With a new president and Republican-led congress, a dramatic change to the healthcare landscape is imminent. Whether the Affordable Care Act is repealed entirely or drastically reshaped, the reality is that the cost of health care is a real issue that must be addressed. Recently, it was announced that health insurance premiums for a mid-tier plan on the national health insurance exchange have increased by 22 percent.
Although there remains a great deal of uncertainty surrounding the goals and priorities of the Trump administration, it is clear that government spending and regulation will be reduced in favor of more market-based solutions. These activities will increase pressure on commercial health plans to lower health insurance premium growth and for providers to lower costs. Medicare and Medicaid programs will need to continue to explore innovative ways to reduce costs, improve outcomes, and increase value.
The basic problem with many current health plan solutions, whether on an exchange or through an employer, is that they combine three distinct solutions—providing primary care access, providing true insurance, and providing specialty care access— into a single, complex product.
Access to primary care. The typical approach to primary care access is that a patient purchases a plan that allows for a set number of visits annually and a set copayment level for each primary care or emergency department visit. This approach, in essence, amounts to a purchase of a limited number of subsidized services rather than actual insurance.
True insurance. Actual insurance typically kicks when the beneficiary requires protection from significant financial exposure in the event of a catastrophic accident or other type of costly healthcare event.
Access to specialists and hospital care. Health insurance selections are made annually, but patients are not likely to be able to anticipate their specific specialty care needs over the next 12 months. Meanwhile, further complicating things, it’s typically up to the patient’s primary care physician to dictate which specialists the patient will be referred to down the road.
Many people are not well served by this three-pronged approach. As with most things we buy, consumers should be able to create a customized solution that meets their specific needs.
A Custom Approach
The best way to create customized healthcare insurance is by taking each element individually.
Primary care: open access and transparent pricing. In the past few years, there has been a proliferation of new, more easily accessible primary care options. These options now include a growing number of urgent care centers, walk-in clinics at places like CVS and Walmart, and telehealth solutions. The cost of these options varies greatly, even for similar services.
In a consumer-friendly primary care product, consumers can make informed decisions about where and how they want to get the primary care that’s best for them. If someone wants to get primary care at a branded, high-priced academic medical center, those prices should be reflected in the premium and copayments he or she pay for the primary care portion of the benefit design. If the consumer prefers a community-based physician, supplemented by a local urgent care center, then his or her primary-care-related premiums and copayments should be much lower.
Customized catastrophic coverage. Catastrophic coverage is a basic aspect of any insurance product, and it comes with a simple trade-off: How much do I want to pay in monthly premium to insure against big losses if something bad happens down the road? One buyer may want to have a higher deductible and lower premiums because he or she thinks a bad event is unlikely and has the financial reserves to cover the cost if it does happen. Another buyer may be willing to pay a higher monthly rate for the security of knowing he or she won’t have any big financial surprises, no matter what happens. How best to design catastrophic coverage is a highly personal decision, and one that cannot easily be solved with a few one-size-fits-all solutions.
Bundled specialty services. The key to creating a more consumer-friendly, lower-cost, decoupled insurance product is the emerging model of bundled care for specialty services. In this approach, a clinical expert serves as the point person in a patient’s care experience, managing every aspect including the medical care, costs, and complications that may arise.
Consider, for example, a standard hip replacement procedure. In the traditional, fee-for-service model, the total bill for a Medicare patient averages about $27,000, which includes payments to many different healthcare professionals and facilities. And this approach includes many hand-offs of the patient. It’s nearly impossible to deliver patient-centered care that is cost effective through this approach.
In a bundled care model, a surgeon or hospital care manager is responsible for the entire process including the care, outcomes, and costs. For a patient undergoing a hip replacement, that process includes preoperative visits, hospitalizations, rehabilitation, and other services as needed; the surgeon is responsible for any complications or readmissions that may arise. Through in-depth analysis of these procedures, across a variety of healthcare providers, an appropriate total fee is selected. And just as patients should be allowed to select a more expensive primary care provider if they choose (bearing the responsibility for the increased cost), they should be allowed to select specialists in a similar manner.
The result of this bundled care approach is consistently lower costs and improved, more coordinated care. In addition, this model has the effect of empowering consumers: Armed with the right information, patients can make informed decisions about their care.
Rapidly increasing health insurance premium prices have been a problem for a long time, and sometimes it seems like there is no end in sight. By approaching healthcare benefit design in this way, however, it is possible to design benefits according to each consumer’s specific needs, while significantly lowering healthcare costs and contributing to lower premiums.
Steps for Moving Forward
The question isn’t whether healthcare insurance needs to evolve, but rather who will assume responsibility for the process of shaping the products of the future. Patients cannot and should not carry the burden alone. Although patients engaged in their own health are a key component, healthcare professionals and payers jointly must lead the way in transforming how best to provide healthcare coverage that meets the needs of consumers.
Specifically, healthcare administrators and executives should take the following actions.
Follow Medicare’s lead and increase the adoption of specialty bundled payment programs into the commercial health insurance market. We have seen significant improvements in the cost and quality of specialty care in these programs; it’s time for health plans and self-insured employers to adopt them as well.
Expand the number of specialists and health systems that can participate in a bundled payment contract. Currently, there are about 2,500 providers across the country participating in these programs. Healthcare leaders can remove the barriers to entry for thousands more clinicians.
Work collaboratively to introduce innovations in coverage. Engage in more experimentation with developing health insurance products that more closely match individual consumer needs in primary care, catastrophic coverage, and specialty services.
Empower patients to make informed decisions. Create healthcare benefit design structures that provide incentives for consumers, through variable deductibles and copayments, to choose the highest-value providers that most closely match their specific needs and goals.
Conduct a bundled payment readiness assessment. The success of a bundled payment program depends on numerous factors that affect patients, providers, and payers. Prior to launching a bundled payment program, leaders should conduct an in-depth assessment to determine how best to effective tailor the program to the unique needs of the targeted patient population.
Dave Terry is co-founder and CEO of Archway Health, Boston.