Insurance and PHM

A key component in the medical industry’s drive to adopt value-based care is health insurance. Although I’m not an expert on health insurance, I’ve delved into the topic a fair amount on this blog, mainly focusing on government-provided insurance like Medicare and Medicaid with only a passing reference to private insurance. This is because the big players in value-based care for years have been CMS, along with, to some extent, state-level health insurance marketplaces established under the federal Patient Protection and Affordable Care Act. 

But that unfairly sidelines private payers from the discussion, a stakeholder group who, in recent years, has been increasingly jumping on board the value-based train. So I thought now would be a good time to take in the broad sweep of how both public and private insurers are trying to lower healthcare costs by A) encouraging their beneficiaries to live healthier lives, and B) by incentivizing physicians to provide care that satisfies pre-determined health measures, the latter of which includes providing proactive care and opening up access to underserved populations. All of these aims are central tenets of something I talk about a lot on this blog: population health management (PHM).

Before we get into how PHM can help right the healthcare ship, though, it might help to provide some context to help you better understand why value-based care is fast becoming a focus of the healthcare industry. And let me say up front: although I am a critic of the U.S. health insurance industry, there are certainly bright points, as I’ll illustrate below. In addition, I try not to assign malicious intent to most health insurance entities; yes, they are often at fault for loading inhuman financial burdens onto people (as I’ll demonstrate below), but the incentives baked into the U.S. healthcare system often run in the wrong direction.

Put another way, I can understand what’s going on without condoning it. 

OK, let’s get started. According to the Alliance for Health Policy, “At the national level, the net cost of major health care programs has grown from 2.3% of Gross Domestic Product (GDP) in 1990, to 6.1% in 2020, and this proportion is projected to climb to 9.2% in 2050 absent any policy change.” Both a rise in healthcare costs and a large, aging population account for most of these costs. 

On the state level alone, the share of healthcare spending is even more daunting: according to the Medicaid and CHIP Payment and Access Commission website, in state fiscal year 2016, “Medicaid accounted for 28.7 percent of spending from all sources,” with federal funding accounting for most Medicaid expenditures.

To put these numbers in their fullest context possible, although it’s true that the rate of spending on healthcare in the U.S. has trended upward at a dizzying pace over the past few decades, some argue that these figures are rising at an ever slower rate. Some, like the health actuaries at Deloitte, have even speculated that “emerging technologies, an ability to cure and prevent disease (or detect disease in the earliest stages), and highly engaged consumers will lead to a deceleration of health spending between now and 2040.”   

That’s potentially great news for the future, but what about the here-and-now? To make the cost curve point in the right direction, we’ll need to first face the reality that despite astronomical levels of healthcare spending – and in spite of the fact that most Americans are covered by some sort of insurance (only 8.6% of Americans weren’t covered in 2020) – a remarkable number of people are still experiencing unacceptable outcomes, both physically and financially.

By now I’m sure you’ve heard that although the U.S. spends more on healthcare than any other high-income country, we come in last in many important measures. Indeed, life expectancy is far worse in the U.S. than among its peer countries, particularly for poor Americans without access to care. And not only are health outcomes and life expectancy lagging: even among those who manage to overcome these obstacles, many find themselves skipping doctor’s appointments in an attempt to avoid high costs, or becoming outright bankrupted by the exorbitant costs involved.

If you’re lucky enough to be in good health and have ready access to healthcare, it’s easy to become desensitized to facts like those mentioned above. But all you have to do is read real-life stories of healthcare-induced hardships like one that recently appeared on NPR for your blood to boil. The article features a mental health counselor and single mom of several foster children who managed to beat breast cancer, only to be left with a $30,000 bill! Mind you, this is someone with health insurance and even she has had to take on extra shifts just so she doesn’t lose her home and her family, all while trying to stay healthy. 

The article is worth a read not just as an indictment of the U.S. healthcare system, but also as a story of hope and resolve. It is a case study in “financial toxicity,” a concept the National Cancer Institute uses to describe “problems a patient has related to the cost of medical care.” Health insurance is supposed to act as a barrier against financial toxicity due to unforeseen illnesses, but in its most vital function, many plans aren’t working as advertised.

Multiply this experience across the patient spectrum, and you can see why we’re in the midst of a serious crisis. If we focus solely on cancer patients – who are by no means the only group affected by financial toxicity – we’ll see that, according to one study, “Patients with cancer are 71% more likely to experience a severe adverse financial event and 28% more likely to have past-due credit card payments than controls, adjusting for age, sex, year, neighborhood deprivation, and average baseline available credit.” And this is to say nothing of the further mental and physical problems that financial strain due to medical debt can bring on. 

To underline the problem, a recent Commonwealth Fund survey found that 79 million Americans are struggling with medical debt. A Kaiser Family Foundation survey illuminated similar issues related to healthcare costs, including that “Half of U.S. adults say they put off or skipped some sort of health care or dental care in the past year because of the cost. Three in ten (29%) also report not taking their medicines as prescribed at some point in the past year because of the cost.”

This all adds up to a shameful picture. So how can we modify a system that saves people’s lives only to plunge them into a different sort of hardship?

Enter population health management. PHM is an approach to healthcare that incentivizes proactive care, uses predictive analytics to stratify risk, encourages healthier lifestyles, opens up access to care across the patient spectrum, and endeavors to tailor care in line with health equity best practices. Pinpointing and mitigating negative social determinants of health (SDOH) is a central tenet of this approach. 

On the insurance side, PHM strategies are often built around either government-supported or private alternative payment models (APMs) that incentivize healthcare providers to deliver care congruent with pre-determined quality metrics. These metrics work to optimize health system performance, an approach the Institute for Healthcare Improvement calls the “Triple Aim”: improving the patient experience, improving the health of populations, and reducing the per capita cost of healthcare. 

To ensure that providers are deeply invested in the success of such models, an increasing number of reimbursement schemes encourage shared risk between insurer and provider. In other words, if healthcare providers can achieve favorable quality metrics while saving their health systems money, they are permitted to share in those savings by receiving a bonus payment; if, on the other hand, the providers deliver substandard care and don’t hit their cost and quality goals, they are dinged financially.

There are many flavors of APMs, from ones that incorporate fee-for-service (FFS) arrangements to ones that are completely severed from FFS. The latter type of APM, which represents the farthest departure from the FFS payment model, is called a Category 4 or Population-Based Payment Model. This model is subdivided into a few different models that “involve prospective, population-based payments, structured in a manner that encourages providers to deliver well-coordinated, high-quality, person-centered care within either a defined scope of practice (4A), a comprehensive collection of care (4B), or a highly integrated finance and delivery system (4C).”

CMS, along with state-level health insurance marketplaces, have been the clear leaders in APM adoption for the past decade. Some of them, like Covered California, have begun signing APM contracts that, for example, include a health equity performance measure set consisting of multiple “population health/primary care outcomes measures” which relate to, for instance, hypertension and diabetes. The goal of such a program is to reduce racial and ethnic health disparities in outcomes, and also to keep a lid on spiraling costs.

As much as CMS and state marketplaces have been the bellwethers for value-based care, private insurers have begun to catch on. Aetna, for example, has more than 2,000 value-based contracts in place which represent more than 50% of their medical expenditures, and their Accountable Care Organization product has the potential to save as much as $675 per member per year. 

In another example UnitedHealth Group is aiming to directly influence upstream SDOH by investing nearly $800 million in affordable housing across the country. This effort is “resulting in the creation of nearly 19,000 homes for individuals and families struggling with housing insecurity.” These new housing units will include health-related support services, and the company is making additional investments “in programs and partnerships focused on food, health literacy, behavioral health and social isolation” to help shore up SDOH.

As a managed healthcare and insurance company, UnitedHealth Group acknowledges that most of an individual’s health is determined by factors outside of a doctor’s control. The project is the outgrowth of a belief on the part of the group that “access to safe and affordable housing remains one of the greatest barriers to better health for many people.”

The topic of PHM and insurance is an incredibly complicated one, and it would take many blog posts to even scratch the surface. I will continue to monitor insurance industry innovations when it comes to encouraging physicians to practice higher quality care while cutting costs, and will report back on what I hear. Until then, here’s to hoping that things keep going in the right direction.

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