With over two-thirds of the public believing that health care should be a top policy priority, there is no debating the importance of “fixing” our health care delivery system. On one extreme of the aisle, there is a growing chorus in support for “Medicare-for-all,” a single-payer, government-funded approach estimated by two independent studies from both liberal– and conservative-leaning institutes to cost about $32 trillion over the next 10 years. On the other side of the political spectrum sits an approach focused on individuality (e.g., the inclusion of health savings accounts [HSAs]), competition, and limited government intervention and financial support for all citizens regardless of socioeconomic standing; the most recent proposed plan, the American Healthcare Act of 2017, was estimated by the Congressional Budget Office (CBO) to reduce federal deficits by $119 billion over 10 years but lead to an estimated increase of 23 uninsured million Americans by 2026. In between these two approaches rest the remaining health care policy proposals, none of which have garnered widespread support within their own political party, let alone across party lines. America needs a health care policy solution. The true – and lasting – solution? A value-based health care system.
Fundamentally, there has yet to be a single proposal that profoundly changes how stakeholders provide, pay, or evaluate health care delivered. Value-based health care reimagines health care to align these misaligned incentives by refocusing health care on the patient and the patient’s needs. Such an approach rewards value – defined as health outcomes achieved per dollar spent – across the entire care cycle for a given condition. In doing so, the health care delivery system helps to curtail the rising cost of health care and address concerns of a growing uninsured population – the ultimate goal of any health care system from any political viewpoint.
To demonstrate how a value-based health care system solves our underlying health care delivery crisis, it is crucial to not only begin by acknowledging the ever-rising cost of health care relative to gross domestic product (GDP) but the amount of waste in the current system. According to a landmark report from the Institute of Medicine (now the National Academy of Medicine), there were $750 billion of unnecessary health care expenses, representing 30 percent of medical expenses. In the current fee-for-service system, each time a service is provided or pharmaceutical used, health care providers, hospitals, and health systems are financially rewarded, regardless of the impact on a patient’s well-being. This perverse incentive paired with system inefficiencies is making our health care system sick. So, what if that money was saved and integrated into a value-based health care system? All Americans could be provided high-value health care – no exceptions.
To substantiate this claim, all one has to do is look at the data. According to the U.S. Census, 28 million people were uninsured in 2017. Further, in 2017, the Centers for Medicare and Medicaid Services (CMS) reported health care spending per the average American of $10,739 per person. When the number of uninsured individuals is multiplied by the average spending per person, a total just south of $301 billion is calculated – less than half of the amount of money wasted in health care today! Further, this value is calculated assuming the bloated spending per person in a fee-for-service system remains constant when transitioned to a value-based health care system, a faulty assumption. Thus, even more savings are likely, paving the way for much-needed investment in infrastructure and education.
From an overarching viewpoint, this may come across as too good to be true – but it is not. Returning to the landmark Institute of Medicine (now the National Academy of Medicine) report, the authors break down the notable waste into six categories: unnecessary services ($210 billion), excess administrative costs ($190 billion), inefficiently delivered services ($130 billion), prices that are too high ($105 billion), missed prevention opportunities ($55 billion) and fraud ($75 billion). The principles of value-based health care can address each one of these areas of waste, saving America billions of dollars and helping to expand coverage to those currently uninsured.
Perhaps the most straightforward example of how value-based health care can address our current health care waste is by eliminating unnecessary services. Currently, in a fee-for-service reimbursement system, there is a financial incentive to perform more tests and provide a greater number of services. Additionally, many physician compensation plans are predicated on reaching a target volume, thereby fostering incentives towards more – not necessarily better – care. Inherently, physicians want to provide only the best and necessary care but barriers exist in today’s system. A value-based health care system that rewards physicians for outcomes instead of volume eliminates the waste from unnecessary services being provided.
A large portion of excess administrative costs come from insurer administrative inefficiencies and billing practices and paperwork burden from care documentation requirements. Additionally, high prices and fraud are also a function of the current health system structure that a value-based health care system would remedy. Under fee-for-service, accurate and complete documentation of every detail is a must to ensure appropriate billing and payment. This requires multiple layers of bureaucracy with physicians spending more time checking boxes on forms and entering non-clinical data into computers than taking care of patients. Value-based health care addresses these excessive administrative costs by removing the onerous, wasteful fee-for-service requirements in lieu of a system that provides a single dollar amount that covers the entire care cycle. Within the care cycle, physicians – working in conjunction with their patients – can decide on the best approach to care that ensures the best possible outcomes per dollar spent. This is the concept of a bundled payment – a sum of money designed to cover the entire care cycle and is not linked to the use or lack of use of a specific treatment decision.
Inefficiently delivered services and missed prevention opportunities are also side effects of the current health care system that is curable by a value-based health care approach. Today, patients are like ping-pong balls, bouncing from one doctor to the next across different institutions and physical sites with limited information technology (IT) infrastructure to assist in care coordination and in monitoring outcomes most important to patients. The system is designed around the doctors and the health system, not the customer (i.e., the patient). A value-based health care system implemented with integrated practice units (IPUs) – an innovative care delivery organized around patients and a condition or group of conditions full care cycle – will remove the inefficiencies of delivered services today. Further, in the setting of primary care, IPUs will promote more routine preventative services, as physicians will be rewarded for ensuring outcomes per dollar spent. These preventative services will boost the numerator of that equation with a minimal increase in the denominator.
By utilizing the landmark Institute of Medicine (now the National Academy of Medicine) landmark report in 2012, one can demonstrate that value-based health care is not just theory or a fantasy but the true solution to America’s health care system woes. For all the claims of innovative and game-changing solutions to health care being proposed today, none can ensure complete coverage, remove red tape, and align stakeholder incentives while producing savings that can be invested in education and infrastructure like value-based health care. It is time to expedite the transformation to a value-based health care system.
David Bernstein is an orthopedic surgery resident.
Image credit: Shutterstock.com
