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Health Aff (Millwood). 2017 Mar 1;36(3):524-530. doi: 10.1377/hlthaff.2016.1256.

Reference Pricing Changes The 'Choice Architecture' Of Health Care For Consumers.

Author information

1
James C. Robinson (james.robinson@berkeley.edu) is the Leonard D. Schaeffer Professor of Health Economics, School of Public Health, at the University of California, Berkeley.
2
Timothy T. Brown is an associate professor of health economics at the School of Public Health, University of California, Berkeley.
3
Christopher Whaley is an assistant professor of health economics at the School of Public Health, University of California, Berkeley.

Abstract

Reference pricing in health insurance creates incentives for patients to select for nonemergency services providers that charge relatively low prices and still offer high quality of care. It changes the "choice architecture" by offering standard coverage if the patient chooses cost-effective providers but requires considerable consumer cost sharing if more expensive alternatives are selected. The short-term impact of reference pricing has been to shift patient volumes from hospital-based to freestanding surgical, diagnostic, imaging, and laboratory facilities. This article summarizes reference pricing's impacts to date on patient choice, provider prices, surgical complications, and employer spending and estimates its potential impacts if expanded to more services and a broader population. Reference pricing induces consumers to select lower-price alternatives for all of the forms of care studied, leading to significant reductions in prices paid and spending incurred by insurers and employers. The impact on consumer cost sharing is mixed, with some studies finding higher copayments and some lower. We conclude with a discussion of the incentives created for providers to redesign their clinical processes and for efficient providers to expand into price-sensitive markets. Over time, reference pricing may increase pressures for price competition and lead to further cost-reducing innovations in health care products and processes.

KEYWORDS:

Consumers; Cost sharing; Innovation

PMID:
28264955
DOI:
10.1377/hlthaff.2016.1256
[Indexed for MEDLINE]

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