There was a study conducted by the Rand Corp that examined payments rates by private health insurers in 25 states and Indiana was one of them. The purpose of the study was exposing what health care providers charge compared to Medicare.
The study determined the dramatic difference in the cost of health care cost across the country. This information could show lawmakers the severe challenge they face with regulating healthcare. It is hospitals that are charging the highest rates should have more government and industry attention.
The study proved that Indiana health insurance plans paid on average more than three times what Medicare did. In Michigan, those medical providers charged closer to 1.5 times Medicare.
Indiana medical providers have been able to charge a great deal more than other states. This could be a direct result of Hoosiers preferring a PPO network where different states have embraced narrow managed care networks. Indiana hospitals systems have grown more and more powerful through mergers and acquisitions which may give them more negotiating power to receive higher reimbursement rates. The medical community lobbying power may also have had something to do with it.
With this RAND study gaining more attention, Indiana businesses are starting to realize how much more we are paying for health care vs. employers in other states.
What could employers do with this information?
One option would contract directly with medical providers. An employer would contact the hospital group directly and negotiate the reimbursement rates of healthcare for all their members. This could result in employees using a limited network for care, which Hoosier have notoriously disliked but with this found cost information, Indiana employers may have no choice.
The direct contracting is now available for even small groups though Franciscan, IU or St. Vincent’s.
There is also the option of a group health plan that uses reference-based pricing to reimburse medical expenses. This is where medical costs are paid based off a multiple of the Medicare rate. The medical community in central Indiana has fought this type of reimbursed. Why should they make less than their 3x Medicare rate?
If Indiana medical providers refuse to discount their rates, then maybe a market correction is in order. With the Rand study showing Michigan with one of the lowest medical costs, maybe employers start sending all acute cases to Michigan for treatment. If the company is self-funded, meaning they are paying the claims up to $500K, and there is member’s that need care that cost’s $400K in Indiana but the same level & quality of care in Michigan cost $200K, that is an easy decision to make.
That employer could charter a private jet for the member and family and still save a significant amount of money.
The Indiana medical community will eventually be held accountable for what they charge by either the government or by a free market.