Cost controls: Healthcare industry on a dangerous collision course

Two long-standing approaches to keeping healthcare costs down are on a “collision course” that could leave them both ineffective, according to a recent opinion piece in the New England Journal of Medicine. Do we have time to course correct or are we left to simply buckle our seatbelts and brace for impact?

Authors Elliott S. Fisher, MD, MPH, Dartmouth Institute for Health Policy and Clinical Practice in Lebanon, N.H., and Peter V. Lee, JD, California Health Benefits Exchange in Sacramento, Calif., said the crash can still be avoided, but it will take a significant amount of progress.

The two approaches in question, the authors explained, are the continued encouragement for providers to improve their care and the push for consumers to be more sensitive to the costs of their own care.

Signs of the first approach can be seen everywhere, from the value-based payment modifier program to the increase in accountable care organizations.

“These approaches are rooted in the notion that improved delivery of effective primary care and better coordination of patient care over time are essential to improving quality and reducing costs,” Fisher and Lee wrote.

Meanwhile, the consumer-focused approach can be seen in cost sharing, which has jumped in popularity in recent years.

“These efforts were spurred by the Rand Health Insurance Experiment, a randomized trial that demonstrated that cost sharing reduced utilization (and thus spending) with no apparent adverse health effects on the average participant but with potential negative effects on low-income participants with chronic illnesses,” Fisher and Lee wrote. “Because benefit design as a lever for constraining health care spending has been readily accessible to both large, self-insured employers and health plans serving small businesses, cost sharing has increased dramatically.”

The problem, the authors said, is that patient care is improving largely because patients are receiving better, more efficient primary care. But cost sharing is “a blunt instrument,” causing patients who aren’t severely ill to cut down on primary care visits altogether.

Muddying the waters even more is the confusing nature of health plans in many states. The authors pointed to Colorado as an example. Denver residents are asked to choose between 35 different “silver” products from 8 different plans. Fifteen of these silver products require consumers to meet their deductible before insurance kicks in.

But there is another way, the authors explained. One that may be less confusing.

“California has taken a different approach,” Fisher and Lee wrote. “As an active purchaser, Covered California, the state’s insurance exchange, opted to standardize the designs of deductibles, copayments, and other cost sharing for all its contracted health plans within each of the four tiers. The aim is to enable consumers to make apples-to-apples comparisons among plans based on cost and network composition (rather than hard-to-interpret differences in deductibles and copayments) and to ensure that consumers do not face undue financial barriers to receiving primary and other high-value care.”

Could this stop the potential crash altogether? The authors think it could go a long way.

“California’s example suggests that it’s possible to avoid a collision between consumer- and provider-focused efforts to improve care and reduce cost growth,” Fisher and Lee wrote. “Benefit designs encouraging utilization of high-quality, accessible primary care that’s supported by an effective organizational structure should help consumers better manage their health risks and chronic conditions and more effectively navigate the challenges of serious illness. At the same time, carefully designed cost sharing may help motivate patients to work in partnership with their primary care physician and others to make wise decisions about what discretionary care they truly need and want.”

Michael Walter
Michael Walter, Managing Editor

Michael has more than 16 years of experience as a professional writer and editor. He has written at length about cardiology, radiology, artificial intelligence and other key healthcare topics.

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