What does the future of health insurance look like?
How good could it be?
In the 1950’s and 60’s, employers routinely offered pension plans as part of their benefits packages. They were, in effect, ‘defined benefits’ plans in terms of retirement; an employee could forecast what their income would be in retirement. With the increase in longevity in retirement and in employee mobility, it eventually became financially impractical for employers to continue to offer pension plans; instead, they reverted to retirement account products that where owned by the individual employee and went with them as they changed jobs. Since the employer’s contribution was now fixed, these could be considered ‘defined contribution’ plans.
Employer sponsored healthcare insurance is highly likely to follow the same path. Employers have already demonstrated an accelerating transition to high deductible health plans with health savings accounts, which result in the employee being responsible for the first several thousand dollars of spend (exclusive of some preventative care). While many employers enjoyed a favorable downward bend in their share of premiums, those premiums have continued to rise nonetheless. Coupled with the problems of a one size fits all approach, this lack of control over costs leaves employers in a very uncomfortable position.
The most likely next wave of change will go even further and will follow the precedent of pension plans: defined contribution health insurance benefits. Your employer will stop providing health insurance plans all together and will, instead, pick a number (probably different numbers for individual, spouse, and families, and probably less than what they’re currently paying in premiums) and increase your take home pay by that amount. This gives the employer certainty in financial forecasting, and significantly lowers their risks associated with varying consumption levels and increasing costs. The individual will then be responsible for choosing their own healthcare insurance in the public markets. And they’ll be exclusively responsible for consumption decisions.
The most significant change in healthcare insurance overall will come from the reimbursement model between payers and providers. Medicare is already experimenting with both ‘bundled payment’ models that set a price for the complete package of care. For example, providers treating renal patients get one lump sum for all care associated, and become responsible for paying for drugs and other consumables, as well as the various doctors and other staff – some of whom are employed, and others contracted. Likely soon to follow will be orthopedic procedures such as knee replacements; one payment will go to the hospital, and they’ll be responsible for paying for all consumables and associated staff members, including post surgical therapists.
Since Medicare and Medicaid combined are by far the biggest payers in the US market, and since the bundled payment model protects them from the extraordinary variations in charges under the existing fee for service model, this is an extremely attractive option. Imagine being in charge of forecasting Medicare expenses for budgeting purposes; it’s fairly easy, from an actuarial standpoint, to forecast the number of patients who will receive a procedure or treatment. But when you can’t forecast what you’ll be billed, you’re out of luck. Under bundled payments the financial risks and cost control responsibilities shift decisively to the providers. A good deal for Medicare. And given the history of commercial insurance following Medicare model changes, in addition to the commercial insurance companies benefiting in the same way, it seems like a given that commercial insurance will immediately follow Medicare’s transition to the bundled payment model.
Waste in the Old Game
What none of the above address, however, are the costs associated with consumption decisions. Specifically, the consumption of wasteful or harmful treatments or procedures. Some estimates of wasteful or harmful consumption are as high as 50% of the total spend in healthcare today.
Imagine what the future of health insurance might look like if one or more insurance co-ops teamed up with the likes of the Lown Institute, their Right Care Alliance, and the Consumer Reports’ Choosing Wisely programs? Both these and other relatively new organizations are committed to the right ‘precision’ high-value care, at the right time, under the right circumstances.
Not rationing. Just not wasting.
What should our waste goal be in the New Game?
Imagine if this work was augmented by unbiased comparative effectiveness research sponsored by NIH and executed by academic medical centers untainted by pharma and medical device industry influence? And if such a health insurance co-op marketed to individuals and families who’s values and beliefs are aligned with that of the co-op?
Could we get the waste and avoidable harm down under 5%? 3%? .05%? Especially since we’d be paying for much of it out of our own pockets?
This, my friends, might be a good future to strive for. We can all do our part to move in that direction by behaving as value based consumers today.
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