Writhing out of narrow networks in a medical seller's market

In a recent post, I voiced some unease about the "narrow networks" offered by a majority of plans on the ACA exchanges. According to a McKinsey study cited by the WSJ, 70% of silver plans are "ultranarrow" (offering access to five or fewer hospitals) or "narrow" (offering access to thirteen or fewer hospitals). Doctor rosters are similarly trimmed.  These networks reflect insurers' relative lack of pricing power versus providers.  As Ezra Klein highlights in a column spotlighting the missing link in U.S. healthcare reform, "It’s health-care providers -- not insurers -- who have too much power in the U.S. system."  That's because the U.S. is the only wealthy country in which government does not effectively set prices.

Insurers are thus retailing overly expensive care.  You can't blame them for trying to cut out the most expensive providers in our most-expensive-in-the-world market.  In that prior post, I highlighted one alternative that many employer-sponsored (or funded) plans provide:

Read that NYT exposé of price gouging in joint replacements? Here's an antidote

For those angered by the recent New York Times exposé of price-gouging in joint replacement devices and operations in the U.S. (total hip replacement tabs topping out at $112k, vs. $13k in Belgium), a CalPERS health insurance initiative offers a partial antidote. Melanie Evans explains in Modern Healthcare:

Joint replacement prices at the most costly California hospitals plunged by one-third after the state required its workers and retirees to pay out of pocket all costs above a “reference price” of $30,000 for orthopedic surgery, a new study said.

The average cost of joint replacement among high-priced hospitals dropped to $28,465 after the California Public Employees' Retirement System made the change in 2011, wrote University of California researchers James Robinson and Timothy Brown in the journal Health Affairs. That's down from $43,308 the prior year.

Using patient incentives to control costs is usually branded as "conservative" in the U.S. And indeed, "consumer-driven healthcare" is just a misleading euphemism unless crucial elements -- price transparency and genuine choice -- are part of the mix. In this case, they are: