Improving health care affordability

Achieving quality improvement while bending the cost curve

Affordability of health care in the U.S. is a system-wide problem. Industry stakeholders, such as health plans and providers, are pulling several different levers to improve not only the cost of health care, but also the quality of care provided. Some examples include: medical management, ambulatory care redesign, clinical integration, patient engagement, and of course, data-driven decision making. Health plans and providers alike may require assistance to determine where to focus their efforts and investments.

Affordability is a hot-button issue

While cost pressures are increasing for all who pay for health care—health plans, governments, employers, and consumers—health plans and providers are in a unique position to meaningfully restructure the health care system. There is a growing risk to the future viability of standalone health plan business due to a shift to less profitable lines of business and the potential disintermediation of the health plan value proposition. Similarly, the lack of value-based care capabilities of some providers puts them at a disadvantage relative to their peer groups.

With existing demographic and public policy trends, Medicare and Medicaid populations will continue to grow rapidly in their share of the payor mix. Health plans need to expand their footprint in the growing government health care programs to meet and exceed profitability targets. Because of the Medicare and Medicaid trends, providers’ margin will continue its downward trend due to the lower reimbursement of government payors and the like.

Providers are also joining the race with health plans and vendors to control population health management capabilities. As providers start to choose health plan partners to manage the risk of certain populations, health plans will need to assume different roles across the payment model spectrum in the future.

If health plans cannot offer value-added services to enable collaboration and partnerships with providers across the payment model spectrum, they run the risk of potential disintermediation in the long term. Now is the time for health plans to pull the right levers to improve health care affordability. But how do they know which ones will benefit their business, their members, and the health care system as a whole?​

The right levers to improve health care affordability

Based on Deloitte's decades of experience across all health care sectors, we know that fee-for-service to value-based care trends will continue. Furthermore, traditional boundaries continue to be crossed as health plans and providers alike are vertically integrating their operations. These levers vary in terms of speed to impact (near-term vs. longer-term) and sustainability of impact (lower vs. higher) and include:

For Health Plans:

  • High-Performance Physician Network
  • Payment Models
  • Medical Management
  • Patient Engagement​

For Providers:

  • Premium Capture and Payer Partnerships
  • Ambulatory Care Redesign
  • Data-Driven Decision Making
  • Medical Management and Clinical Integration
  • Sustainable Cost Reductions


Affordability of health care has become a major issue for all constituencies. At the same time, margins are under significant pressure for both health plans and providers. There is plenty of opportunity to improve affordability as studies indicate up to a third of all health care spend is unnecessary. The challenge is in identifying specifically which services are unnecessary and the best approach to increase efficiency without sacrificing quality.

-Jim Whisler, principal, Deloitte Consulting LLP

What is the path forward for affordability?

Deloitte's six affordability platform offerings are constructed to help health plans pull all the right levers during an affordability transformation:

  • Opportunity assessment: Identify targeted opportunities for improvement and cost savings (e.g., medical, pharmacy, fraud detection).
    • Problem: Runaway medical and pharmacy costs eroding profitability.
    • Value generated: Identifies 5-15 percent of medical costs that are deemed to be achievable by health plans.
  • VBC transformation: Incentivize providers to shift from FFS to fee-for-value.
  • Provider/Health plan collaboration: Explore new collaboration models and ways to enable providers.
    • Problem: Need to converge plan and provider capabilities, assets, and resources.
    • Value generated: Enables better management of the delivery system by aligning the interests and capabilities of a provider and a health plan.
  • Care model redesign: Implement programs to target over-utilizers and optimize the patient's site of service.
    • Problem: Need for ecosystem cost and quality solutions for care models.
    • Value generated: Launches complex case and chronic condition programs supported by new CX tools and underlying data and analytics.
  • PBM relationship maximization: Manage performance and operations of PBM and evaluate potential partners.
    • Problem: Increasing drug prices, particularly for specialty and on- patent medications.
    • Value generated: Reduces cost of goods sold ranging from 8-20 percent over the life of the new contract.
  • Next-Gen product design: Enable consumer behavior to drive quality and cost-effective decisions.
    • Problem: Outdated plan designs which do not support future business model.
    • Value generated: Leads to optimized networks and more affordable product.

Deloitte’s affordability platform offerings are anchored by an opportunity assessment that focuses transformation activities on a health plan’s value proposition across the payment model spectrum.​

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