Private Payers News

How to Achieve Cheaper Medical Technology Insurance Coverage

By Jacqueline DiChiara

- Is more financially sound medical technology the answer? One-third of 2012 Medicare spending in physician or outpatient setting is linked to technology that has only been in existence within the past decade, according to a new paper from the Hamilton Project at Brookings, authored by Amitabh Chandra, PhD, Malcolm Wiener Professor of Social Policy at Harvard University, Nicholas Bagley, JD, Professor of Law at University of Michigan, and Austin Frakt, PhD, Associate Professor at Boston University School of Medicine.

health plans Medical Technology Insurance Coverage

The allegedly fashionable “if you build it, we will pay for it” mantra technology developers appear to blithely thrive on, say the authors, promotes continuous investment in innovative technological endeavors that generate incremental advantages. However, such is generally without any honest consideration of price, they add.

Due to legal and institutional limitations, healthcare consumers are now obligatorily insuring themselves against the risk of needing pricey care of bleak clinical value, even when more inexpensive coverage is available, the authors claim.

“A combination of legal rules and institutional forces pushes health plans to cover nearly every medical innovation. The result is that many Americans are effectively forced to over-insure themselves for coverage of some therapies they do not much value,” explain the authors.

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  • Some healthcare consumers may readily spend more money on health plans that cover medically unnecessary or merely underdeveloped therapies, they add. “Technology developers thus receive distorted signals about the size of the market for new innovations, leading them to develop medical treatments that are not in line with what Americans would demand in a well-functioning market,” the authors maintain.

    Can a tri-fold solution alleviate the problem?

    The authors describe three specific policy proposals that may solve this problem:

    • First, Congress should eliminate the tax subsidy for health insurance for high-paid employees.
    • Second, Congress should reform Medicare’s coverage determination process so the program is not required to cover therapies that deliver insignificant health benefits at a high cost. Because of the influence of Medicare over the commercial market, many private insurers would likely follow its lead.
    • Third, the Centers for Medicare & Medicaid Services (CMS) should experiment with reference pricing—a practice under which insurers pay a single reference price for all treatments with similar therapeutic effect, allowing patients who want less-cost-effective treatments to pay any difference out of pocket.

    “Although these proposals may strike some as politically unrealistic, alternative approaches to tackling the one-size-fits-all nature of insurance — in particular, allowing health plans to compete on the scope of what technologies they cover — would require regulations that are unlikely ever to be politically and culturally attractive,” the authors maintain. “Addressing the incentives for technology development, and not just its diffusion once invented, is critical,” they claim, advocating for the development of more financially sound medical technology.