will grow at twice the rate of growth of their incomes.
  • The combination of the 32 million newly insured plus those with more generous insurance will push health care spending higher than it otherwise would have been.
  • Traditional tools to control costs -- limited benefits, greater cost sharing, etc. -- will be limited.
  • One of the few tools employers and insurers will have left is to use limited networks -- you may end up in a plan that covers only half the doctors in your area, and you may have to pay full cost if you go outside your plan's network.

More likely, most services will be subjected to "reference pricing," under which your plan pays 100 percent within network and you pay 100 percent of any extra cost you incur outside the network.  This type of reimbursement mechanism will lead to the steady exodus of providers from the insurance system and allow an unfettered market to develop outside of it, says Goodman.

Even without this transformation, there will be a redistribution of health care services from those who currently have less to those who already have more.  Anyone who is in a plan that pays below market will have increased difficulty getting care.  These are people in Medicare, Medicaid and possibly (as in Massachusetts) people in subsidized plans sold in the health insurance exchanges.

Source: John C. Goodman, "Health Care Overhaul Could Ironically Increase Consumer Power -- for Some," Health Care News, April 8, 2011.


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