But so far, these proposals have only addressed one dimension of that system: insurance coverage. We must also address the high cost of care.
In 2018, healthcare spending climbed to $3.6 trillion, or $11,172 per person. Without tackling costs we will not be able to afford care for everyone. We learned this lesson over a decade ago in Massachusetts, when “RomneyCare,” a predecessor to the Affordable Care Act, required residents to have health insurance. In developing this law, policymakers, legislators, business groups and healthcare players agreed we’d address cost as a separate issue. In the following years, increases in our healthcare spending soared in comparison to the rest of the country.
To really transform our nation’s healthcare system, we need meaningful solutions to reduce costs. Moving the country further and faster to value-based payment models, where providers have aligned incentives to improve quality and manage costs, can do this. Despite concerted efforts to hold onto fee-for-service, this reimbursement model has failed us. Although it creates predictable revenue streams, it promotes overuse, fragmented care and disease-based approaches as opposed to a preventive care system, and arguably is responsible for the current cost crisis.
Payment reforms and price controls have a successful track record of controlling costs and are a sure mechanism for moving to value. From 2009 to 2014, Rhode Island required an increase of reimbursement to primary-care providers by 1% annually, with no allowed increase to specialists and a concurrent cap on hospital payment of 1% above inflation. The state’s total healthcare spending fell by more than 14%, saving more than $80 million. Regulating hospital prices, similar to efforts around controlling drug costs, could incrementally impact savings.
Payment reforms can stimulate better care through prevention, care coordination and waste reduction. Currently, waste in the U.S. healthcare system is estimated at $760 billion to $935 billion—approximately 25% of total spending. CMS and Center for Medicare & Medicaid Innovation experiments in value-based reimbursement models have stimulated investments in processes that eliminate unnecessary spending. These include using lower-cost care sites; employing analytics and population health tools to identify and treat high-risk patients before they require hospitalization; and instituting programs to improve access—and thereby avoiding emergency department use—such as telehealth, video visits and hospitalization at home. At Atrius Health, our experience with the Medicare Pioneer and Next Generation ACO models has helped us advance these approaches, saving almost $60 million over six years while simultaneously achieving high quality scores.
Social determinants and personal behaviors such as housing and food insecurity can impact as much as 70% of healthcare costs.
These are complex issues and should be part of the election dialogue, just as healthcare providers are factoring them into treatment plans. Several health systems are investing in housing and food pantries, but providers, generally, are ill-equipped to handle this alone. Truly addressing the social factors requires a systemic government effort. Savings generated by moving rapidly to value-based payment, along with other price controls, could free up a great deal of money to reinvest in addressing many social determinants.
Medicare for All and other reform proposals this election season are not panaceas. They frame a reimbursement model but leave out how to bring patients, payers and providers into alignment. Reforms emphasizing value-based care and waste reduction and addressing the social determinants can lock in durable solutions, improving care outcomes and bringing down costs.
The candidates in this year’s election have the clout and platform to advocate for these necessary changes. We owe it to our nation to do a better job. And we can.