Health care industry moves toward value-based coverage at a sluggish pace
As health care costs in the United States continue to rise, employers are looking to manage those costs. Insurance companies, policy experts and doctors agree that “value-based care” is part of the solution, but the industry is moving toward this model at a sluggish pace.
For nearly a century, health care has been based on a fee for-service system, which pays providers retrospectively for each service they provide. Some experts say this inadvertently encourages doctors to pursue the costliest forms of treatment, rather than the most effective and do as many procedures as they can.
The value-based model, on the other hand, ties payments to the quality of care and the patient's health. It emphasizes primary and preventative care. Insurers and health systems began looking at the model in the 1990s, and it has slowly become more prevalent.
Pressure is building to move more quickly to value-based as health care costs continue to rise. Employers throughout the United States expect their group health plan premiums to increase an average of about 5 percent in 2022, even after taking cost-management initiatives such as narrowing networks into account, according to recent employer surveys conducted by Society for Human Resource Management, a professional association headquartered in Alexandria, Va. It can be difficult, however, for insurers to show employers the value-based method is cost effective, Dave Milich, CEO of Texas and Oklahoma United Healthcare, said at the recent Houston Business Coalition on Health Conference.
The insurance companies have to make their case that spending more on preventative and primary care upfront leads to better patient outcomes and avoids expensive surgeries and treatments. But it’s hard to find data to quantify something that didn’t happen, Milich said.
“Essentially, what we're saying is because (the doctor) did these things, these other things didn't happen,” Milich said, adding that companies should be better able to track avoided costs in the future. “Data is going to become more prevalent, and value-based arrangements are going to become more profitable and dominant in the commercial space.”
Already, academic research indicates that value-based health care is more efficient and less costly. A study published in the New England Journal of Medicine in 2019 compared the annual medical spending for organizations in value-based plans to those in traditional fee-for-service plans and found costs in the valuebased plans were 12 percent lower.
Researchers also noted in the study that value-based model reduced unnecessary emergency room visits and imaging, such as MRIs. Both are particularly costly.
One indicator that the new model’s time has come is the Centers for Medicare & Medicaid Services has already implemented seven value-based programs. One of the programs aims to cuts costs by giving incentives to providers to reduce readmissions to hospitals. CMS launched its first valuebased program a decade ago.
It’s not just insurance providers that have been slow to adopt the value-based model. Some health systems are not equipped to make the transition. Only 15 percent of physicians practice in a fully integrated settings in which different specialists and other providers can collaborate on and coordinate care to improve patient outcomes, according to the Keckley Report, a weekly health care policy newsletter.
That has made it harder to realize the value of value-based health care.