REDUCING HEALTH CARE COSTS: DELIVERY VS. FINANCING APPROACHES


by David Gimlett


Pay for Performance, Accountable Care Organizations, and Managed Care promise to reduce health care costs and improve outcomes. They could very well succeed, but not in the U.S. Why? Because they address health care delivery, not health care financing.


What's the difference? Delivery determines how we pay providers. Financing determines which patients participate, who pays, and how we collect.


The many delivery systems used in the U.S. (e.g., fee for service, capitated payment, salaried physicians) are used by other industrialized nations. However, no other nation uses our uniquely dysfunctional private insurance business model. What is the result? In spite of our attempts to offer better delivery systems to patients who get care, millions of Americans lack access to any care at allat least not until the acuity of their deteriorating health drives them to emergency rooms.


Every other industrialized nation provides better health care to more people for less money than we do. What separates our American failure from these successful health care systems is our financing system, not our delivery system.


To a patient without access to health care, the delivery system is irrelevant.


Successful financing systems in every other industrialized country have three common characteristics not seen in our American model: (1) universal access to comprehensive care without discrimination against the sick, poor, or unemployed; (2) encouragement of patients to seek health care without financial penalty; and (3) financing by publicly accountable, transparent, not‑for‑profit agencies.


A health care system containing all three characteristics but using only one publicly accountable, transparent, not‑for‑profit financing agency is called "single payer." Single payer systems in the U.S. and around the world utilize a variety of delivery systems, all with good results. Our American insurance model utilizes that same array of delivery systems, but with poor results.


This should be no surprise. American insurance companies are motivated primarily to avoid sick patients. After all, no company can stay solvent offering comprehensive policies at affordable prices to people who might need care. The practical application of this immutable business fact is private health insurance companies sell policies primarily to the working wealthy, to the exclusion of the unemployed poor. Mark Bertolini, CEO of Aetna insurance, neatly summarized this strategy: "Margins over Market." An insurance executive's ideal market is small enough to include only those patients sufficiently wealthy to afford policies and sufficiently healthy not to need care.


Delivery reforms can reduce costs and improve outcomes only for patients with access to care. Patients without access continue to embarrass our public health record and inflate our costs by their desperate attempts to get care through emergency rooms; all this despite improved delivery systems to other, wealthier patients.


If the U.S. wants to provide better care to more people for less money, we must learn three rules from successful health care systems:

1. If you want comprehensive care for more people for less money, reform the financing system.

2. If you a dramatic reduction in costs without compromising quality, reform the delivery system.

3. If you want Rule #2 to work, you must first apply Rule #1.


Delivery system reforms leave our dysfunctional financing system intact. This is a fatal error, in more ways than one. There are no examples of any delivery system anywhere providing better care to more people for less money in the absence of a functional financing system.