The American healthcare model, and the US in general, is going through considerable changes as an industry and country, trying to find ways to simultaneously lower cost, deliver high quality care for individuals, and to care for populations of people. This 3-part goal has been called the Triple Aim, coined by the Institute for Healthcare Improvement.1
The cost of healthcare in the United States is one of the most expensive in the world. Many researchers and economists like to make comparisons of the US model of care to the rest of the world. In many ways, it is an unfair comparison because they compare healthcare independently of the context of the country’s economic, social, racial, and constitutional makeup. Nevertheless, the cost of healthcare in the US is a staggering $3.8 trillion or 17.7% of GDP in 2019 and has a 4.65% rate of growth.2
In efforts to achieve cost control, the healthcare industry has gone through many iterations of the newest and latest formulas to deliver it. Most of the formulas have been unsuccessful, including the period with HMOs. HMOs, for a while, were the best and latest model, but as was discovered, their answer was to restrict services which shut many people out from receiving any care at all.
In the 2000s, President Obama enacted the Affordable Care Act, aka “ObamaCare”, which – as it turned out – wasn’t so affordable, and although President Obama promised, “If you like your doctor, you can keep your doctor…”, that was not true either.
There are, were, and will be many attempts to control costs and deliver high quality care in the US. But why is it so difficult to achieve the Triple Aim? It’s for the reasons stated earlier: the comparisons are unfair. This isn’t an excuse – just the facts. The US is not a monolithic country like the Scandinavian countries, nor does it have a socialist or communist government that dictates what and how healthcare services are to be distributed. It is a country founded on the principles of free enterprise, enforced by the US Constitution, and we also happen to have 50 independent states. All of which makes finding the right formula – nationally – difficult.
Value-Based Care versus Fee-for-Service
Fee-for-service (FFS) healthcare is a simple model of care that allows for healthcare providers to get paid for the services delivered for the care provided. This is the good old fashioned American free enterprise model. Or is it? Unfortunately, when it comes to healthcare delivery, it is not like buying an appliance or any other commodity because it is flawed in that it doesn’t guarantee the best service, but nevertheless, is expensive. FFS requires lots of volume of patients to be seen, lab tests to be run, but with no guarantees of preventive care, nor does it control admissions to Emergency Departments, hospitalizations, or senior care facilities, etc. Additionally, one should keep in mind that the American healthcare model does not meet free market expectations. This is because healthcare payers in the US control reimbursements, which is not free market pricing. For example, if a doctor charges $100 for services provided, the payer will only pay the doctor $35-$40. With this kind of business, what do you think someone is going to do? Find a way to make up the difference. Thus, the volume of patients seen.
FFS is promoted by the very entities that want to control costs: the payers, and especially by the largest payer of them all – the government, in the form of the Centers for Medicare and Medicaid (CMS). They do not follow any logic or understanding of doctors and what and how we provide care, or the progression of diseases or its care. However, one day they began to figure it out, pay more for better preventive care that has a measured, focused approach, which is the achievement of the Triple Aim. Value-based care (VBC) was born.
“Value-based healthcare is a healthcare delivery model in which providers, including hospitals and physicians, are paid based on patient health outcomes. Under value-based care agreements, providers are rewarded for helping patients improve their health, reduce the effects and incidence of chronic disease, and live healthier lives in an evidence-based way3.”
Here are the benefits for each industry sector:
- Patients: benefit by having their diseases managed better, resulting in fewer doctor’s visits, fewer medical tests, less money spent on medications, declines in admissions to hospitals, Emergency Departments, and senior care facilities.
- Providers: deliver higher quality care, which increases the value of care and not volume of care. Additionally, and finally, providers get paid appropriately for the value of the care provided. It allows for more and better innovations of care without being penalized.
- Payers: have more control over costs and reduce their fiduciary risks. Overall, healthier people means a healthier population with fewer higher costs, e. g. all types of hospital admissions. Payers are better able to control efficiency for chronic conditions.
- Society: overall, healthcare spending is less because the population is healthier. Therefore, for the country, value-based care has the promise to significantly reduce overall costs spent on healthcare.
As a consumer, you are looking for healthcare delivery models that use the value-based care model rather than the fee-for-service method. If you aren’t sure what model your provider uses, ask them. And, if their answer has a lot of medical jargon that you don’t understand, ask them to explain it as though you were in the 5th grade. Above all else, get understanding.
- The Triple Aim: Care, health, and cost. Berwick DM, Nolan TW, Whittington J. The Triple Aim: Care, health, and cost. Health Affairs. 2008 May/June;27(3):759-769. http://www.ihi.org/resources/Pages/Publications/TripleAimCareHealthandCost.aspx
- NHE Fact Sheet. Historical NHE, 2019: https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NHE-Fact-Sheet
- NEJM Catalyst. What Is Value-Based Healthcare? https://catalyst.nejm.org/doi/full/10.1056/CAT.17.0558