Medicare
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11.28.2022

The Cost of Low-Value Care and the Market Structure Needed to Repel the Practice

The utilization of low-value care services, such as unwarranted diagnostic tests and the prescription of branded drugs over generic equivalents, is an issue of growing concern, with estimates suggesting that these practices could be costing patients anywhere from $158 billion to $226 billion each year. In an effort to tackle this issue, Covered CA, a state-level insurance program, is taking a holistic approach to reduce the utilization of low-value care.

State-level data agencies are playing a crucial role in identifying low-value care, which affects 42 percent of Medicare Beneficiaries. In states such as Colorado, Maine, Virginia, and Washington, all-payer claims databases have been established to monitor spending and highlight potentially wasteful services. This information is then disseminated to local communities, allowing for improvement at a local level. Additionally, organizations have been set up to recognize and reward high-value providers, enhancing their reputations and standing within the communities they serve.

An alternative approach would be to hold insurers accountable for the total cost of care. However, this approach may be limited in its effectiveness, as insurance companies may be unable to effect change if providers operate in a monopolistic or oligopolistic market.

Covered CA's holistic approach, which seeks to streamline the healthcare process and assign value to services rendered, has already made it easier for buyers to access information on the benefits they receive from their providers. By allowing for a comparison of benefits in one place, CoveredCA has streamlined the process of purchasing health insurance, and is set to play a crucial role in reducing the utilization of low-value care services.


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Nov 28, 2022