The transition of the U.S. healthcare system from a volume-based fee-for-service system into an economic ecosystem that rewards the creation of value is a long game. Major economic systems require time for new competencies to replace legacy thinking and practices. Though it’s a long game, it isn’t a new game.
Our country is about 25 years into a likely 40-year transition to value-based care. Determining our progress on this journey is complicated. Such marches don’t happen in a straight line. Parts move at different paces and in varying ways, but in aggregate over time they become directionally clear. However, nearly every year there are changes—large or small—that contribute.
In the case of value-based care, there are several inflection points that speak to our progress—including learning what may (or may not) work for the market. To begin, while thoughtful health economists and historians can disagree on when the transition started, and when it will be done (if ever), some would point to this migration starting with the universal adoption of DRGs by Medicare in the late 1980s. During the mid-1990s managed-care providers learned that neither consumers nor healthcare providers liked gatekeepers deciding who could get care. In the late 1990s, the study To Err is Human reminded us that while costs are important, value must include quality and safety.
In the early 2000s, risk adjustment became part of Medicare pricing, while healthcare organizations began to talk about population health and value. In the later part of that decade, Medicare Advantage began to increase in popularity among consumers and provided a vehicle for provider risk-taking. Likewise, consumers were given choices in Medicare Part D. The next decade saw the passage of the Affordable Care Act. Finally, even in a year characterized by political polarization and conflict, 2019 was a surprisingly productive year in advancing the long game of a value-based system of healthcare within the U.S.
While improvements require focusing on what needs to be fixed, there are some things that are right with American healthcare. Below, I offer five examples of activity in the past year that reflect a continued drive toward a demonstrably better, safer and more consumer-friendly American healthcare system.
First, the CMS’ introduction of advanced payment models and iterative improvement of existing ones sent an unambiguous message that the current administration would join with the two prior administrations in pushing value payment. Also notable is the Health Care Payment Learning and Action Network’s (LAN) new goals to tie public and private payments to risk. While ambitious and perhaps a bit unrealistic where they have less influence (i.e., Medicaid and the commercial market), it signals a real commitment to value by government and industry representatives on the LAN’s steering committee.
The continued expansion of Medicare Advantage is also a signal of the future with a growing momentum toward 1 of every 3 seniors enrolling in a Medicare Advantage plan. 2019 can also be remembered as a year when strong focus was given to price/cost transparency for consumers. From surprise billing and lower healthcare cost legislation in Congress, to CMS’ (albeit controversial) regulatory proposals, there is clear interest in helping consumers understand their prices and costs.
Finally, 2019 is also the year the pharmaceutical industry continued efforts to develop value-based pricing models. Curative, “once and done” treatments that reflected a dynamically different approach to a lifetime of taking a drug to manage a chronic disease led the market to not only lower prices but also rethink pricing approaches such as Louisiana Medicaid’s “Netflix” model.
Yes, these developments contributed to the long game required to transition the American system of care to a better and more affordable healthcare system. Yes, we are far from done. But let’s appreciate progress when it happens.