Health reform must focus on incentives to cut costs

Health reform must focus on incentives to cut costs

Summary: The real beauty of the Affordability Model is that it offers minimalist steerage. It implements a (relatively) simple, straightforward incentive, and then allows the market to innovate to achieve the desired results.


Health care reform advocate Brian Klepper is getting depressed.

The  bill now moving through the Senate is all about who pays for health care, he writes, and not about what we should be buying.

Changing the financing model alone probably won't fix health care. What's needed - what is critical right now - are changes to the ways health care is supplied, tooled, delivered, managed and reimbursed, independent of any health plan's sponsorship and legal structure.

Who has the answer?

Klepper says it's Bob Laszewski (right, from his Healthpol Web site) a policy consultant and former insurance executive.

Laszewski's health care affordability model focuses on the delivery system, not finance. It uses tax incentives to change demand to what we need rather than what the present system wants to give us, Klepper writes.

It's pretty simple.

Insurers would first offer any plans they wanted, with employers and employees free to buy any plan. But over three years plans that did not meet national goals for lowering overall costs would lose their tax preferences.

Meanwhile, Medicare would track the successes of private insurers in holding down costs and follow those best practices, he writes.

Market incentives have to change, Klepper writes, in favor of doing what we know reduces costs as opposed to standard fee-for-service, where the incentives are to increase costs.

Writes Klepper:

The real beauty of the Affordability Model is that it offers minimalist steerage. It implements a (relatively) simple, straightforward incentive, and then allows the market to innovate to achieve the desired results.

Klepper expects everyone in the industry to oppose Laszewski's plan, because over time it shrinks industry revenues, but adds they ought to favor it because it provides a sustainable economic model with minimal government interference in the market.

How do you like it?

Topics: Health, CXO, IT Employment

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  • Changing who pays for health care

    is precisely what is needed to cut costs. The only problem is, who pays
    for health care needs to be you, and not someone else. As long as we
    simply shift who the "someone else" is, the problem will never get fixed.

    You want to cut a huge cost in health care right now? Eliminate the
    hassles with insurance billing. Make medical insurance like all other
    kinds of insurance. Something you buy against the unexpected. Right
    now, it's something you buy against the inevitable. Modern health
    insurance is like having insurance for groceries. Pays $500 a month, and
    you can visit the grocery store twice a week and take home 100 pounds
    of food for a $20 co-pay. It's asinine.
    • Wrongheaded thinking

      The fact is that visiting the doctor at some
      point in the future for some illness or
      something else IS inevitable, period and done
      with, even for someone like myself with the
      BEST health!

      So, no, we should NOT make medical insurance
      something that you buy 'against the
      unexpected'. The model we have right now and
      which Europe has done us one better on by
      better than the system that you are suggesting.
      • Both you and FRGough miss the point

        Cost increases with Medicare, which is paid for by the taxpayer, are in line with increases generally, and there are wide variations based on the incentives within a community for doctors to sell services (i.e. -- when they have skin in the game).

        The point here is that we need financial incentives which put downward pressure on prices and a market system that will let people compare the care they get at those prices.

        If everyone is forced to conform to a pricing regime in order to maintain their tax incentives, then maybe Consumer Reports can do the rest.
    • Wish you were right. You are not

      Where is the price transparency? Where is the ability to compare costs and benefits in the health care system?

      What if you have a car crash? Want to haggle with the ambulance driver?

      While what you say makes a lot of sense as political rhetoric, and I agree with you in many ways, what you say is also impractical.

    • Right on!

      Exactly right. Removing the consumer of services from the provider of services put us in this mess.

      No one has car insurance for oil changes and all of us seem to be able to maintain cars in running order. To think people would treat their healthcare services different than other basic services shows how much idiocy this society is willing to accept.

      Get the government and trial lawyers out of healthcare and you'll see prices stabilize and quality of care rise.

      Does anyone really want FEMA running healthcare??? Think about that. What makes people optimistic in the competency of career bureaucrats?
      Michael Perkins
  • Not impressed

    What I see is insurance companies needing to cut
    their costs in order to keep tax breaks. So what is
    the easiest and fastest approach to cutting costs?
    Delay and/or deny.

    Seems to close to HMOs in terms of patients
    getting treatment, and I believe HMOs should be

    If you want to cut costs there are two major things
    we can do that can be effective.

    First recognize that our costs are increased to
    cover those who cannot pay for medical care.
    That increase can be eliminated is there is a
    universal plan at a core level.

    The second thing that needs to be done is to
    maximize the use of tests and equipment that is

    A good example is the A1c blood test for diabetes.
    Major screening efforts could identify and start
    treating diabetes patient early - before the
    expensive treatments & care starts. Testing all the
    kids in a diabetic's family might just be the start
    of reducing the overweight/diabetes problem in
    our schools - because of earlier diagnosis. I
    believe that early detection on a wide scale will,
    over time, reduce long term treatment costs as
    well as difficult problems for the patients.
  • A Grave Misconception That Plays Right Into Insurance Company Interests

    Ken_z understands well - if insurance companies need to reduce costs to keep tax breaks, they will simply resort to increasing the frequency with which they already exclude, delay, deny, underpay, and terminate benefits for legitimate claims.

    This concept of cost incentives is the worst disaster that could happen to the public and a boon for profiteering insurance companies.