3 ways to make insurance coverage of health IT more cost-effective

New technology is making a big impact on the healthcare industry, and health insurance plans now are pressed to cover nearly every medical innovation, according to a new discussion paper from The Hamilton Project.

But the question stands: How can the country encourage development of medical technology that provides high value and discourage the creation of tools that drive up costs but don't improve care?

The authors of the paper propose the following three policies to encourage the development of medical tools that offer the best value for the money:

  • Replace the tax exclusion for employer-provided health insurance with a tax credit. Congress should eliminate the tax subsidy for health insurance of high-paid employees, the paper states.
  • Strengthen Medicare's coverage-determination process. Congress should reform the process so Medicare is not required to cover therapies that deliver insignificant health benefits at a high cost. Private insurers would likely follow the government's lead.
  • Experiment with reference pricing for certain therapies in Medicare. If members choose a provider that offers the service for less than the reference price, they pay nothing, but if they choose a provider that exceeds the price, they must pay the difference, saving both consumers and insurers money.

Policymakers need to enact changes because of the explosion in new medical technology and the challenge of how to pay for it, the paper's authors write. They cite data that shows a third of Medicare's spending in physician and outpatient settings in 2012 reflects technology that did not exist a decade earlier.

"Although these proposals may strike some as politically unrealistic, alternative approaches to tackling the one-size-fits-all nature of insurance--in particular, allowing health plans to compete on the scope of what technologies they cover--would require regulations that are unlikely ever to be politically and culturally attractive," the authors write.

The struggle is not new, as studies have looked at the insurers' efforts to curb costs how it relates to their coverage of new items and services made possible by advances in medical technology.

To learn more:
- read the discussion paper