Another year, another damning report for American medicine. In August, the Commonwealth Fund ranked US health care last among 11 of the world’s wealthiest nations (the seventh time in seven reports since 2004).
Compared to its global counterparts, the United States has the lowest life expectancy, the highest infant and maternal mortality rates, and the most preventable deaths per capita. Worse still, Americans are spending twice as much on medical care as their international counterparts in exchange for these rock bottom clinical outcomes.
Congress is unlikely to solve the problem given the dysfunction that plagues Congress and the partisanship that characterizes any possible government solution to our health problems. However, the good news is that Americans can have better access to excellent health care, as well as effective social programs to combat homelessness, food insecurity, obesity and other leading causes of disease by asserting more industry power to fight industry power.
Cue American employers, who currently provide health insurance to 155 million Americans, nearly half the country. Companies are tired of seeing their coverage rates increase by 5-6% every year. In the absence of a legislative solution, the only recourse for US employers is to completely redo the healthcare reimbursement model.
Today, approximately 90% to 95% of healthcare providers in the United States (doctors and hospitals) are reimbursed on a “fee-for-service” basis, and are paid for each new test, procedure and treatment, whether or not they help patients.
This arrangement drives up health care costs with little or no clinical improvement to demonstrate. Of course, when doctors and hospitals are rewarded for doing more (rather than doing better), that’s exactly what they’re doing. They buy and advertise multi-million dollar surgical robots that barely move the needle on patient outcomes, and they recommend expensive treatments that often prove ineffective. In fact, one study found that one in four dollars spent on health care is wasted.
Unlike fee-for-service, some of the nation’s top healthcare providers rely on an alternative reimbursement model called “capitation.” From the Latin caput, which means “head”, capitation refers to a “tariff per head”. Concretely, it works as follows: a payer (insurance company or self-financing company) pays a group of doctors and hospitals a fixed, annual sum, per patient, paid in advance for all health care services rendered every year.
At Kaiser Permanente, a large health care system where I served as CEO for 18 years, capitation has helped our clinicians limit unnecessary expenses, reduce medical costs, and earn the #1 quality rating in the nation. both the National Committee for Quality Assurance and Medicare. When physicians are incentivized to do better (rather than more), that’s what they do. They achieve higher rates of medical prevention, reduce complications from chronic diseases, and commit fewer medical errors.
As a result, patients who receive care through organizations such as Kaiser Permanente are 30-50% less likely to die of heart attack, stroke and colon cancer than patients from the rest of the country. If every health care provider in the United States matched even the low end of these outcomes, we would not only save billions of dollars per year, but we would also save over a quarter of a million American lives each year. .
The benefits of capitation don’t stop there. Prepaid health systems also have natural incentives to invest in “non-traditional” health care programs, aimed at addressing the social determinants of health, thereby delivering the kinds of public health benefits seen in countries like Norway and the Netherlands.
In Pennsylvania, Geisinger Health is providing patients with free transportation to doctor’s appointments to remove barriers to obtaining medical care. Geisinger also runs a weekly food program for patients with diabetes, offering fresh fruits, vegetables, lean meats and whole grains to support healthy eating habits.
The Mount Sinai Urban Health Institute sends community health workers to the homes of asthma patients to help address environmental triggers of the disease, such as dust and second-hand smoke.
Finally, Kaiser Permanente leaders recently partnered with community leaders in Oakland to invest $25 million in housing for the homeless, because they understand that reliable shelter is essential for better health.
Of course, no healthcare solution is perfect, and capitation has its downsides too. Americans like to choose their doctors, for example, but capitation systems rely on a tighter network of doctors and hospitals to maximize the efficiency and effectiveness of medical care. Meanwhile, doctors fear losing revenue if patients’ medical needs exceed available prepaid funds. This fear prevents many independent providers from joining a funded group.
Therefore, the move from fee-for-service to capitation in the United States will only happen after a few cost-weary companies start requiring or providing it. Once other employers learn of the quality improvements and lower costs, they will follow. And when enough companies join in, the momentum will build and our nation’s health care system will be well on its way to becoming the best in the world.
Robert Pearl is a Clinical Professor of Plastic Surgery at Stanford University School of Medicine and on the faculty of the Stanford Graduate School of Business. He is a former CEO of The Permanente Medical Group.
©2021 Le Point d’Appui
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