Montana state government adopted reference pricing

Reference pricing is the idea that an employer (or payer) will pay up to a certain amount for a procedure or a product. The employee patient is free to pay the difference between the reference price and a more expensive offering. This policy then puts the onus on the patient to try to figure out whether a certain premium (e.g. institutional prestige or convenience) is worth paying for. As reported earlier, the California Public Employees' Retirement System has experienced success with using reference pricing. Kaiser Health News reported on how Montana's state government has also experienced success with reference pricing for their employees.

In this case, Montana decided to pay more than twice what Medicare pays, and the state was able to get hospitals to agree to their new pricing structure. However, it appears that the state did engage in a public relations battle to secure agreement from one major health system. Two years after deployment of the new pricing structure, the state estimates that it saved over $15 million this year over what it would have paid without the change.