Many employers think that the only way to make healthcare more affordable is to cut quality.  At CBGH, we hold the opposite view.

Decades of research demonstrates that the only way to reduce the growing burden of healthcare costs is to improve quality.  Now an excellent article from the Center for Healthcare Quality & Payment Reform on Insurance Affordability reinforces that counter-intuitive idea. “How to Make Health Insurance Affordable” outlines how the cost of healthcare can be reduced effectively while maintaining or actually improving quality care for patients.   And while it outlines several realities about the costs of health care, we picked the following six to elaborate on:

  1. The Cost of Health Care Can Be Significantly Reduced Without Rationing. Any value-improvement efforts must begin with and focus on quality.  A library of studies show that many “low value” services are grossly over-utilized, many “high-value”services are woefully underutilized, and others are plagued with errors.  Addressing these three issues improves care and reduces costs.
  2. Current Payment Systems Prevent Healthcare Providers From Delivering Lower Cost Care. Fee for service payments drive the waste for over-priced “low-value” services discussed above.  But we don’t incentivize high value services, or superior health outcomes and employers have not demanded alternatives.  For the most part, under current agreements, providers can actually lose money by improving quality.
  3. Alternative Payment Models (APMs) Are Needed to Solve These Problems. Most employers understand that what’s profitable gets done and what’s not doesn’t.  Healthcare economics isn’t rocket science.  If you overpay for some services you’re going to get overuse.  If you underpay other services – like primary care – and you get underuse.  Ignore quality and you simply get high volume instead of value.
  4. Accountable Care Organizations Don’t Solve the Problems with Current Payment Systems. This is almost a corollary to #3.  Employers should worry about payment models, not delivery models.  Fix the payment incentives and the providers will fix the delivery system.  They’re pretty smart folks.
  5. Physicians That Have Participated in Well-Designed APMs Have Shown They Can Significantly Reduce Costs.  Speaking of smart folks, we’re strong advocates of employers sitting down with their local physicians to discuss what it takes to change the trajectory of care.  In the end, physicians are the engineers of high quality care and will respond to employer needs.
  6. Private Health Plans Need to Move More Rapidly to Create True Alternative Payment Models. Today’s healthcare market – generally driven by commercial payers – simply does not reward affordability. If it did, you can bet that US insurers and providers could deliver it.  Since employers, not health plans, are the true “payers” for the majority of care, employers need to demand changes in how their plans pay providers.

Few employers in Colorado contract directly with providers but, instead, rely on health plans – either as the insurer or as the administrator – as surrogate purchasers.  That model can work but only if they pay attention to these six realities.