Employers who wish to improve the value-proposition of health care for both their employees and themselves must address both the supply and the demand variables in the equation. In the final part of this series on the Healthcare Value Problem, we’ll discuss two strategies that purchasers can use to buy more health, not more healthcare: Value-Based Purchasing and Value-Based Insurance Design are essential.
A family of four paid an average of $25,826 a year for healthcare in 2016 – a three-fold increase over 2001 when it was $8,414. In Part 1 of this three-part series, I argued that we must do more than simply inventory the seemingly countless number of issues that contribute to the problem: we must carefully distinguish between results and causes.
In Part Two, we identified two primary root causes to America’s Healthcare Value Problem, each of which exacerbates the other:
So what can we do this information?
We must replace the surrogate purchasing model by proactively purchasing health care.
First, to be clear, insurers and third party administrators play an important role in health care. They perform vital functions that employers do not and should not be expected to perform. But relying on third parties to purchase care without employer involvement causes four major problems:
Employer benefits must be designed to encourage the use of high-value services and discourage the use of lower value services.
The National Business Coalition on Health (NBCH) “Value-Based Purchasing Guide” defines value-based purchasing as “a demand-side strategy to measure, report, and reward excellence in health care delivery, taking into consideration access, price, quality, efficiency, and alignment of incentives.”
This means employers reward high performing health care providers through transparency and employee reporting.
We know that some services – particularly preventative care and primary care – offer high value. And we know that other services – such as those on “Choosing Wisely” either offer limited or no value. Undifferentiated benefit design translates in employees under-utilizing and under-valuing the most beneficial health care services while demanding services that either doesn’t help or may actually harm them.
The University of Michigan established value-based insurance design “on the principle of lowering or removing financial barriers to essential, high-value clinical services. Through the process, health plans are designed to align patients’ out-of-pocket costs, such as copayments, with the value of services.”
All sorts of health plans have benefitted – clinically and financially – from implementing value-based insurance design, including:
David Goldhill, Catastrophic Care: Why Everything We Think We Know About Health Care is Wrong
Executive Director, Colorado Business Group on Health