by Sena Meilleur I had a conversation with a client recently about the rising cost of health care. This CFO, like many, has seen his health plan costs go up every year, and like many, his first instinct was to blame the insurance company. We discussed how the lion’s share of his costs is actually his plans’ claims, and because of the way we pay providers, costs increase every year with no end in sight. Our current fee-for-service model pays providers for every service they perform, meaning the more they do the more they get paid. And since there are no regulations around what a provider can charge, the fees get higher every year. There is no other product or service we pay for in quite this way. “We have to change the way we pay providers,” I said to the CFO. “What other way is there?” he asked.
Enter value-based medicine. The concept has been around for years, but very few health plans actually do it. The idea is that the provider is reimbursed not for every service performed, but based on the outcome of the treatment. This method focuses on the health of the patient, and pays the doctor based on the patient’s health improvement. Suddenly the incentive is on keeping the patient healthy. Sounds great, right? So why aren’t we doing it?
The fee for service model has been the way we have paid for health care for hundreds of years. Value-based medicine would be a sea change that would completely revolutionize the way we pay for health services. To add to the difficulty, this model would require some general agreement on the definition of ‘value’ in medicine, as well as some consensus on measuring health improvement. Much of our health care payment system is currently automated, meaning a computer makes 90% of the payments without a human looking at the claim. If we decrease this automation by introducing a subjective ‘value’ element into the claim process, administrative costs could rise. So establishing some standardized measures of value would need to come first – no easy task.
By far the biggest barrier to implementing value-based medicine is that currently, most health care providers are opposed to it. It would mean providers – especially hospitals – would no longer control what gets charged and how much the charge is. The health care lobby is incredibly powerful in this country, and so far they have managed to keep this concept largely under wraps.
But there is hope. Pilot projects across the country are testing the viability of a value-based medicine system. Here in Vermont, we are in the middle of a one-year pilot with 30,000 Medicaid recipients, where their providers are being reimbursed according to the health outcomes of their patients. The providers volunteered to participate in the pilot and hopes are high that this will contain costs for this Medicaid population. CMS is conducting similar pilots with select programs and populations in other states.
Results to come … stay tuned to learn whether this model could spell a new era in paying for health care.
Sena Meilleur is a principal at OneDigital Health and Benefits, the nation’s largest company focused exclusively on employee benefits. OneDigital combines people and technology to deliver the new generation of health and benefits. It provides fresh thinking ahead of the market, innovative approaches and market-leading solutions that give clients peace of mind.