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STAT: How To Fix the Two-Tier U.S. Health Payment System

By Amol NavatheRisa Lavizzo-Mourey and Joshua Liao for STAT How the U.S. pays for health care is neither efficient nor fair. Despite spending an astounding 20% of its economic output on health care, the U.S. ranks poorly among high-income countries in national health system performance. To make matters worse, the payment system for this care has ingrained systematic health inequities for historically marginalized groups like people of color and low-income Americans. Many individuals in these groups and their families are covered by public health insurance programs like Medicaid or the Children’s Health Insurance Program. These often pay doctors and hospitals only a fraction of what private insurers pay for the same care. Together with structural racism, this payment disparity creates what is effectively a two-tier system for the haves and the have-nots. The solution seems simple: Pay more. But even if policymakers were to increase payments for care provided through public insurance, they would flow through a system that pays doctors and hospitals for every visit or procedure in a piecemeal, fragmented fashion that doesn’t address entrenched structural inefficiency and inequities. Simply paying more is also fiscally and politically challenging, as reflected in stalled legislation to create parity between what primary care doctors are paid for taking care of Medicaid and Medicare patients. To level this tiered system, the U.S. needs to fundamentally revamp how it pays for health care. Over the past decade, government and private health insurers have been trying to do just that with the “big idea” of moving toward a value-based approach that pays more for good results — cost-efficient, high-quality care that delivers better health. Value-based payment has produced early wins by improving quality with modest reductions in health spending for populations assigned to certain clinicians as well as people hospitalized for surgery or medical illness. But low-income Americans may not experience these benefits. Low-income Americans frequently struggle with unstable housing, inadequate access to healthy food, limited transportation options, and more. Some also face barriers or structural discrimination as a result of living in rural areas or identifying as racial or ethnic minorities. These issues can complicate an individual’s health, making good outcomes harder to achieve and medical care more costly. A value-based payment approach based on costs and health outcomes can create conflict for doctors and hospitals, pitting their intrinsic motivation to care for all patients equally against the fear that lower-income patients will hurt their financial bottom lines or, in the most extreme case, put them out of business. Scary financial scenarios may prompt doctors and hospitals to shun low-income patients such as those on Medicaid to avoid being on the financial hook for their care. The result: widened inequities.. Read more at STAT News.