Pricing with CPD Tables

[tope]

..Claim Probability Distribution...aka Continous Tables

I am looking to price the impact of cutting a rate from 300% of Tarriff to 20% of Tarriff

Assuming Tarrif = $300

I am thinking of using the tables to price this as a benefit max of $900 vs $600 with 100% coinsurance up to the max, then find the value of deductible at each point...

Does this make sense to anyone or am I off the deep end?

I know I also have to consider utilisation impacts..which is more subjective

[DudeMan]

I'm not sure what your question is

Are you trying to run a simulation or something?

[tope]

Apologies for the confusion

A plan pays a maximum of 300% of Tarrif for hospital claims, now they want to reduce this benefit to 200% of Tarrif

Again Tarrif is an about $100

Now I want to price the reduction in PMPM cost due to the reduction in the tarriffs , using a claim probability distribution table

The question is, is this possible, assuming we make the % of tarrifs, a maximum benefit limit

[Dr T Non-Fan]

Originally Posted by tope

..Claim Probability Distribution...aka Continous Tables

I am looking to price the impact of cutting a rate from 300% of Tarriff to 20% of Tarriff

Assuming Tarrif = $300

I am thinking of using the tables to price this as a benefit max of $900 vs $600 with 100% coinsurance up to the max, then find the value of deductible at each point...

Does this make sense to anyone or am I off the deep end?

I know I also have to consider utilisation impacts..which is more subjective

Quick question: what is "tarriff"?
I've never seen that word used before in this context.

[tope]

Tarriff is a negotiated rate between the a medical plan and physicians...an aussie term

[Dr T Non-Fan]

Originally Posted by tope

Tarriff is a negotiated rate between the a medical plan and physicians...an aussie term

Ah.
Speak English, mate!

OK, if the "tariff" (two r's? two f's) has been negotiated, why is the going reimbursement (?) rate 300% of that amount?
How many services are being affected? All of them? some of them? ONe of them?
Does deductible apply to all services, or just the ones getting the "tariff" reduction?

Maybe you could do a walkabout of the claim payment life cycle? From time it comes in to final payment out the door, with all parties' obligations included?

[tope]

negotiated tarriffs are one thing, the plan can decide to pay 2 or 3 times this amount, as doctors can charge what they want above the tarriffs negotiated...its complicated, i dont know why they are not just restricted to the tarriffs, but I would suspect the tarriffs are similar to the Usual and Customary Rates in the US

Can you please expand on your last para?

[Dr T Non-Fan]

walkabout: Australian term for a hike. Makes no sense how I used it. Just trying to blend in to the Aussie thread!

For example:
1. Claim comes into the claims shop.
2. Has a billed amount, usually whatever the doctor's computer says to bill.
3. Claims employee/processor looks at the amount and the service, looks up the contracted rate. ("Tariff," I think it should be. Why bother negtotiating otherwise?)
4. Then the employee/processor looks up the member's benefits, and determines how much member owes of that contracted rate in deductible or coinsurance or copay.
5. Employee/processor then cuts a check for the remainder to the doctor, and notifies the member that he owes the doctor deductble/coinsurance from step 4.

Now, I could assume that the process is upside-down in Australia, but I'm gonna let you have a go at it, mate.

Regardless of what happens, the tricky part of your analysis is applying deductibles. This usually requires some kind of repricing of a sampling of members' claims, since the first claim of a member might be all deductible, in which case your company gets no savings from it, while the third one might be pure coinsurance because the deductible is satisfied in the first two.
Is it possible to simply assume that deductibles are X% of all contracted amounts? Sure, until you change the contracted amounts! If you lower every single contracted amount from, as you wrote, 300% to 200% of Tariff, now the deductible is X%+Y% of contracted amounts. (Y>0, but is not known, and actually is what you're looking for.)

OPK, so the question is whether you can use a CPD to do this.
Yes, if:
1. The CPD is representative of your company's experience.
2. You have an idea of what your average % of Tariff is. You wrote "up to," so it might not be 300%.
3. EVERY claim is affected by this decision.
With these three conditions, it's pretty easy. (So easy, an Australopithacus could do it!)

In reality, what might happen is that claims between 200% and 300% are simply dropped to 200%, while those under 200% are untouched. Now, it's even more complicated. If you can get some idea of the average % of Tariff of those claims paid over 200% of Tariff, you might be able to come up with something.

[tope]

Thanks for your help, sport!!!

In this case, the plan pays 100% claims up to the % of tarriffs negotiated

I think I can use the CPD tables as follows

To value the impact of moving from 300% tarriff to 200% tarriff, assuming tarrif is $100


Id try

Value of Total claims - Value of claims above $200

Divided by

Value of total claims - Value of claims above $300


then I will have to tag on a subjective utlisation decrement . this part I haven't figured out how to model yet..it seems many folks either don't do it and if they do, it is proprietary..

[Dr T Non-Fan]

Not sure how utilisation is affected. Do you think doctors will change their ways, or patients will change their ways?

You can provide a range of utilisation changes, either to show that it won't make a difference or that it's a huge difference for such an unknown variable.