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Can flat-rate pricing help control cancer costs?

For cancer patients already dealing with the extreme stress of their illness, a myriad of surging costs can add to the worry of treatment.

UnitedHealthcare (UNH), the biggest U.S. health insurer, is taking aim at controlling costs of treatment with a new pilot program that will provide a set sum for a patient's coverage. The plan is being developed with the University of Texas MD Anderson Cancer Center and will enroll about 150 patients at first, the insurer said in an email to CBS MoneyWatch.

Terms of the contract are confidential, but the idea of paying a set sum for treatment is a shift away from the typical per-service payment that Americans are familiar with. Paying on a per-service basis has come under fire for encouraging doctors and health care professionals to heap on tests and treatments that might not be necessary, and it has been singled out as one reason U.S. health care spending has spiraled to $3 trillion this year, a 42 percent jump since 2006.

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"The goal of the pilot is to reduce medical costs while maintaining profits for MD Anderson by eliminating unnecessary tasks and services and paying more for those essential services," UnitedHealthcare said in the email.

The program will focus initially on patients with head and neck cancers, although the company said it may eventually expand the pilot test to include other cancers and to start pilots with other large cancer centers in the U.S.

So, what happens if the cost of treatment exceeds the bundled payment? The annual payment won't increase if complications increase treatment costs. Eight bundles are available for patients, depending on what services they need, the insurer said.

"The bundled payments (there is a total of 8) cover all services and care provided by MD Anderson for treatment, including complications," UnitedHealthcare said. "Each bundle has a fixed, specific price depending on the type of services and care included in a treatment regimen. For example, some patients may just need radiation and chemotherapy, while others may need those services plus surgery."

Of course, hospital treatments alone aren't responsible for the high price tag facing sufferers. Oncology drug costs have doubled to $10,000 per month in only a decade, during which time the consumer price index increased by only 23 percent, according to a new report from the IMS Institute for Healthcare Informatics released earlier this year.

American patients and their insurers shelled out $37.2 billion for oncology treatments in 2013, the study found. Prices in the U.S. are higher than in Europe, where medications can cost as much as 38 percent lower.

Bundled treatment plans are also being tested in other pilot programs for ailments such as orthopedic issues, but a Rand Corp. study this year found some efforts "failed to gain a foothold."

The cancer-treatment pilot will provide an incentive to "avoid unnecessary steps" in treatment, UnitedHealthcare and MD Anderson said in a statement.

It added: "This careful mapping is expected to produce improved patient outcomes, lower costs and a better quality of life for patients."

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