Health and Medical News and Resources

General interest items edited by Janice Flahiff

Dump the Business Model | The Health Care Blog

Dump the Business Model | The Health Care Blog.

From the 22 January 2015 post

There are no winners in the fee-for-service game.

It’s time to toss the whole business-as-usual model — for your own good and the good of your customers.

The emerging Default Model of health care — the “consumer-directed” insured fee-for-service model in which health plans compete to lower premiums by bargaining providers into narrow networks — not only does not work for health care’s customers, it cannot work. This is not because we are doing it wrong or being sloppy. By its very nature the Default Model must continually fail to bring our customers what they want and desperately need. Ultimately it cannot bring you, the providers, what you want and need.

Take a dive with me into the real-world game-theory mechanics of the health care economy, and you will see why. It’s time to rebuild the fundamental business models of health care.

The Default Model Health Care Game

It’s a little easier to find our way around an economic model by picturing it as a game and asking: “What defines winning for each player? What does each player need to do to win?”

Health plans: For health plans, winning means surviving, succeeding and growing as a business. But there are a couple of rule changes now. Health plans used to be able to stay more profitable by pushing down their medical loss ratio (MLR — the percentage of premiums actually paid out for medical care), by “rescinding” the plans of people who cost too much, and by refusing to cover anyone with pre-existing conditions.

Now they have to take everybody, can’t toss them out, and their MLR has to be at least 80 percent (or 85 percent for large customers). So their administrative expenses, advertising, executive salaries (and the profits and stock price of the for-profits) are all tied to a percentage of the actual costs of health care. Hmmm. If they were confronted with a way to make health care cost half as much, would they be interested? Would they make it a top priority? No. They have no incentive to actually drop the real costs of health care.

….

While I agree with the author of the above article, the selected related articles do include other viewpoints.

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January 26, 2015 - Posted by | health care | , , , ,

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