Affordable Care Act / Healthcare / Medicaid / Politics

Implementing a Value-Based Healthcare System


As the cost of healthcare rises, the government is pouring money into the current health insurance system to find a way to counteract this rise, and lower costs for patients. Progressive Democrats propose expanding upon the Affordable Care Act (ACA) and implementing a single payer system. The key issue with a single payer system is that it will deliver lower quality care at an enormous expense to the government. Real, effective solutions will have to address both the quality of care and the structure of health care payments, and value-based care (VBC) and coordinated care provide such solutions.


Consequences of a Single Payer System

Douglas Holtz-Eakin, President of the American Action Forum, explains the economic consequences of a single payer system, citing that a nation-wide single payer system has an estimated cost of $32 trillion in the next ten years, which is only slightly less per year than the entirety of federal government spending in 2016. But even more critical than this cost is the fact that the Democrats’ “solution” would cause the quality of care to decline. In the newly proposed “Better Deal” Democrats propose decreasing the price of prescription drugs by giving Medicaid the ability to price negotiate. Prescription drugs only account for about 10% of health care spending and the CBO has shown that giving Medicaid the ability to price negotiate would not actually decrease the cost of drugs. In fact, the report shows that the only way for Medicaid to save money on drug spending is by restricting the drugs that are covered by Medicaid insurance.


The Argument for Coordinated Care

VBC aims to tie the value and effectiveness of a medical treatment to the payment for that service. It is commonly described as shifting from paying for volume to paying for value. The goal is to administer more effective, personalized care and eliminate wasteful medical spending. A study from the Harvard Business Review found that the health care system could save nearly $1 trillion if it eliminated “clinical waste,” meaning low quality care, unnecessary testing, excessive testing, and inefficient use of resources. The health care industry stands to save a large amount of money if it can eliminate this waste, and coordinated care is the most logical approach to doing so.

A well-known implementation of VBC is Medicare’s Accountable Care Organizations (ACOs). The ACA established ACOs in an effort to lower health care costs by providing coordinated care. ACOs provide Medicare patients with networks of health care providers, including hospitals and physicians. The providers are paid based on the value of the treatment provided to the patient, and if the ACO saves Medicare money through the coordinated care program, the providers receive a portion of those savings back from Medicare as incentive for participating in the program.

An additional way to save money through coordinated care is by integrating mental health services into primary care services. The Southcentral Foundation in Alaska does this by instructing the primary physician to provide some basic mental health analysis and bring in a psychiatrist if necessary. This diminishes the stigma of mental health disorders for the patient, gives the patient access to care faster, and streamlines the entire process. From a pragmatic point of view, failing to provide mental health services costs the health care system money. Chronic diseases, such as hypertension, obesity, and diabetes are estimated by the CDC to account for 75% of health care spending and often co-occur with mental health issues. A 2012 report from Milliman cited Missouri’s Medicaid program for patients with chronic medical issues as a successful integration of behavioral and physical treatment. They found that for 6,757 patients with severe mental illness, they saved $8.3 million through their coordinated care program. Similarly, the Intermountain Healthcare Medical Group found that Mental Health Integration (MHI) clinic patients had a lower rate of growth of expenses compared to the traditional care group. MHI patients’ expenses grew 10% slower than traditional patients and found that depressed patients were 54% less likely to visit the emergency room than depressed patients in traditional care hospitals.

Coordinated care should also be encouraged for non-medical health care solutions. Currently, Medicare almost never pays for services that are not medically necessary. But if things like grab bars in retirement homes help prevent painful falls and the ensuing costly surgery and nursing home expenses, or transportation to non-critical doctor appointments increases patient compliance, then these are great investments. Health care payers and providers need to be encouraged to provide services that will prevent high cost services down the line, which is something that is not currently addressed because it requires upfront funding.


Hurdles to VBC

The main argument against a VBC is that we do not know exactly how effective it is in practice. VBC systems, specifically ACOs, have had mixed results. Some ACOs have been successful and generated savings while other ACOs did not save a significant amount of money, and sometimes even spent more money than anticipated. Generally, the older ACOs have been more successful, which could just mean that it takes more time for the ACOs to generate savings. And with no satisfactory way to measure the success of coordinated health care systems, providers lack the strong evidence they need to warrant abandoning the old fee-for-service system and adopting coordinated care instead.


Despite the inconclusive data, some ACOs have generated savings and other coordinate care programs have established common sense solutions to bring down health care costs. Single-payer is the wrong direction if we want to improve health care in the U.S., but we need to find ways to decrease spending, both among patients and insurers. Continuing to work with these VBC programs and fixing the glitches in these cost-saving strategies seems to be the most promising way to bring down health care costs.