The Unsustainable Rise in Healthcare Costs

A fragmented and siloed healthcare system has resulted in unsustainable rising costs. Globally, America spends the most on healthcare out of all developed nations, at nearly 17% of gross domestic product (GDP). The next 4 countries (Germany, Switzerland, France, and Japan) spend significantly less: approximately 11% to 12% each. This additional spend does not correlate with better health outcomes for Americans when compared to other countries, indicating that there are significant efficiencies to be gained in our current system. America needs to bend the healthcare cost curve downwards. The current trajectory is unsustainable.

The Increase in Healthcare Costs Compared to Wages

Healthcare costs have continued to rise faster than wages and inflation over the past decade. Since 2010, the average family premium has increased by 55%, while wages and inflation have limped along at less than half that rate (27% and 19%, respectively). Effectively, rising healthcare costs represent an annual wage cut for the average American worker, and medical bills are cited as the primary reason for consumer bankruptcies.

Not only are commercial health insurance policies and medical bills becoming increasingly unaffordable (and potentially catastrophic) for the average worker, but Medicare, which provides a safety net for older Americans, is at risk of insolvency as well. Government actuaries have estimated that the Medicare Health Insurance fund (which funds Part A claims) could be depleted as soon as 2026 – and the shortfall is estimated at $517 billion.

The Mission to Reduce Healthcare Costs While Improving the Quality of Care

Episodes of Care, as a piece of the transition from fee-for-service (FFS) to value-based care, represent an incredible opportunity to impact the current healthcare cost curve, especially in specialty care. Episodes of Care (EoC) group related services for a patient into one “bundle” over a defined timeline, allowing payers and providers to track savings and quality against trends. Enlace Health works with payers to identify high-volume, high-quality provider groups in areas such as orthopedics, GI, maternity, cancers and others to operationalize EoC programs at scale. Additionally, Accountable Care Organizations (ACOs) use EoC analysis to help them manage specialty care within their program. These analyses highlight high-quality, efficient care providers the ACOs can confidently refer to for specialty care services.

While Enlace Health is flexible enough to support retrospective programs, we are evangelists for prospective payment programs whenever possible, as this presents the greatest opportunity to save against medical trends and improve quality. With prospective payment programs, the payer captures savings immediately because the contract rate is set up front against the market. Providers have increased opportunity for savings and quality improvements as well since they work with other downstream providers to coordinate optimal care pathways. Finally, members also have a better experience with prospective payment programs, as they pay only once upfront, and then all related care is covered under the program in the one lump-sum amount. Prospective payment programs truly offer upside for everyone involved.

Healthcare costs will continue to increase if the US doesn’t change its current behavior and move towards value-based care. This can be a daunting change for payers and systems that are entrenched in an FFS model; however, Enlace Health’s expertise and passion for value-based care, accompanied by our seamless technological solutions, make us a perfect partner to support scaling your value-based care programs.

References:

Average Family Premiums Rose 4 % in 2020, Benchmark KFF Employer Health Benefit Survey Finds

Debt.org: Bankruptcy Statistics

FAQs on Medicare Financing and Trust Fund Solvency

Health expenditure as a percentage of gross domestic product (GDP) in selected countries