Payers reimburse physicians based on volume, not value. Payer risk pools, in turn, favor well beneficiaries over sick beneficiaries. And employers, instead of employees, decide how to consume health care.
At no point do supply and demand actually transact. Rarely are consumers able to make informed decisions.
To the extent that health reform legislation realigns incentives where at least payers and providers operate closer to the same page, efficiency levels could rise.
According to the actuarial consultancy Milliman, the force driving this could be provider risk-sharing. In a recent briefing paper, the consultancy describes this as a process of re-adjusting "health plan payments, provider payments, and individual or group premiums to reflect the health status of plan members".
Think of it as two entities, normally opposed to each other, owning an economic opportunity, in this case a better, more cost effective patient outcome. By owning it, they both share in the upside—and the downside—while utilizing resources more efficiently.
"Instead of fee-for-service," write the paper's authors, "compensation may come in the form of a per-member basis, with bonuses paid depending on the provider's achievement of specified targets and goals. Savings will be shared between providers and payers according to their effectiveness and efficiency. Pay-for-performance components within this overall approach will reward improved patient outcomes as well as straightforward savings." Read paper here (PDF).
By endorsing programs such as accountable care organizations and evidence-based medicine, health reform legislation potentially eases the restraints on factors necessary for risk-sharing to take place. And with advancements in electronic health records providing key technological support, provider risk-sharing stands a reasonable—if not excellent—chance of revival after faring poorly in the 1990s.
(For information about Medicaid risk-sharing projects in the 90s, read here. These projects followed a capitation, or set fee-per-patient, payment model where health plans transferred percentages of government payments to providers based risk assumption.)
As the authors note, failure resulted from:
- poor quality measures
- insufficient documentation and coding procedures
- non-pervasive best practices
- weak information technology
- unsophisticated risk assessment techniques
Regardless, risk-sharing faces a big challenge in overcoming entrenched inertia and the fear of another disappointing failure. Both providers and payers will need to trust the new system before shedding the old one, and any number of successful demonstration projects may not motivate wide enough adoption to bend the cost curve.
Risk sharing, though, is an intriguing concept, and could easily apply to provider practices beyond the scope of government programs: concierge and retail-based care delivery, for example, where consumers align their own dollars with providers' dollars to ensure the best possible care.
Not matter what, it comes down basic economics. At this point, we can expect large government deficits and profit constraints on payers and providers to overwhelm trust and fear issues, and motivate consideration of alternative systems.
Any economic improvement or good standing, especially among providers, would likely diminish risk-sharing's chances for adoption.