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Strategic reference-based pricing: A cure for the medical overbilling epidemic

April 12, 2024
Business Affairs
Christine Cooper
By Christine Cooper

No one is immune from the nation’s medical overbilling epidemic – not even a former U.S. surgeon general. Jerome Adams, who served in that post under President Donald Trump, recently received a staggering $5,000 medical bill for a routine ER visit to treat what turned out to be dehydration. He noted that despite his extensive knowledge and resources, navigating the complexities of healthcare billing proved to be a daunting task. His experience underscores a pressing need for clear and accurate price transparency in U.S. healthcare to avoid egregious bills in the first place.

Adams has plenty of company when it comes to this issue. Many patients are often blindsided by exorbitant medical bills and a lack of transparency, grappling with rapidly rising out-of-pocket costs they cannot ever anticipate or afford, or drowning in a sea of medical debt. The implications are far-reaching, with unpaid medical bills now accounting for the leading cause of personal bankruptcy.

Medical overbilling creates a vicious cycle wherein scores of average working Americans delay or forego important medical care, or ration medicine. In a growing number of households that are unable to save for emergency expenses, even families with employer-provided health insurance face an untenable choice of putting food on the table or being treated by a physician. These factors invariably erode employee health and wealth, which in turn, undermine productivity and competition.

A growing movement is now afoot nationwide to help working Americans erase crippling medical debt, with some state and local governments enacting measures to prevent this scourge from undermining their credit. It’s part of a cultural tipping point that acknowledges the financial fragility of both working and middle-class households that struggle to make ends meet.

Passage of the No Surprises Act (NSA), which was signed into law as part of the Consolidated Appropriations Act (CAA), and the Transparency-in-Coverage rule represent a step in the right direction, but there are meaningful marketplace solutions that can make a massive impact beyond greater government oversight.

Short of a post-pay review that includes repricing unreasonably high claims or challenging them in court, there’s actually a proven way to help healthcare payers, plan sponsors and members avoid exorbitant costs, a way that fortifies an elevated level of stewardship that is increasingly expected among health plan fiduciaries under the CAA. That way is the strategic implementation of reference-based pricing (RBP), which serves as a healthy dose of preventive medicine.

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