The way we pay for health care in the US is complicated. Sometimes the patient pays the provider directly, sometimes the patient pays an insurance company, and they pay the provider, and other times the government is involved in paying. This primer explains how the way we pay for health care–payment reform–is changing in Colorado and around the country. These changes can impact the patient experience or reduce cost, by changing what we pay for.
Right now, we generally determine the amount that is owed based on the number and types of services a patient received. Services include things like lab tests, visits with providers, x-rays, as well as procedures such as surgeries and blood transfusions. This system of billing for services is known as a fee-for-service (FFS) payment model, and it dominates health care in our country. In a fee-for-service model, providers are paid for each service they administer, which means that they have the incentive to increase the number of services provided. If providers administer fewer services, they are paid less, so there is little incentive for them to deliver care more efficiently. Furthermore, the emphasis on providing individual services under FFS frequently causes providers to focus on acute concerns and individual components of care without adequately appreciating their relationship to a person’s health and well-being as a whole. Some have described FFS as the single biggest contributor to both the excessive use of services and the fragmentation, or the lack of coordination between a patient’s multiple providers, of the US health care system. Although FFS may have aligned with the priorities of the health care system in the past, it is increasingly agreed that this system falls short of meeting today’s health needs.
Payment reform is the movement to change what we pay for in health care. Instead of paying for services, we should pay for good value: health care that improves our health and costs less. However, payment reform can be confusing, technical, and intimidating. It typically occurs at the intersection between health insurance (either private health insurance, like UnitedHealthcare or Aetna, or public health insurance, like Medicaid or Medicare) and health care providers. This is where incentives can be created for higher value care.
Because FFS can contribute to inefficiency in our health care system, recent reforms have aimed to replace the FFS model with ”alternative payment models.” These models attempt to change financial incentives for providers so that they deliver better quality care for patients and cut costs. There are four common alternative payment models, and each has a different impact on patient experience. However, given that there is a lot of variation in how each model is implemented, it’s difficult to say that one is better than another.Payment Reform Primer