How to Improve the Health Payment System?

 What's the best way to make sure providers are encouraged to provide the highest quality care at the lowest price? Witnesses at a Senate hearing on the topic offered different answers to that question.

"The original sin of U.S. healthcare turns out to be the decision in the mid-20th century to exclude the value of employer-based health insurance from all taxation," Avik Roy, chairman and co-founder of the Foundation for Research on Equal Opportunity, a right-leaning think tank in Austin, Texas, said at a hearing of the House-Senate Joint Economic Committee. "For every dollar a worker receives in wages, the same dollar used for employer-sponsored health insurance is worth $1.51. Over eight decades, this massive tax subsidy has driven American healthcare prices skyward. Employers and insurers have little incentive to control costs or make their workers healthy."

The Swiss Model

"We could fix these problems and many others to boot by using the Swiss model as a vision for a freer, healthier, and more fiscally sustainable system," Roy continued. "Switzerland has universal coverage, but there are no government insurers. Everyone individually buys their own private-sector plan and takes it from job to job, independent of their employers."

Matthew Fiedler, PhD, senior fellow at the left-leaning Brookings Institution's Center on Health Policy in Washington, D.C., had a different idea. "A fundamental challenge is that U.S. healthcare markets are just not that competitive," he said. "In almost half of metro areas, patients have only one or two hospital systems to choose from. Physician markets are also often highly concentrated, in part because around half of physicians are now employed by hospitals. Limited competition allows providers to demand high prices."

To tackle that problem, large steps are needed, which could include "capping the prices providers can collect, or introducing a public option that sets prices administratively, as Medicare does," he said. Wasteful use of health services also needs to be addressed; options there include increasing use of more services that reduce downstream costs, such as certain preventive or curative therapies, he added.

"Another option is continuing efforts to move Medicare away from fee-for-service payment, which may generally spill over into utilization savings among the privately insured that private insurers could not achieve on their own," Fiedler said.

Issues With the ACA

Panelists also discussed the problems with the plans on the Affordable Care Act (ACA) health insurance exchanges. "One of the design flaws of the ACA is the 'honor system' where [enrollees] estimate what their future monthly income is and then get a subsidy based on that," said Roy. "It's very hard to claw that back [if it's wrong]. It would be better to base it on the previous year's tax returns."

Rep. Nicole Malliotakis (R-N.Y.) expressed interest in incentivizing people to make better lifestyle decisions. "How do we incentivize better, healthier lifestyle choices to lower premiums, the same way car insurers do it?" she asked. "If you have safety features in your vehicle, if you don't get in an accident in 5 years, you have lower premiums ... Maybe we could do the same thing on the health insurance side, with gym memberships, wellness programs, or if you're a non-smoker."

That's actually one of the flaws in the ACA, Roy responded. "[The ACA] actually makes it illegal for insurers to charge a different premium to someone who is healthier relative to sick," he said. "So the kinds of things you're talking about with car insurance ... that's illegal in the ACA. The only thing the ACA allows you to do is charge a 50% surcharge if [the enrollee is] a smoker. That's it."

One advantage to the Swiss health insurance program "is that they allow for longer-term insurance contracts," Roy said. "So instead of merely having 1 year of insurance, you could buy a 3-year plan or a 5-year plan, and that really incentivizes the insurer to invest more in prevention, because they actually reap the rewards in that third, fourth, or fifth year."

Incentivizing the Patients

Witness Brooks Tingle, CEO of John Hancock Financial, a life insurance company, talked in his opening statement about how life insurers should have more of a vested interest in keeping their customers healthy. "The longer a customer lives, the longer those [premium] funds stay invested, and frankly, the more the insurer makes for profit," he said. "So on economics alone, the math tells us that the life insurance industry should have a vested interest in their customers living longer, healthier, better lives."

This principle is the idea behind John Hancock's Vitality program, which offers its life insurance customers tools, incentives, and rewards to help them improve their health, he explained. "Using an app, customers who choose to participate can earn points for everyday activities that correlate with better health -- from a good night's sleep and daily exercise to things like meditation, regular physicals, buying fresh produce, and taking part in early detection screenings," he said.

In turn, "those points add up to a status level, bronze, silver, gold, platinum, and that status level then drives two really important things for our customers: one, the level of premium discount they enjoy on their life insurance premium, and two, the value of a range of discounts and rewards from a variety of program partners, including discounts on healthy foods and travel," said Tingle.

The program has worked, "with 52% [of customers] with high blood pressure bringing readings within a healthy range, 45% reducing their BMI [body mass index], and 63% bringing their cholesterol within a healthy range," he said.

Rep. Don Beyer (D-Va.) asked about site-neutral payments -- the idea that Medicare and other insurers should pay the same amount for a particular service regardless of where it is provided; currently, most services provided in hospital outpatient departments are reimbursed at a higher rate than the same services provided in a private-practice physician's office.

Fiedler said that hospitals often argue that the patients they see in their outpatient departments are "much more complex" than the patients seen by private physicians, so they need a higher level of payment. "The evidence we have been looking at [shows that] for the types of services that are being targeted in site neutrality reforms, these patients actually aren't meaningfully more complex than the patients that are being seen for the same services in a physician's office," he said. "Their payments aren't higher because costs are higher. Their payments are higher because we've had two payment systems that we just failed to line up with one another."

https://www.medpagetoday.com/publichealthpolicy/healthpolicy/119099