Why the importance of value-based care will continue to soar

As reimbursement tightens and puts pressure on providers, they’ll need information technology and more data to successfully restrain costs under a single payer system or any other payment approach.

Relatively unnoticed because of congressional Republicans’ continued internecine disagreements over repealing and replacing the Affordable Care Act (ACA), the idea of a single-payer healthcare system is gaining some traction, and a referendum on it could loom in the not-too-distant future.

Granted, that’s certainly not the focus of the current Congress. It’s clear that the Republican leadership is working to undo the ACA, with new tax legislation containing a repeal of the ACA’s individual mandate. And some Congressional leaders are on record saying they’ll next pursue changes that will aim to limit entitlement programs, such as Medicare and Medicaid.

Still, there’s rising public support for a national approach to healthcare. According to a June 2017 national survey by the Pew Research Center, 60 percent of the American public believes the federal government is responsible for ensuring healthcare coverage for all Americans, and 33 percent favors a single-payer approach, with a single health insurance system run by the federal government.

In any scenario, any move to a different approach of healthcare reimbursement will require greater use of value-based care mechanisms to restrain the growth of healthcare costs. And to make value-based care approaches work, information technology will be needed to provide and process data to make wise, cost-efficient care decisions.

In September, Senator Bernie Sanders (I-Vt.) introduced the Medicare for All Act of 2017, with 16 Democratic senators—one-third of the party’s Senate caucus—aboard as co-sponsors, including Cory Booker (D-N.J.), Kirsten Gillibrand (D-N.Y.), Kamala Harris (D-Calif.), and Elizabeth Warren (D-Mass.).

As articulated by Sanders, Medicare for All would create a federally administered single-payer healthcare program that provides comprehensive coverage for all Americans, covering the entire healthcare continuum, “from inpatient to outpatient care; preventive to emergency care; primary care to specialty care, including long-term and palliative care; vision, hearing and oral health care; mental health and substance abuse services; as well as prescription medications, medical equipment, supplies, diagnostics and treatments.” All doctors would be in network, and there would be no deductibles, copays or cost-sharing requirements of any kind.

An overly simplistic way to ballpark the cost of a single-payer system would be to assume that the federal government would pay for the nation’s entire national health expenditures (NHE), which the Centers for Medicare and Medicaid Services projects will reach about $3.5 trillion in 2017. That would constitute a more than tripling of the roughly $1.1 trillion the federal government will spend this year on Medicare, Medicaid, the Children’s Health Insurance Program, health insurance subsidies and related spending, and Veterans’ medical care.

Single-payer advocates argue that administrative savings and decreased waste would reduce spending, generally by 20 percent to 30 percent, but such savings would likely be offset by increased demand resulting from the elimination of all cost-sharing requirements, which tend to deter overutilization of medical services.

Citing the lower per capita costs of healthcare in other industrialized countries with single-payer systems, Sanders argues that NHE would actually decrease under his single-payer plan, by $6 trillion over 10 years. Based on Sanders’ six-page white paper, “Options to Finance Medicare for All,” which outlines a dozen tax revenue-generating ideas, $16.2 trillion is the implied expected increase in federal expenditures over a 10-year period under Medicare for All.

However, the Urban Institute and Emory University economist Kenneth Thorpe, in their respective analyses of Sanders’ Medicare for All plan, both concluded that federal expenditures would increase by much more than Sanders’ estimate, and NHE would be much higher than under the present multi-payer system.

Obviously, given the potential for large projected increases in federal spending, even with the numerous tax hikes proposed by Sanders, there will be enormous pressure to curb healthcare cost inflation. And if the existing multi-payer system continues, it’s likely that the same cost-cutting pressures will be facing healthcare providers.

As shifting from the current multi-payer system to a single-payer system will not magically reduce healthcare costs and may even exacerbate the problem, value-based care will be crucial to bend the current healthcare cost curve.

For well over a decade, the value-based care movement has been experimenting and advancing quietly, while health policy debate in Washington has mostly been focused on coverage and access issues. Fortunately, there have been many encouraging examples of value-based care’s effectiveness in avoiding or decreasing healthcare costs, driven by a number of the major healthcare delivery reforms of the ACA.

According to the Agency for Healthcare Research and Quality, from 2011 to 2015 there was a 21 percent decline in the rate of hospital-acquired conditions, preventing the deaths of 125,000 patients and avoiding $28 billion in healthcare costs. In September 2016, the Centers for Medicare and Medicaid Services reported that hospital readmission rates dropped by an average of 8 percent nationally from 2010 to 2015.

Perhaps most significantly, accountable care organizations (ACOs) reduced Medicare spending by almost $1 billion during 2013 to 2015 through the Medicare Shared Savings Program (MSSP), and in 2016, 56 percent of MSSP ACOs saved money relative to their spending benchmark.

Given the significantly higher cost of a single-payer system, value-based care constitutes arguably the only workable approach to restrain the growth of healthcare spending by addressing a number, though certainly not all, of the underlying drivers of cost.

While value-based care provides financial models that reward healthcare providers for reducing cost and/or improving quality, healthcare IT serves as the enabling, data-centric engine for innovation, measurement, and process improvement. Especially under a single-payer system, that role would grow in importance as the nation’s healthcare costs would outpace economic growth even more than under the current system.

What types of IT capabilities will be needed to ensure success with value-based care? The answer can be derived from an analysis of the distribution of healthcare costs across the U.S. population. Though estimates vary, about five percent of Americans account for roughly half of the nation’s healthcare costs. These individuals generally have multiple chronic conditions and are taking numerous prescription drugs, which in turn results in below-average levels of medication adherence.

Given this high concentration of costs, information technology that enables risk stratification, care coordination, medication adherence, and patient engagement and communication will all be critical to channel patients to the most appropriate and cost-effective settings of care.

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