How Did We Get Here? Part V

/0 Comments/in /by

In our last installment of this series, I’d like to review some of the ongoing changes in our healthcare system  and their potential impact on how healthcare is practiced in US.

First, health insurance exchanges are meant to provide everyone an opportunity to have health insurance. On the surface, this might suggest increased costs to the government since many people will receive government subsidies to buy health insurance. How, then, does this help the government save money and stay solvent? Well, many of these people are currently getting care in very expensive settings such as emergency departments or hospitals, and cost the system lots of money. This results in rise of the healthcare costs and everyone ends up paying more, including the government. By insuring everyone, the goal is that people will get preventive care and have access to the system before they need to go into the emergency departments or hospitals. This will result in lowering the overall cost of care. The Congressional Budget Office (CBO) projects that this will result in significant reductions in overall healthcare costs over the next few decades.

Second, payment reform will mean that providers will need to shift from getting paid per episode of care to payment based on the outcome of their actions. This is quite a change from how medicine has been practiced and paid for historically. Providers are used to seeing their patients when those patients feel that they need medical care. After each episode of care, be it in a clinic or in a hospital, patients and their families are responsible for following the medical instructions. Now, with the new payment models, providers need to worry whether their patients will fill their prescriptions or take them. They’ll need to identify their high risk patients, anticipate their complications, and intervene before they reach a critical stage where they may need expensive care in a hospital. How are providers dealing with this? Many are taking very measured steps toward these new care delivery models. Change is not easy but you have to start somewhere.

Let’s next talk about what providers are doing to succeed in this new world.

How Did We Get Here? Part IV

/0 Comments/in /by

So, now you are the US government, the number of people in Medicare is increasing and they live longer and get better and more expensive treatments for their heart disease, arthritis, and Alzheimer’s and you have to pay for all of it. Economic growth is around 2-3% annually, which means the tax revenue coming in is not nearly enough to keep up with the rise in healthcare costs. Well, government and insurance companies have tried many things over the years to curb the growth in healthcare costs. These include incentives for people to change their behavior so they would be healthier and use less healthcare services. Such incentives included premium discounts for not smoking, losing weight, taking their medications, and other things. Also, they tried disease management services that included focusing on certain high cost diseases such as diabetes and heart failure and making sure people with those conditions were treated well so they would have less complications. Whether these programs had any impact on the rise in healthcare costs is debatable, but what is clear is that the costs continued to rise at a brisk pace.

In the last decade, Medicare and commercial payers have been experimenting with payment models where providers are incentivized to take responsibility for the outcome and overall costs of care of their patients. The idea behind this is that only providers have the knowledge and relationships to impact the outcome of their patients’ conditions. Patients who have been reluctant to participate in disease management programs run by insurance companies seem much more open to the idea if it’s through their own doctors. Providers have to get used to a new kind of care: one that pays them to keep their patients healthier rather than by the volume of the patients they see or the number of procedure they perform. Initial data shows promising outcomes and pioneer provider institutions have shown reduction in overall cost of managing a population of patients.

Next, we can see whether and how all of the current changes may add up to increased coverage and reduced costs.

How Did We Get Here? Part III

/0 Comments/in /by

Well, it looks like big trouble for the governments who committed to providing healthcare to some or all of their population. After all, who could have predicted all of the expensive advances that would be made in diagnostics and therapeutics? How governments began to deal with this depended on how their population were insured. In European social democratic countries, universal coverage meant government was responsible for insuring and paying for everyone’s healthcare. This meant that these governments were the sole buyers of healthcare services and thus able to set prices. Therefore, price controls became the main tool these governments used to control the escalation of healthcare costs. Also, in the last decade, these governments have begun doing comparative analysis research, where they determine if the new treatments are more effective than the existing ones. If the new treatment costs more, it needs to show what justifies this price premium. This means many new treatments that are “me too” could not get premium pricing. That’s how the rise in healthcare costs has been controlled in many of these counties. In United States, these price controls have not been the norm. Most Americans have private insurance. This means that there is not one buyer for new diagnostics and therapeutics. That has made it easier for pharmaceuticals and medical device companies to commercialize their products in the United States at healthy margins. Also, competition in healthcare between providers has resulted in escalation of costs as they try to match each other in having the latest technologies and best treatments. Another factor has been the large number of uninsured Americans who use emergency departments and other expensive healthcare services result in unreimbursed costs to provider institutions. These costs gets passed on to insurance companies and eventually to all of us. All of this means double digit increases in the cost of healthcare in US for the last few decades. This is now reaching a point where it can no longer be ignored as Medicare trust fund only has a few years left.

Next, we will discuss the steps that are now being taken to bring this fast rise in healthcare costs under control.