Newtown, CT – February 6, 2015
Towards the end of the 19th Century, in most of the western world, there was a gilded age of sorts, a period of general peace and prosperity during which the rise of democracy and new technologies led to the rise in prosperity of most average citizens, not simply the ruling classes. It was generally referred to as the Belle Époque. The changes brought about in U.S. healthcare during the last decade can potentially lead us to a new gilded age, one we’re calling the Well Époque.
Over the past ten years, the by-product of health plan benefits that have high deductibles and co-insurance is the current transparency revolution, a revolution very few status quo incumbent wants to see happen. The outcome of that revolution has yet to fully play out, and the forces of the status quo may yet prevail (especially if the transparency tools don’t increase their accuracy) but we can start to see the outline of a true market for health care services emerge. To a large extent, this is reminiscent of the financial industry’s revolution wherein we moved from local banks and savings accounts to on-line day trading and mutual funds. The defined contribution of retirement accounts created the right environment for that revolution. Something similar now has to be done for health benefits.
The problem revolves around unilateral fee-for-service (FFS) deductibles and co-insurance; that is, a layer of cost exposure for consumers that stretches across covered benefits and that does not reflect clinical value. Current deductibles and co-insurance are blunt tools that have virtually no clinical nuance in their design and have outlived their usefulness. Once the deductible and/or the out-of-pocket max is met, the consumer-patient is back to being insensitive to price, so that even with accurate and reliable price and quality transparency, consumers wouldn’t be able to make much use of it.
So, what if we made the deductible layer smart? What if, instead of a single deductible that’s undifferentially applied across all services, the plan member had a health plan benefit that would feature a multilateral deductible, built on episodes of care, fine tuned to clinical nuance, and designed to improve patient and provider incentives. With multilateral deductibles, it would make sense for providers to compete on price and quality because consumers would not only have access to cost and quality information, but the means and incentives to put them to good use. Providers offering warranties would have a distinct advantage, and those combining that with average or below market average prices would win big. Imagine that, a multilateral benefits system that sparks provider competition and from which consumers can actually make money for making wise decisions.
In our field work implementing innovative payment models, we’ve encountered many provider groups and health systems who want a more rational payment system and are willing to make painful changes to accommodate value-based payment. But they have one big pushback: why should they take on all that risk if employee benefits stay the same and fail to pair patient incentives with provider incentives? It’s an excellent question. Providers, even “best in class” providers, can only do so much to improve population health (and the accompanying costs). Employees as consumer-patients must also have a smart stake in the game so that, from all this, a true market for health care services would emerge.
And with the emergence of a genuine market for health care services, we may observe something even more profound. For decades our third-party FFS health care system has been a net drain on national wealth, especially that of the middle class, and has become the country’s third largest source of unnecessary deaths and injuries. A tragic state of affairs. But the market-based system we described offers the prospect of transforming our health care system from a net drain on wealth to a net creator of wealth, or a “Well Époque”, where delivery system reengineering and healthy behaviors make individuals, providers and companies better off. We actually have a unique opportunity to arrive at something long espoused as a goal for any productive human, but that along the way to these modern times we forgot: Health is Wealth.
Note: A more comprehensive description of these concepts can be viewed at HFMA Magazine.