Managing the Risk to Payors Posed by Changing Health Care Delivery Models: Health Care Delivery Models Are Changing Rapidly, Regardless of How the Supreme Court Decides on ObamaCare Later This June. Management and Boards Must Remain Vigilant and Be Able to Respond Quickly-Or Risk Being Left Behind
Foster, Don, The RMA Journal
Pending a ruling by the U.S. Supreme Court that could affect, at the very least, the universal-coverage component of the health care reform legislation, America's health care system is on the verge of upheaval. Changing are the paradigms that have applied historically to the delivery of health care and who pays for it. And these changes are having a profound effect on the private health insurance industry.
Attempting to manage the risks created by health care providers' response to the reform, insurance companies are undergoing a radical transformation. This article takes a look at the early stages of that transformation.
The Traditional Health Insurance Market and Health Care Reform
The model that Americans have grown accustomed to is one in which independent physicians and hospitals partner to provide health care services to consumers who are largely members of employer-based group health insurance plans. These plans have reimbursed the providers through a fee-for-service payment model. Superimposed upon this model are government insurance programs--Medicaid and Medicare--that supplement or replace private insurance. Until the health care reform legislation, they were also based on a fee-for-service reimbursement model.
This traditional model has been implemented through a series of interrelated contracts between those who provide the service and those who pay for it. The employers negotiate group insurance policies for their employees' coverage and premiums. The insurers negotiate contracts with providers and also process claims. The consumer's physician-of-choice negotiates admission privileges with a hospital or hospital network. These contracts ultimately dictate the consumer's choice of physician and non-emergent hospital care.
The result has been a volume-based reimbursement system that incented providers to increase the delivery of services, while at the same time separating the consumer from the data related to the cost and price of a particular medical service or product. Who among us, for instance, knows the combined cost to the device manufacturer, the surgeon, and the hospital for an artificial knee implantation? And who cares about the price as long as it is insured?
Everyone agrees that health care costs must be contained. The Congressional Budget Office estimates that, at the current rate of increase, one out of every four dollars spent in America in 2025 will be for health care. However, health care and health insurance are not the same thing, and the public debate over the need to control the rising cost of health insurance (that is, the premiums) has focused on the number of people without health insurance and the hidden subsidy paid by those who do buy insurance. But this debate really has nothing to do with the rising cost of the underlying care itself--recognizing, of course, that there is an actuarial correlation between what is paid for the service and the premium for insurance coverage. (1)
Nevertheless, any reform of the model by which health care is delivered inevitably requires a change in the way Americans go about paying for it. This necessarily implicates insurance coverage. Accordingly, the legislation that constitutes federal health care reform seeks to:
1. Insure more people (that is, everyone).
2. Improve the quality of care and overall public health by changing the delivery system to promote prevention and wellness and by requiring providers to account for outcomes.
3. Reduce costs by moving from the traditional fee-for-service model to one that connects reimbursement to outcomes ("fee for performance"), as well as emphasizing prevention and wellness.
This is a massive change that has enormous implications for the health insurance industry. Health care reform would rein in the tens of millions of uninsured people, many of whom, from a medical underwriting perspective, are younger and healthier than average. …