How to Hold Down Health Care Costs

A report by the Commonwealth fund suggests strategies to hold down healthcare costs as the Affordable Care Act is enacted. Private insurance premiums for businesses and families could be lowered if multiple payers were able to negotiate to use similar payment methods and more consistent pricing under state or federal government auspices. They could align payment with efficient care and value, rather than simply passing on higher prices in consolidated markets. To ensure accountability, among health care purchasers would need to be under public auspices. The report also suggests the following:

Provider Payment Reforms
Replace Medicare’s system for determining physician fees. Hold fees constant while adjusting payment rates for services that meet specified criteria as overpriced. Only increase future payments to providers that participate in innovations in payment and delivery systems. Institute competitive bidding for medical commodities, such as drugs, equipment, and supplies.

Strengthen primary care teams for high-cost, complex patients
Change the primary care payment system to reward care management, coordination, and a team-based approach to treating patients that are covered by Medicare, Medicaid, other public programs, and by private plans participating in the new health insurance exchanges.

Bundle hospital payments to focus on total costs and patient outcomes
Allow a single payment to be made for all services provided during an episode of care involving a hospital stay for patients in Medicare, Medicaid, other public programs, and private plans participating in the new health insurance exchanges.

Adopt payment reforms with public and private payers
Require private plans participating in health insurance exchanges to incorporate alternative payment approaches, such as payment for primary care medical homes, care teams, bundled payment for episodes involving hospital care, and shared savings or global payment arrangements with networks of providers. Encourage private insurance plans in each state to negotiate health care prices that are consistent with value and efficiency — and not just pass on higher prices to consumers.

Create incentives for consumers to choose high-value care and high performing care systems
Offer a new Medicare Essential plan that provides more comprehensive benefits and better protection against catastrophic costs. The plan would include incentives for providers and enrollees to achieve better care, better health, and lower costs. Develop a value-based benefit design that encourages beneficiaries to get care from high performing care systems. These incentives would be aligned with payment reforms that give providers incentives to provide innovative care systems that improve patient outcomes.

Provide incentives for Medicare and Medicaid beneficiaries to seek care from high-value, patient-centered medical homes, care teams, accountable care organizations, and integrated delivery systems. Work with local employer coalitions to spread the same value-based approach, with positive incentives for patients in private plans.

Enhance information on clinical outcomes of care and patient experiences
Create health information technology that can do the following:
• Compare clinical outcomes from alternative treatment choices.
• Monitor patient safety and outcomes through patient registries.
• Give consumers and clinicians transparent information on costs and prices.

Reduce administrative costs, reform malpractice policy, and set targets for total spending growth
Simplify and unify administrative procedures in public and private health plans to reduce administrative costs and complexity among providers and plans. Reform medical malpractice to provide fair compensation for injury while promoting patient safety and best practices. Set spending targets for the nation as well as states, regions, and localities. Collect data so that states and localities can develop focused policies if growth exceeds targets.

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Last Updated 05/25/2022

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