PPO or MPN Network vs Supply and Demand
A PPO or MPN network where paying more remains the goal? This article is related to yesterday’s post on Obamacare and medical treatment rationing.
A phone call from one of our long-term readers basically said that I was crazy to think that Workers Comp payors would ever pay MORE for Workers Comp treatment than the fee-scheduled amount.
As I mentioned yesterday, the basic economic model says that if the supply of something stays the same, but the demand increases prices will increase. The model has been in existence for over 300+ years. The model has been proven as accurate again and again over that span of time.
However, the basic economic model (by Adams) did not count on any governmental interference in the marketplace. The basic idea of rationing comes into effect when the government tries to keep prices in check by some type of price-adjusting plan.
The effect of price ceilings – which is the basic effect of Obamacare – is basically rationing. This is a great explanation using gasoline prices on how the government holding prices down would create a shortage. Some of us are old enough to remember the gas lines of the 1970’s. The PDF file may take some time to load. It is worth the read.
If healthcare prices are to be tamped down from the actual market, then the natural result will be rationing. The PDF indicates that one of the ways to work around shortages is a grey or black market where the same service will have a much higher price.
The going rate for medical network reductions is 15%. What if to have your injured workers seen timely you were willing to pay an extra 15%? Page 2 of the PDF points out that the seller, (medical provider) will get to choose whomever they will provide the service to overall. They would likely be the ones that are willing to pay the most.
The PPO effect of volume causing a discount in price would be thrown out the window as now the medical providers do not need the volume. Why would they take a 15% hit if the medical providers are going to not need any additional volume?
The 30% turn in additional medical costs would be staggering as 60% of Workers Compensation claim dollars are now being spent on medical.
This may not all come to fruition. Medical treatment rationing may never become a reality. However, if you are a risk manager, business owner, or medical provider, this is something that has to be part of your 5 – 7 year plan.
©J&L Risk Management Inc Copyright Notice