Population Health: How Do We Pay for It?

Although we spend much more per capita on health care compared to other advanced nations, we do not achieve the life expectancies seen in those countries, as shown in the figure below.

In addition to the lower US life expectancy, other parameters of poor health such as obesity, chronic disease, and maternal mortality rates are higher in the United States than those other nations.

“Upstream” factors such as poverty, homelessness, hunger, low health literacy, poor education, and polluted and unsafe environments contribute to illness, which is treated “downstream.” We focus upon and do well when addressing the downstream complications of poor health, while devoting little attention to the upstream, nonmedical factors that, if addressed, would promote population health. This downstream work provides the fee-for-service revenue which sustains our health care systems. But 80% of what makes us well is unrelated to direct medical care. Health disparities result. The upstream factors, the social determinants of health, are increasingly being identified as major drivers of poor outcomes. Social inequities and systemic racism further contribute to these disparities.

Value-based care (VBC) models, which offer more substantial reward for prevention and the management of total costs of care, do attempt to promote population wellness, but participating in these models is a challenge for most health care organizations. Even cutting-edge, forward-focused accountable care organization struggle to bridge the gap between traditional health care and value-based care.¹ The health care industry is still heavily reliant on fee-for-service reimbursement despite a drive to adopt value-based care, according to Xtelligent Healthcare Media’s recent Value-Based Care Assessment.²

Being caught between these two payment models can be called the “straddle.” As illustrated below, fee-for-service payments reward fragmented piecemeal work, incentivizing the volume of work.  This is at odds with what value-based care payments seek to promote: a focus on prevention, coordination of care, and community.

The COVID-19 pandemic further revealed that health systems alone are ill-equipped to respond to a public health crisis, to withstand the adverse economic impact to FFS revenues, and to address health care inequities.³

Especially for meeting needs that have not been considered traditional health care, this challenge requires new priorities.

New models of primary care, especially for high cost high need patients, work through the Medicare Advantage program. In exchange for accepting responsibility for the total cost of care, providers gain flexibility in how health care dollars can be spent. This allows innovation to address social determinants around transportation, food, and housing. By working upstream to promote prevention and better manage health conditions, substantial savings are generated, largely through the avoidance of acute care in hospitals and emergency rooms. Those savings can allow for investment in addressing social determinants of health while still providing profits for the payers and other private organizations taking on the risk. But in recent Health Affairs blogs, Richard Gilfillan and Don Berwick question the long-term benefit of this private profit-oriented solution to addressing population health, especially because costs of the Medicare Advantage program are higher than for traditional fee-for-service payment.^4,5

The maxim: “No money…no mission” points to the elephant in the room: where will we find the resources for population health priorities? Could health care resources be shifted to public health and population health needs? Currently 95% of organizations providing value-based care refer to usually underfunded community agencies to address social needs as they are increasingly being identified during health care screening.

Are there enough dollars to pay for health care and population health? Many argue against devoting more GDP to health care. The US health care system is burdened by waste, which represents up to one-third of what we spend. Less waste in health care could certainly recover resources, which could be shifted to population health needs.

Our complicated health care payment system, with its mix of government and private payers, will not achieve value-based care goals of reducing cost while improving the health of populations without address of social determinants of health. Models promoting value-based care, working within a fee-for-service payment structure, are making incremental progress in improving population health. But the answer for how population health can best be funded, and how resources should be allocated between Government programs, public health, private payers and investors, and providers of health care, continues as our National challenge.

References:

1. Murray GF, Rodriguez HP, Lewis VA. Upstream with a small paddle: how ACOs are working against the current to meet patients’ social needs. Health Affairs 2020;39(2):199-206. doi:10.1377/hlthaff.2019.01266
2. Sokol E. Healthcare reimbursement still largely fee-for-service driven. March, 2020. Accessed November 12, 2021.https://revcycleintelligence.com/news/healthcare-reimbursement-still-largely-fee-for-service-driven.
3. Kaminski, M. and Skoufalos, A. The pandemic exposes clear opportunities for population health in the United States. Popul Health Manag. 2020;23(3). doi:10.1089/pop.2020.0071.
4. Gilfillan R, Berwick DM. Medicare Advantage, direct contracting, and the Medicare “money machine” Part 1: The risk-score game. Accessed November 12, 2021. https://www-healthaffairs-org.proxy1.lib.tju.edu/do/10.1377/hblog20210927.6239/full
5. Gilfillan R, Berwick DM. Medicare Advantage, direct contracting, and the Medicare “money machine” part 2: building on the ACO model. Accessed November 12, 2021. https://www-healthaffairs-org.proxy1.lib.tju.edu/do/10.1377/hblog20210928.795755/full/