Perspectives

Aligning health plans and providers

Working together to control costs

​While the Affordable Care Act improved access to coverage for many Americans, the recent Presidential election has created uncertainty about the future of this law. Whether access comes through subsidies on Affordable Care Act (ACA) exchanges, expanded Medicaid, or other legislative solutions or we return to higher levels of uninsured, health care spending per covered person will continue to be a challenge. How will continued health care cost increases be paid for, and how can these increases be dampened?

Overview

​Health care spending was $3.2 trillion in 2015, a 5.3 percent increase from 2014, and is expected to continue to grow 5.8 percent annually for the next decade1. Health care as a percentage of the US gross domestic product (GDP) has steadily risen from 13.8 percent in 2002 to 17.8 percent in 2015, and is predicted to be 20.1 percent by 2025.

While the Affordable Care Act improved access to coverage for many Americans, the recent Presidential election has created uncertainty about the future of this law. Whether access comes through subsidies on Affordable Care Act (ACA) exchanges, expanded Medicaid, or other legislative solutions or we return to higher levels of uninsured, health care spending per covered person will continue to be a challenge. How will continued health care cost increases be paid for, and how can these increases be dampened?

Large rate increases aren’t the answer for health plans. Higher premiums can deter healthy people from voluntarily purchasing insurance products, resulting in a higher average level of “risk” or illness burden in the group that does buy coverage. This creates a “vicious cycle” of even higher premiums as the risk deteriorates. The industry should consider focusing on identifying and implementing strategies to bend the medical cost curve while improving health outcomes.

Concerns over the cost of care aren’t new. Rapid, but expensive improvements in technology and the shift from commercial to government payers while care systems have negative margins on government paid patients and unaffordability of premium rates, give payers and providers greater incentives to collaborate on population health approaches. This paper explores innovative ways that providers and health plans can work together to accomplish these goals.

 

Key information

Payers have always had to manage health care costs to maintain affordable premiums without resulting in negative margins. With the passage of the Affordable Care Act in 2010, health plan profitability has been challenged. The health care exchanges and Medicaid expansion increased the number of insured Americans by 20 million between 2010 and 2016. However, Aetna, Humana and UnitedHealth’s 2016 exit from many of the health care exchange markets exposed some of the significant challenges of pricing the product for the population’s acuity level.

Traditionally, health plans focused on managing health care cost trend through utilization review, care management, and provider contracting. Health plans worked primarily with utilization and claims data well after the services actually occurred. This approach does not engage the physicians to contribute to the solutions for generating additional efficiency without sacrificing quality. In addition, fee-for-service payment models continued to drive utilization, contributing to unsustainable trend rates. Without addressing the root cause and altering behavior across the continuum of care, any temporary reductions in cost will likely be just that—temporary.

Although many health plans have developed value–based contracts with small segments of their provider network, the broader base of providers still do not have downside risk that captures their attention enough to change the way that they practice. However, it isn’t appropriate to put providers at risk without providing them with the information they need to understand how they can perform better.

Value-based care has the long-term potential to change the health care cost trajectory. A number of physicians have the impression that it won’t work because of previous experiences. However, the skill, approaches, information available and risk mitigation techniques are now much better than they were in the early days of value-based care. As is discussed below, the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) may give a strong incentive for physicians to participate in value-based care leading to a more rapid deployment for some of the key components enabling value-based care.

To read the full article, download it now.

 

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