Medicine panel considers health costs

Says some services may be too pricey to qualify as essential coverage

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Weighing in on the types of services Americans will be guaranteed under the new health care law, an Institute of Medicine (IOM) panel told the Obama administration it should consider whether certain services are too expensive to be defined as essential benefits insurers must offer.

By recommending that cost be considered, the 18-member independent committee ventured into a potentially controversial question — whether the government should base health coverage for millions of patients on how much services cost.

Released Friday, the report suggests criteria for the Department of Health and Human Services to consider in defining the minimum coverage insurance companies must offer individuals and small businesses beginning in 2014. The Affordable Care Act laid out 10 general categories — ranging from prescription drugs to hospitalization — but left it up to HHS to determine how detailed the essential benefit package will be.

The agency faces a difficult balancing act. If the requirements are too exacting, it could burden insurers, who would pass costs along to consumers.Keeping them too general, though, could allow companies to wiggle out of covering important services.

The panel said HHS should make sure the scope of benefits wouldn’t result in premiums that cost more than the national average for a typical small-business employer plan.

“Because the package must be affordable to the small firms and individuals who will be the principal customers for the exchanges, its comprehensiveness should be balanced with its potential cost,” the committee wrote.

HHS Secretary Kathleen Sebelius said the agency will seek public feedback before making a final decision.

“I appreciate the work of the Institute of Medicine that led to today’s report on a process for determining essential health benefits,” she said. “I have heard from states, insurers, patients, providers and employers on this topic and I look forward to reviewing these recommendations and proposing options for the essential health benefits package soon.”

Another panel didn’t consider costs this past summer when it recommended preventative care services that insurers must also cover under the health care law. The administration already had outlined most of the services qualifying as preventative care, but the women’s health recommendations were considered so sensitive that the IOM was asked to look at the issue.

Because the health care law doesn’t specify whether the government should consider cost in determining coverage mandates, it is surprising that the panel gave it such a strong emphasis, said Ian Spatz, an adviser in the health care practice of the law firm Manatt, Phelps & Phillips.

“To date, the federal government has not gotten into the business of deciding which benefits are worth including in health plans because they’re cost-effective or not cost-effective,” he said. “There was a lot of controversy about whether that was rationing.”

The insurance industry applauded the recommendations, praising the panel for recommending that essential benefits packages not exceed typical plans already offered to small businesses.

“With this thoughtful report, the IOM is urging policy makers to strike a balance between the affordability of coverage and the comprehensiveness of coverage,” said Karen Ignagni, president of America’s Health Insurance Plans. “We agree that this balance is critical to ensuring that individuals, working families and small employers can afford health insurance.”

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