$500 or $50 co-pay? Mass. Blue Cross Blue Shield offers a choice

Posted May 25, 2012, at 5:52 a.m.

BOSTON — You’re in your doctor’s office, and he’s got some bad news: You need an MRI. Now you have a choice to make.

There’s a large academic medical center, one of Boston’s best-known hospitals, where you will pay a $500 co-pay for the scan.

Or, about a mile down the street, there’s a community hospital. It’s not nearly as well known, but when it comes to routine care, outcomes tend to be equally good. At that hospital, the MRI will cost you a $50 co-pay. So, what do you choose?

Blue Cross Blue Shield of Massachusetts is betting that you’ll choose the latter — and end up bending the health care cost curve in the process. The health plan is experimenting with a novel attempt to reduce the cost of health care without sacrificing quality.

Massachusetts has had, for years now (and well before its health insurance expansion), some of the highest health insurance premiums in the country. It also has huge variation in how much health care costs: A 2010 Attorney General’s Office report found some hospitals were charging Blue Cross twice as much as other hospitals, without delivering any higher quality.

In those two challenges, Blue Cross saw an opportunity. It could offer “tiered” co-pays, where patients who went to the more expensive facilities would pay more.

That would give patients a reason to go to the lower-cost provider — namely, they’d dodge that $500 MRI co-pay. It would also allow Blue Cross to offer lower premiums, as its actuaries predicted many subscribers would take the $50 co-pay instead.

Medical tiers are not a novel concept in health care. Insurers have regularly used different prices to nudge patients from brand name drugs toward generics.

But the practice is rare for other health care services, things like hospital visits and trips to the doctor. For decades, Blue Cross had charged every patient $50 for an MRI, no matter who delivered it or how much they charged.

Andrew Dreyfus, the health plan’s chief executive, was worried when he rolled out the product in February 2011. What if patients revolted when they found out it would cost 10 times as much to go to Boston’s top hospitals?

“We set up a dedicated call center for some of these new products,” Dreyfus said. “We thought they would get a lot of complaints.”

But the call volume never materialized, Dreyfus said. He has, however, heard from one of Boston’s more expensive hospitals.

“They were starting to lose referrals because of the new payment model,” he recalled. “He asked, ‘Can I lower my prices?’ I said, ‘absolutely.’”

That’s, of course, anecdotal evidence. Blue Cross is currently at work on a more rigorous evaluation to see whether subscribers are actually choosing the lower-cost product.

While the tiers are supposed to incorporate quality measures, some worry that they lean too heavily on cost. That could, theoretically, make the cheapest providers the ones who provide lower quality care. “It’s hard to effectively regulate quality among doctors,” M.I.T health care economist Jonathan Gruber said.

Consumer groups are concerned that the Blue Cross plan could limit choice and, without enough emphasis on quality, put better providers out of reach for lower income subscribers.

“We have real trouble with tiering,” said Amy Whitcomb Slemmer, president of Boston-based advocacy group Health Care for All. “It’s limiting care and, as advocates, we could get more excited if you could say the better quality was actually in all the tiers.”

Dreyfus contends that the plan does have measures to guard against this: There is a cap, for example, on how much each subscriber will pay out of pocket. If an individual is already in the middle of treatment at a more expensive facility, her co-pays will not go up. Then there’s also that attorney general’s report, which couldn’t find a link between quality and cost of health care in Massachusetts.

The experiment with tiered health plans, Dreyfus said, responds to an undeniable truth about health care: It’s too expensive, eating up a growing chunk of worker salaries and government budgets.

“If a company offers a rich benefit plan, and wants to keep it, they’ll see their premiums go up 10 percent,” said Dreyfus. “If they want to avoid that, they can keep the lower co-pays for the majority of their employees, knowing a minority will end up paying more. It’s a different process. We’re still early in the process of figuring out what results we’ll achieve.”

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