Cost Containment in Healthcare: What are the Laws?
Cost containment in healthcare has become more appealing to employers across the country who need to stem skyrocketing healthcare costs. These employers realize that healthy workers are more productive, likely to retain their positions, and have fewer absences from work. They also know that an effective cost containment strategy can maximize employee incentives while helping them save money.
However, because of increased healthcare costs, the impact of transparency laws, and the declining quality of medical services, healthcare reform has become a common point of contention in our national political discourse. As such, it’s only logical for employers seeking cost containment in healthcare to explore the implications of federal legislation.
In other words, what are the laws that affect cost containment?
This blog post examines some of the laws that could impose regulations or restrictions on cost containment in healthcare.
What Types of Laws Affect Cost Containment in Healthcare?
As national health spending trends toward unsustainable levels, expected to reach $6.2 trillion by 2028, cost containment strategies to mitigate these increases have met potential influences from a variety of laws. Let’s take a closer look at some of them and see how these laws could impact the effectiveness of cost containment methods.
Healthcare reimbursement models represent an industry area ripe with the potential to produce significant employer savings. A clear understanding of medical billing and payment processes empowers employers and administrators to choose the most cost-effective methods instead of blindly trusting the accuracy of traditional medical reimbursement forms.
Legislation like the Payment Integrity Information Act of 2019 (PIIA) supports such cost-saving strategies because it was designed to reduce wasteful spending among government agencies. The demand for greater transparency and accountability among agency officials prompted cost containment measures in the public sector, which shares an alarming habit of overspending with the healthcare industry.
Laws like this tend to focus on using alternative payment models to eliminate overspending. The goal is to fix issues that result from traditional healthcare reimbursement models like fee-for-service or capitation.
For example, some states have created accountable care organizations (ACOs) to bolster Medicaid programs. These ACOs integrate shared savings plans as part of a reimbursement process that incentivizes healthcare providers to offer enhanced care with more transparent and accurate patient billing.
Legislation that produces lower Medicaid and Medicare payouts can signal big savings for those practicing cost containment strategies like reference-based pricing since lower prices for Medicare services also lower the benchmark for price negotiation.
Controlling the prices billed for healthcare services has become another growing area of legal focus. Because many healthcare providers charge exorbitant rates and have varying price increases, regulating providers’ prices will help lower costs while also slowing or preventing arbitrary price increases.
Legislation like the No Surprises Act, effective January 1, 2022, offers patients federal protection from surprise medical bills—usually unavoidable out-of-network charges due to an emergency. The law also applies to undisclosed specialist charges for new parents, and exorbitant prices for over-the-counter treatments. While this serves as an extreme example of “cost regulation,” the fact that such federal law exists implies a substantial need born of widespread occurrences. The same logic applies to The Inflation Reduction Act of 2022, which caps prices on prescription drugs and monthly insulin costs for Medicare recipients.
At the state level, some have established their own benchmarking systems to prevent additional price gouging in healthcare. For example, the state of Massachusetts caps the growth of healthcare costs for all payers at 3.1%. The intention of benchmarking in this way is to reduce the growth of healthcare spending overall.
Another common practice is the creation of state oversight commissions that act as watchdogs over healthcare prices and industry practices. Restricting healthcare price increases should have positive impacts on cost containment strategies in the future.
A lack of transparency and integrity in the claims process and in pricing services causes tremendous difficulties in dealing with the healthcare industry. Patients typically have little to no knowledge of how prices work: they are simply billed and expected to pay the charges listed.
This stands out in stark contrast to most other, everyday transactions that patients take part in. For example, if someone wants to buy a used car, resources like the Kelley Blue Book can provide a benchmark for a certain vehicle’s reasonable price. In addition, buyers often shop around to peruse the prices auto dealers have for specific models.
Healthcare patients rarely have access to—or knowledge of—resources that list reasonable prices for different services. Nor would they consider negotiating lower prices using such benchmarks because it simply isn’t done. Some states, however, have created mandatory claims databases to house healthcare price data. While only some data is publicly available, it’s a step in the right direction toward turning healthcare into a marketplace where patients can shop for the best deals in coverage or services.
The Bottom Line
Thus far, instead of creating barriers or obstacles, many laws that affect cost containment in healthcare appear to be supportive of measures to create a more transparent and equitable future for patients. The precedent set by the public sector to reduce wasteful spending offers a roadmap of successful measures to improve healthcare in the private sector.
However, the first step to successful cost containment in healthcare is simply raising awareness of these options. Most profit-driven industries—including healthcare—are unlikely to help people save money when it cuts into their own revenue.
The 6 Degrees Health Difference
6 Degrees Health was founded by industry experts with the shared goal of disrupting the broken healthcare system’s traditional model of inflated prices and poor care by increasing integrity and transparency to eliminate abusive practices. As an industry leader in cost containment, 6 Degrees Health has the know-how and the methods to deliver comprehensive cost containment solutions.
Backed by industry expertise and powerful proprietary software, our reference-based pricing model, clean claim reviews, and out-of-network solutions are designed to help you lower your healthcare spending by up to 40%.
Want to know more about how laws affect cost containment in healthcare? Speak to a representative today to find out how our reference-based pricing model can help you realize the true benefits of healthcare.
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