The insurer can protect itself against extreme inflation risk by setting a
cap on how high the inflation-adjusted rate can rise when the contract is
issued, Hancock says.

In other insurance ideas news:

– America’s Health Insurance Plans (AHIP), Washington, says Aparna
Higgins, an AHIP vice president, and other AHIP staffers have published an
article on early experiences at accountable care organizations (ACO) in the
September issue if Health Affairs, a health care finance and delivery
academic journal.

Government officials and other policymakers are hoping that ACOs – efforts to
use payment structures to create health care provider teams that can deliver
care on a whole-patient basis, rather than on a service-by-service basis – will
help control the cost of care and increase the quality.

The AHIP staffers suggest that some providers may need technical help from
health plans to participate in the ACO arrangements.

In the real world, health plans have had to adjust ACO arrangements to suit
the needs of providers and patients, rather than taking a one-size-fits-all
approach, the AHIP staffers say.

– Health Affairs xx also has published two other interesting articles
in its latest issue.

In one, Charles Roehrig and David Rousseau conclude that health care spending
is high in the United States more because the cost of care is high than because
the amount of care delivered is increasing.

Between 1996 and 2006, growth in cost per case seems to have accounted for
about 75% of inflation-adjusted per-capita health spending, Roehrig and Rousseau
say.

In a second article, Miriam Laugesen and Sherry Glied suggest that the high
fees paid to U.S. physicians seems to account for the fact that physician
spending is higher in the United States than in other developed countries.

Some have speculated that U.S. physicians may charge more because they pay
much more for their education and for certain practice costs, such as medical
malpractice insurance, than physicians in other countries.

Laugesen and Glied compared physicians’ fees paid by public and private
payers for primary care office visits and for hip replacements in Australia,
Canada, France, Germany, the United Kingdom and the United States.

The researchers also compared physicians’ incomes net of practice expenses,
differences in financing the cost of medical education, and the relative
contribution of payments per physician and of physician supply in the countries’
national spending on physician services.

Private payers paid 70% more for primary care office visits in the United
States than in other countries and 120% for the orthopedic physician office
visits.

“We conclude that the higher fees, rather than factors such as higher
practice costs, volume of services, or tuition expenses, were the main drivers
of higher U.S. spending,” the researchers say in the article abstract.

– Allison Bell