A Well-Meaning But Expensive Idea In New York Goes National

Last year, Attorney General Andrew Cuomo of New York accused the major national health plans of underpaying health care providers because they were using a database from Ingenix which set “usual and customary” prices too low. In January, the health plans settled, agreeing to pay a penalty and fund a nonprofit organization that would set prices fairly and transparently. See an older post for a further explanation of this issue.

Now, Senator Jay Rockefeller has convened the Commerce Committee to investigate the issue nationally. The preliminary conclusion is that “large health insurers in every region of the country are relying on faulty databases to underpay millions of valid insurance claims.”

There’s a real conundrum here. In the US, we have a serious unit cost problem. We have fewer hospitalizations, fewer office visits, and fewer prescriptions than other OECD countries– yet our cost per unit of service is so high that we spend more than twice as much on health care as western European countries while we leave over 15% of our population uninsured.

Bashing the health plans is popular, to be sure. Further, United’s ownership of Ingenix does appear to be a conflict of interest. But the fruit of Cuomo’s labor is that effective unit prices will be even higher, and physicians who have a high amount of leverage are more likely to opt out of health plan contracts with set fee schedules and demand higher payment, driving unit costs higher still. As we struggle with how to afford health care, this is a step backward. Hopefully, the Senate Commerce Committee will not pursue a legislative remedy that will make health care even less affordable.