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Payer and Patient Prices

By March 6, 2019Commentary

The pioneer Institute releases a report detailing prices for MRIs at different Massachusetts hospitals.   (Pioneer Report)   Massachusetts has an all-payer database which allows analysis of actual amounts paid by health plans and other third-party payers and by consumers out-of-pocket.  The authors probably chose MRI to look at prices because that service has been shown in other research to have widely varying costs.  Other services may not show as dramatic a results, but it is still likely the conclusions have some validity.  Even if consumers want to price shop, it is hard for them to easily find and understand cost data.  And it is worth consumers understanding before a service, what the total cost will be and how much of that is paid by any health coverage they have and how much will come directly from them.  14 hospitals across the state were used, and included both major facilities and community-based ones.  Total paid price ranged from $1423.37 to $475.61.   That is an astounding three-fold variation.  Imagine how much money would be saved if all scans were at the lowest price.  The academic and major urban center hospitals tended to have the highest prices, but not always.

The patient out-of-pocket also had wide variation and appeared to have no clear correlation with total price.  In some cases patients paid less than a tenth of the total price and in some over 25%.  This may be largely due to patient mix.  Hospitals with a lot of Medicaid aren’t getting a lot of patient out-of-pocket payments.  And benefit design also undoubtedly plays a role–people with higher deductibles are going to pay more out-of-pocket regardless of price.  The key issue is why some hospitals have to charge so much more for the same service.  Does it really cost them that much more?  That is hard to believe.  So it suggests that some hospitals just have, or are more willing to use, market power that allows them to feel free to charge more.  If this is the explanation, then that market power is what needs to be addressed.  Expecting consumers to be able to do that, through price transparency tools, incentives or other mechanisms, is foolish, in my judgment.

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