“Usual and Customary”: Macro Effects?

The NY State attorney general is investigating (NYT) health insurers for gaming the system on “usual and customary” charges. Turns out the database used to determine the charges is managed by Ingenix, which in turn is owned by UnitedHealth Group–one of the country’s biggest health insurers. The database is licensed to other insurers as well.

I can’t determine from press reports who crunches the database to determine the charges–Ingenix or the insurer. But in any case it’s to their advantage to set those charges lower rather than higher, so they pay less.

Wouldn’t this serve to ratchet down health care costs? Free market at its best? (Especially considering the impediments to individuals exerting any downward pressure on those costs.)

Well yes, except for all those “out of network” payments. The uninsured pay full ticket, and the insured going outside the insurer’s preferred provider network have to  pay (all or some percentage of ) full ticket minus the (gamed down) U&C amount.

Just theorizing here absent any empirics (you judge if it makes sense): If medical providers are getting less than they should from insurers, the natural incentive is to raise prices for everyone (else). This would also feed back into the (rather elastic) insurance loop, exerting upward pressure on the U&C payments.

Short story, the well-insured and the insurers do better, everyone else does worse. What‘s the net macro effect? I haven’t found any research to answer that, and I’m at a loss to answer it myself.