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Comment by whatshisface | Hacker News Reader

What's reference-based pricing?

It's basically price-controls.

A regulatory body looks at how much something "should" cost based on its history of reimbursement and the cost of its inputs and then sets a cap of say, cost + 20%.

The problem is having an independent body that is free of influence of health insurance companies and hospitals, both of which have perverse incentives to continue profiteering.

Not to mention the fact that it will eventually cause a supply shortage.

Germany has reference pricing for their drugs system and doesn't seem to have a supply issue. Genuine question, is there something that makes you think that wouldn't be true for the US?

How would anyone notice a shortage when shortages came in the from of it not being standard practice to prescribe a medicine in a certain situation?

I was thinking more in terms of procedures. Look for waiting lists, those are the procedures where the government–chosen price is too low. Meanwhile more profitable procedures will not have a waiting list.

Medicines are more complicated because the manufacturer will probably have patents that grant them a manufacturing monopoly, meaning they can always set the price to whatever they want anyway. Not to mention that a multinational can afford to make less in some countries as long as on average they make enough to continue doing research. If Germany somehow sets a price that is egregiously low, the manufacturer can simply sell their medicine elsewhere instead.

" Genuine question, is there something that makes you think that wouldn't be true for the US?"

The US is too big, too diverse, too whatever else, blablabla for things that work perfectly anywhere else in the world. Nothing can be learned from other countries unless it makes capitalists richer.

No compulsory licensing.

The sibling is right but in this case we'd probably do something like Medicare + 20%, which is actually close to what most insurers do for some of the codes already. It just removes the cost of negotiation, brokers, out of network, etc. and actually lets you know the cost up front for most appointments. We also need to get rid of service levels for most appointments. It is just used as an excuse to up charge by having patients fill out pointless paperwork. We also need to reimagine our service provider models. We have already move to CMAs to take blood pressure, etc. We also need to move to PA or LPN instead of a Dr for most cases. Ear infections, colds, flus, etc. are a majority of family appointments and can be handled by lower levels. The Dr can then review cases and deal with the more complicated cases where her expertise is most needed.

The whole premise of a doctor visit is you don’t know what is going on and you need someone to differentiate everything that’s happened to you to figure out if it’s gas pain or cancer. When you see a Doctor, they are trained for years more than any mid-level provider and they carry massive legal risks if they are wrong or negligent. When you see a PA or LPN they have far less training, and are judged by “nurses standard”, so when they miss your child’s cancer, or kill you by administering the wrong dose, you don’t have repercussions.

In reality, the legal costs in healthcare should be the next big trim on the cutting block - a single judgment for the $100 million against a provider somewhere in South Carolina makes insurers raise malpractice rates for all doctors everyone by huge percentages. Those costs put doctors out of business and all of a sudden you have far less providers in many rural areas and people die of preventative stuff. The stress of dealing with malpractice is so high (60% of all doctors are sued for almost entirely frivolous reasons, every single year nowadays) that doctors are now directing their kids to become nurses - higher guaranteed pay, you don’t lose your 20s to medical training, and no stress of career ending lawsuits.

If you go to a hospital for a longer illness and have to be taken care of by team of rotating health professionals, every lawsuit can name every single professional, whether they have anything to do with your damage or were just on the note for admitting you to the hospital. All of those providers then have to pay 100k to a lawyer to defend themselves, even though it’s obvious to a kid, they shouldn’t have to.

I’ll admit I haven’t thought of all of the potential consequences, but this seemed like a good idea.

Medicare collects cost data from hospitals and uses it to set their DRG payments. They have the data.

You could make some law saying providers can’t charge more than X% of what Medicare rates are. You could even make it 200% (lots of room for higher reimbursement) and it would be a massive change. You won’t have one hospital charging $2000 for an MRI and another $15,000 (actual numbers I’ve seen - the payment insurers made!).

That would force hospitals and insurers to at least keep price somewhat closer to reality and they’d need to stop the game of “ill take an insurance payment below cost for X-rays but make it up in MRI reimbursment” which is what a lot of hospital do - they look at line of service finances not procedure costs (so they don’t care if X loses money if they make it up on Y).

Problem is, most hospitals have no clue what things cost (a friend worked at a major hospital and said they’ve never calculated what it costs, all in, for say an MRI).

It would be massively disruptive for a while but eventually contracts would be renegotiated and you’d end up with bills that are at least in the ballpark of actual costs.

> in this case we'd probably do something like Medicare + 20%, which is actually close to what most insurers do for some of the codes already.

But this is how Medicare sets its own prices - they pay a percentage of the minimum price you charge anybody else. You can't then have the non-Medicare parties charging a percentage of Medicare; that's a circular reference that could result in absolutely any price.

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