Newtown, CT – December 18, 2015
Christmas came early this year, so let’s unwrap some of the gifts – First, Zach Cooper and his colleagues released a very thoughtful and thorough paper that finally dispels the myth that “what goes for Medicare goes for everyone.” Second, CPR released an important guide for employers to evaluate alternative payment models offered by their third party administrators. Third, the rat got caught.
What this means to you – As part of a Commonwealth Fund supported project, economist Zach Cooper of Yale and his colleagues have spent a considerable amount of time analyzing some of the pricing variation that occurs in the private sector and comparing it to Medicare price variation. What they find, broadly, is that there is no correlation whatsoever between variation in costs for Medicare and variation in costs for the private sector. In some instances, the variation is exactly opposite. For example, the beacons of efficiency pointed out by Medicare and federal policy makers, such as Mayo Clinic in Rochester, MN, and Grand Junction in CO actually have far higher prices for the private sector. In other words, some of these providers are making up on the private sector what they give up on Medicare. This is pretty much the message that Mike Painter from RWJF delivered in an OpEd on The Health Care Blog 6 years ago. The good news in Dr. Cooper’s paper is that there are some areas that are efficient for both Medicare and the private sector, and those are the ones we have to look to for answers. One clear characteristic these efficient markets share is a lack of provider consolidation. Yes, competition works, and when federal policy makers destroy competition by instituting payment policies that massively encourage consolidation, the private sector loses, and loses big. That has to stop. Which is why CPR’s new guide for employers to evaluate alternative payment programs is so timely. The guide offers a rigorous set of questions that payers have to answer when they offer up some new payment model, so that employers don’t find themselves on the back end of an initiative with yet another price hike. After all, if all you’re getting served up is some vague trend rate formula that gets adjusted for renegotiated FFS rates, what’s the point? That about as big a sham as Shkreli’s. And that brings us to the last gift, which was seeing the hooded rat get scooped up by the feds. His unabashed hubris and disdain of pretty much everyone else has caught up, as it almost always does. And therein lies a lesson for all the price gougers who have preyed on the majority of Americans, and they should pay close attention. Because as study after study has pointed out, there’s no reason why anyone should pay $48K for something worth $12K, or even $6K for something worth $1K. Cooper’s paper puts that evidence front and center, CPR’s guide teaches us how to counter it, and the rat’s demise serves up a lesson. Three great gifts for the holiday season. Enjoy.
Francois de Brantes