As with everything that is pertinent to the wellbeing of the human race, healthcare has been an issue at the forefront of policy formulation and implementation the world over. It is increasingly becoming clear that health is an inalienable right and as the population becomes more aware of this, governments and relevant institutions have had to step up their initiatives that ensure that they cater sufficiently to this issue.
No country is more familiar with the quagmire that is healthcare than the United States of America. Despite spending 18% of its gross domestic product being dedicated to healthcare every year, the US still has no concrete policies in place that adequately, even moderately, caters for all stakeholders. Its healthcare system is a hybrid of sorts, with 48% of healthcare plans being funded by private funds, 28% by households and about 20% by private businesses . As of 2014, about 80% of the American population had some sort of insurance, but while that figure may seem impressive, it would only be fair to point out that slightly more than a third of the insured received insurance from federal government-sponsored programs like Medicare and Medicaid; schemes that cater to low income and senior citizens only.
U.S. Healthcare System: Fact Check
According to the Congressional Budget Office, about 26 million Americans remain uninsured . This is even after the Patient Protection & Affordable Care Act, popularly referred to as Obamacare, came into effect during former President Barrack Obama’s administration that ensured an additional 11 million Americans had one form of insurance cover or the other. Americans have no universal healthcare cover and most healthcare solutions are delivered privately.
Additionally, healthcare in the U.S. is known to be notoriously high. As determined by the World Health Organization (WHO), America’s total health spending per person in 2016 stood at a staggering $ 8, 965 while other countries in the Organization for Economic Cooperation Development (OECD) averaged at only $ 3,633 . Private or out-of-pocket spending on health is also very high, as it is estimated that Americans spent over $ 4,500 on health in the last year. Ironically, the excessive expenditure on health has not resulted in better health for Americans. The average life expectancy for Americans currently stands at 78 years, yet in Switzerland, whose out-of-pocket spending per person was estimated to be $ 3,097, the life expectancy was almost 4 years more.
The exploitatively high costs rampant in the American healthcare system can be attributed to three major factors. First, the cost of new technologies and prescription drugs has for a long time determined the cost of healthcare. Every year, billions of dollars are poured into research and development of new drugs and treatments for the plethora of ailments known to the world. And while this has genuinely resulted in some cures and better health solutions, the cost implications have been transferred to the patient. Prescription drugs are also quite expensive, with data from the Centre for Medicare and Medicaid Services (CMS) estimating that over $ 325 billion was spent on prescription drugs in 2015. Moreover, the trend is still to grow, as CMS further estimates that expenditure will grow yearly by 6% between 2016 and 2025 .
There has also been a significant rise of chronic diseases and conditions among the greater American population. The Centers for Disease Control and Prevention estimate that heart disease, strokes, cancer, type 2 diabetes, obesity and arthritis are some of the deadliest and costliest of chronic diseases known to America. Not only did they account for 7 out of 10 top causes of death in 2014, but they also accounted for 10% of the total healthcare expenditure in the last two years . Expensive health care is also attributed to high administration costs. Every player in the healthcare system from the drug and machines manufacturers, service providers, medical practitioners, insurance firms, the local and federal governments, all want their share. And as usual, the patient bears the brunt of it all.
The Value-Based Healthcare Model
Given all this, the healthcare industry has seen a lot of criticism that has propelled discussions towards the development of a value-based healthcare system, which as defined by The Economist’s Intelligence Unit, is the “creation and operation of a health system that explicitly prioritizes health outcomes that matter to patients, relative to the cost of achieving those outcomes” .
At the core of this model is the premise that payments should be made based on the quality of services rendered, not quantity. This model aims to radically advance three objectives: improve quality of healthcare, improve population healthcare management strategies and significantly reduce healthcare costs . Thus, instead of paying for the volume of services they receive, patients will only pay for the quality of services they receive that have resulted in positive outcomes for them.
As America seeks to transition from the traditional fee-for-service reimbursement model to the value-for-services reimbursement model, a lot of concerns have been raised about its viability and effectiveness. While it is an opportunity to build a system that centers on the well-being of patients rather than the profits of providers & insurers, it still presents a threat to the historical model and its benefactors. Changes will be experienced in payment procedures and quality control measures that will transfer the burden of proof to the service providers.
As a business model, much can be said about the value-based system. This model of reimbursement champions for a single-payer system, which in this case will be the federal government. Thus services will be paid for by the federal government, meaning that cost control will be high on the government’s agenda. The model will also engineer a reverse payment system, whereby instead of the patient paying for each service rendered, the model advocates for improving quality of care while increasing accountability for the price of care. This simply means that the service provider will be reimbursed when the quality of service has been proved, among other metrics pertinent to ensuring value for the patient.
What does this mean for the players in the healthcare industry? For starters, their revenue streams will definitely take a hit. As has been experienced in the traditional fee-for-service model, costs of procedures and treatments have been increasing steadily, especially so for chronic ailments and conditions. Thus, the industry was spending more to see and treat patients, yet the outcomes of these were not improving. With the value-based healthcare model, service providers across the chain will be required to prove that all the services they provided resulted in positive outcomes for the patients they treated, failure to which would result in no reimbursements.
This model will also put emphasis on data collected by service providers on their patients. For the quality of services provided to be proved, service providers will have to gather and analyze data on their patients, tracking their progress throughout the treatment cycles. This measure pushes for accountability as physicians and other service providers will have to ensure that their clients are actually improving, instead of forgetting about them the minute they walk out of their offices. Furthermore, the federal government will have a chance to control everyday decisions concerning health care and using the data collected by service providers, ensure that value is delivered throughout the entire system.
Accountability is important in every sector, more so one as critical as healthcare, therefore this will entreat the service providers to be more diligent and effective in the carrying out of their duties. Having the federal government as a watchdog is certainly enough motivation to be transparent, however, this model also enforces that the well-being of the end user, the patient, is always at the forefront of every action. This new model calls for a widespread adoption of transformative approaches that shift priorities from profit to genuine wellbeing of those in search of quality healthcare services.
Despite these genuinely positive premises of the value-based model, there are some staunch critics of the same. The American Medical Association for instance, while acquiescing to the benefits of such a model to the patients, pointed out that having a single-payer system as the model advocates for will stymie private sector innovation in the healthcare . This will slow down the great strides that America has had in the field of medicine, which will impede the progress of the very system that the value-based model purports to save. Additionally, the AMA argues that limiting the system to a single payer will lead to fewer choices for the patients, as they will only have access to service providers deemed worthy and essential by the federal government. Specialized needs and services that may seem too expensive or less cost-effective to the single payer may be denied, effectively shutting out members of the population that may need them, the AMA postulates.
Perhaps the industries to be radically affected by the changes proposed in a value-based healthcare approach system will be the insurance and pharmaceutical industries. Parties of these industries fear that with the introduction of this model, there will be “wholesale bureaucratization” of the healthcare system by the federal government . This bureaucratization, they insist, will do more damage than good to the already robust healthcare system in the country. Payments will take much longer to be processed and there are concerns that the check and balances systems to be instigated in this reimbursement models may not be as objective and prudent to serve all the needs of the players in the healthcare system.
To assess the value-based healthcare system as a viable business model is almost an inexhaustible affair. While indeed healthcare must take into consideration the quality of services provided and the value accorded to the patient, the total upheaval of the old system into this new model must be a multi-layered approach. Stakeholder buy-in is key, especially to an industry with such monumental impact in an economy as enormous as that of America. Bundled payments and sources of funding for new innovations are significant matters that must be agreed upon by all the current stakeholders. Collaboration and support from national policymakers are imperative if the development and institutionalization of this model are to be deemed successful.
That the need to shift from the volume of services given to the proper assessment of patient outcomes shows that the America has realized that healthcare can no longer be treated as a business but as a right to every citizen where quality and value reigns supreme. A single step it may seem for now, but it is a step in the right direction.
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