If reference-based benefit designs work, why are they not widely adopted? Insurers and administrators not doing enough to address price variation

Paying patients to use lower-priced providers

OBJECTIVE

Many employers have introduced rewards programs as a new benefit design in which employees are paid $25-$500 if they receive care from lower-priced providers. Our goal was to assess the impact of the rewards program on procedure prices and choice of provider and how these outcomes vary by length of exposure to the program and patient population.

STUDY SETTING

A total of 87 employers from across the nation with 563,000 employees and dependents who have introduced the rewards program in 2017 and 2018.

STUDY DESIGN

Difference-in-difference analysis comparing changes in average prices and market share of lower-priced providers among employers who introduced the reward program to those that did not.

DATA COLLECTION METHODS

We used claims data for 3.9 million enrollees of a large health plan.

PRINCIPAL FINDINGS

Introduction of the program was associated with a 1.3% reduction in prices during the first year and a 3.7% reduction in the second year of access. Use of the program and price reductions are concentrated among magnetic resonance imaging (MRI) services, for which 30% of patients engaged with the program, 5.6% of patients received an incentive payment in the first year, and 7.8% received an incentive payment in the second year. MRI prices were 3.7% and 6.5% lower in the first and second years, respectively. We did not observe differential impacts related to enrollment in a consumer-directed health plan or the degree of market-level price variation. We also did not observe a change in utilization.

CONCLUSIONS

The introduction of financial incentives to reward patients from receiving care from lower-priced providers is associated with modest price reductions, and savings are concentrated among MRI services.

An Employer-Provider Direct Payment Program Is Associated With Lower Episode Costs

Bundled payment has shown promise in reducing medical spending while maintaining quality. However, its impact among commercially insured populations has not been well studied. We examined the impacts on episode cost and patient cost sharing of a program that applies bundled payments for orthopedic and surgical procedures in a commercially insured population. The program we studied negotiates preferred prices for selected providers that cover the procedure and all related care within a thirty-day period after the procedure and waives cost sharing for patients who receive care from these providers. After implementation, episode prices for three selected surgical procedures declined by $4,229, a 10.7 percent relative reduction. Employers captured approximately 85 percent of the savings, or $3,582 per episode (a 9.5 percent relative decrease), and patient cost-sharing payments decreased by $498 per episode (a 27.7 percent relative decrease).