Reference Pricing: A Small Piece of the Health Care Price and Quality Puzzle

Reference pricing, or capping payment for a particular medical service, has been gaining interest as a strategy to reduce health care costs. Using private insurance data as a measure, reference pricing applied to a narrow scope of inpatient services was shown to produce limited savings—only a few tenths of a percentage of total spending; reference pricing applied to a much broader set of “shoppable†inpatient and ambulatory services was shown to potentially save about 5 percent of total spending. When considering reference pricing, employers and health plans would need to weigh the potential savings against the additional resources needed to implement and manage a more complex program.