Do tariffs and prices correspond with costs? A case study of orthotic braces

The Belgian third-party payer wishes to set reimbursement tariffs at a level that reflects the costs of orthotic braces. This article aims to calculate production and distribution costs of a prefabricated hard neck and knee brace and to explore whether Belgian tariffs and actual retail prices correspond with estimated costs of these two braces.

The cost model considered manufacturing costs, general overheads, research and development costs, warehousing costs, profit and distribution margins. Data were gathered from manufacturers, a production site visit, desk research, a decomposition of finished products and stakeholder interviews. The price year was 2007.

The cost model estimated a retail price of euro55-euro150 for the neck brace, depending on assumptions. The estimated retail price for the neck brace was lower than the reimbursement tariff of euro194 and the actual retail price of euro241. The estimated retail price of euro331-euro694 for the knee brace was lower than the actual retail price of euro948.

Actual retail prices and reimbursement tariffs for a neck brace and a knee brace exceeded prices based on estimated costs. Therefore, there appears to be scope for reducing tariffs.