An Oregon policy capping maximum hospital payments appeared to reduce patients’ out-of-pocket spending, though its state health plan’s savings were fettered by a resulting increase in utilization, newly published data show.
Starting in October 2019, a state law began restricting in-network hospital prices to 200% of Medicare and out-of-network prices at 185%. The restriction doesn’t stretch across the state, only applying to 24 of Oregon’s largest urban hospitals and members of the Oregon State Employee plan.
To gauge the policy’s cost-saving potential, researchers previously reviewed 2014-21 all-payer claims data and found $107.5 million (4%) in savings for the plan during the cap’s first 27 months as well as significant reductions in inpatient and outpatient prices.
A similar study from the same team published Friday in JAMA Health Forum focused on how the policy impacted more than 90,000 plan members’ wallets and care-seeking behaviors as compared to a control group of commercial plan enrollees.
They found that plan members’ average out-of-pocket spending per outpatient procedure dropped by 9.5% compared to control during the 27-month post-implementation study period, according to the study.
“These findings suggest that at least some savings from the price reductions were passed along to enrollees through lower out-of-pocket spending at the point of service,” researchers wrote in the journal.
On the other hand, the researchers’ analysis found a 4.8% uptick in outpatient procedures per enrollee per year, a finding they said is “consistent with the moral hazard literature, which suggests that patients will modify their demand for healthcare services in response to price changes.”
Neither the observed changes in out-of-pocket spending or service use varied substantially between different shoppable services, or those considered to be overused or “low-value” for most patients. Additionally, there were no significant changes in either outcome across the inpatient spending, in line with prior research suggesting that the inpatient setting is less affected by price caps.
Taking the findings together, the researchers estimated $1.8 million in out-of-pocket savings for the plan members associated with 27 months of the price cap policy (or about $800,000 annually). The increase in utilization led to lost plan savings of $10.3 million over 27 months ($4.6 million annually)—though, even with the service use increases, the price cap generated tens of millions in annual plan savings.
Policymakers have looked to price transparency, strengthened antitrust and price regulation to contend with the staggering costs of care delivery in the U.S., the study authors wrote, though published research “suggests that price regulation may be the most promising of these approaches.”
Though it may not translate one-to-one for other states or populations, the researchers advised others weighing similar hospital price caps to take Oregon’s experience into account.
“States that are considering payment cap policies should be mindful of changes in enrollee service use that may be associated with reductions in out-of-pocket spending, as these changes may affect total savings,” they wrote.