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For Policymakers: The Public Payer Meets the Marketplace
Balanced
Choice—our purpose:
We are working to advance sustainable, quality health care reform. We
believe that a public plan
would be improved and gain greater political support with the two Option
choices and Balanced
Funding Mechanism features promoted by Balanced Choice.
The compelling aspects:
We are working to advance sustainable, quality health care reform. We
believe that a public plan
would be improved and gain greater political support with the two Option
choices and Balanced
Funding Mechanism features promoted by Balanced Choice.
Balanced Choice combines ideas from public payer proposals and market
models to include
patient choice and provider freedom to practice profitably. This combination
retains the
advantages of public payer plans, and increases potential political
support by:
-
Attracting endorsements from patients and providers including those
who have
resisted traditional government programs, citing the lack of market
forces
-
Reducing
costs by adding reasonable tools for cost control
-
Making
a public payer system more attractive by increasing patient choices,
participation, and responsibility.
The
Summary of Balanced Choice:
Balanced Choice modifies a one payer system. The one payer system simplifies
billing,
reduces cost shifting and decreases administrative expenses. This could
be a Medicare-for-all
type that includes everyone in the single risk pool. Or it could be a
one payer public plan that
operates parallel or in competition with private plans.
Basic to fiscal responsibility is transparency and readily
available information about costs. All
of the cost numbers would be specific and available at the time medical
decisions are made.
Transparency only works to contain costs, however, when choices are available.
Balanced Choice adds two interrelated choices. The Standard-of-Care
Option reimburses
providers at an established amount. Patients have no deductibles but make
small co-payments,
which are waived for instances of financial hardship. The Independent
Option reimburses
providers at a lesser established amount and the providers can charge
“whatever the market
will bear” with the patients paying the difference. Patients and
providers freely and continually
choose between the Options. The presence of two options supports competition
based on
value. The individual becomes an informed consumer. The provider, who
can treat patients with
a mix of options, need not be locked into an externally established fee
schedule.
A two-Option system must be balanced so as not to allow
one Option to become underfunded
and unable to serve the health care needs of the population. Accessibility
and quality are just as
essential as affordability. However, runaway escalation of fees would
also destroy the system’s
viability. The Balanced Funding Mechanism allows the
system to adjust reimbursement rates
to ensure that 70% of the funding pays for Standard-of-Care Option treatment
and that 30% of
the funding is reimbursed for Independent Option treatment.
The
explanation below more precisely describes how the system works, but
the basics are:
Explanation
of Balanced Choice
For
Policymakers: The Public Payer Meets the Marketplace
The
Need:
We hunger, in the United States, for a good way to pay for our health
care. We know we
are both spending much more than other industrialized countries and getting
poorer results.
We want health care that is accessible, high quality, and affordable.
We need a system that
reimburses providers fairly and has freedom of choice for consumers and
providers, and is
responsive to market forces. We want clear cost information when we make
thoughtful medical
decisions. Creatively meeting this range of requirements, Balanced
Choice improves on the
best of efficient public payer systems by introducing market realities.
Balanced Choice embodies those positive features found in most public
payer proposals: an
expanded risk pool, reduces the administrative costs of a multi-payer
system, an income safety
net, and the long term focus of cradle to grave coverage that gives incentive
to preventive/
primary care. Balanced Choice supports provider flexibility in setting
fees; promotes responsible,
cost aware utilization by patients; expands choices for patients and providers
alike; and
engages an intelligent response to market forces.
In addition to incorporating the advantages of a public payer system,
Balanced Choice concepts
address the three strongest criticisms of a public payer system. Providers
object due to a fear
that one powerful system could set reimbursements unrealistically low,
and Balanced Choice
gives providers some independence in setting fees. Consumers fear that
they will lose the kinds
of choices that they have under insurance with a unitary public payer
system, and Balanced
Choice assures consumers that they would have the same type of freedom
that they have for
in-network and out-of-network choices under insurance. Economic critics
warn that if all health
care were free, unnecessary care would increase, and Balanced Choice encourages
consumer
responsibility to both decrease unnecessary care and contain costs.
A fundamental aspect of Balanced Choice is the addition of two interrelated
payment options to
a single public payer system. There’s a Standard-of-Care
Option and an Independent Option.
These are coordinated through a Balanced Funding Mechanism.
The
Two Payment Options:
At
the outset, provider reimbursement rates would be determined by a non-governmental
Trust
in collaboration with all stakeholder groups. These rates would likely
be similar to, though
likely higher than, those in the Medicare schedule. Payment in the Standard-of-Care
Option
would be the provider reimbursements made from the Trust, completed
by patient copays.
In the Independent Option providers would receive 85% of the standard
reimbursement rate,
completed by a higher patient gap payment.
-
Providers may have any mix of Standard-of-Care Option and Independent
Option
patients.
-
Providers
decide whether they will see new patients in the Standard-of-Care
Option or
Independent Option.
-
If
a provider is accepting new patients only in the Independent Option,
potential patients
ask how much the provider charges and decide if they want to pay the
gap.
- If
a patient does not believe there is enough value to warrant the cost
of the gap, the
patient looks for a different Independent Option provider or chooses
a Standard-of-Care
Option provider.
The
Balanced Funding Mechanism:
These
Options are coordinated by the Balanced Funding Mechanism. In response
to market
forces this balancing is administered by the Trust to maintain a ratio
of use of 70% Standardof-
Care Option to 30% Independent Option. If the Standard-of-Care Option
reimbursement
becomes too low (as it is for primary care in the current Medicare system),
providers would tend
to move toward only accepting Independent Option patients. This would
result in the Standardof-
Care Option providing for less than 70% of services. The balancing would
be attained by the
Trust either raising the standard-of-Care reimbursement rates or by
lowering reimbursement
rates in the Independent Option from the 85% of the base rate. The former
process tends to
raise overall costs, the latter to constrain them, one or the other
used as market conditions
warrant.
The Balanced Funding Mechanism brings together realities of the health
care marketplace and
thoughtful oversight. It maintains fair reimbursements, with the related
quality of care, in the
70% of Standard-of-Care services. As well, it allows Providers with
greater training, expertise,
and experience to charge fees commensurate with what they have to offer.
Quality is maintained
for all, while options are preserved for consumers and providers.
Base
and Gap Payments:
Another
central contribution of Balanced Choice is the base and gap
payments combination.
The base (paid by the Trust) and gap (individual out-of-pocket expense)
combination is used for
medications, labs, and imaging; it is also the basis of the Independent
Option.
The best way to explain the base and gap payment system is to begin
with an example of how
it might apply to medications: The system might make a $100 base payment
for one category
of medication. If one brand of medication costs $130, the patient
would pay a gap of $30. If
another medication of the same category cost $150, the patient would
pay a gap of $50. In the
Independent Option, provider fees are expressed as a percent of the
Standard-of-Care Option
base rate, making cost comparisons simple for consumers.
The base and gap pay system has five features:
-
Base payments are set for each category of service at the appropriate
level so that
patients are cost conscious, payments are affordable, and providers
are reimbursed
adequately.
-
Base and gap payments create a market where health care providers
can compete on
both cost and quality.
-
A person’s total gap payments would be less than the total
out-of-pocket expense with
most current insurance plans.
ask how much the provider charges and decide if they want to pay
the gap.
-
Low
income patients and patients with high out-of-pocket expenses
would have gap
payments and copayments waived in the Standard-of-Care Option.
-
Gap
payments would not apply for emergency or intensive care procedures
because
patients are not able to make thoughtful cost decisions in these
urgent situations.
The
base and gap payment system provides cost consciousness and transparency
to the
health care system, a feature removed by insurance-driven health care.
Attempts to restore
cost consciousness have not been affordable for most patients. For example,
Health Savings
Accounts have favored the healthy and wealthy, and because consumers
pay the full cost of
treatment, HSA’s discourage or make unavailable some medically
necessary treatment for those
patients with high needs or limited income.
Transparency:
Transparency
is an essential component of the Balanced Choice system. Reimbursement
rates,
base payments, and likely gap payments would be available in written
material and on line.
Consumer friendly and culturally appropriate language would be the
standard. Independent
Providers would be required to base their fees on a percentage of
the Standard-of-Care Option
reimbursement schedule, which would allow consumers to compare Independent
Provider
fees. For example, one provider might charge 110% of the Standard-of-Care
Reimbursement
and another might charge 115%. Both printed and online material
would allow consumers to
compare likely gap charges for various services.
The
Way Forward:
The
need for fundamental change is great. Because of the growing number
of the elderly,
Medicare faces an impending financial impossibility. Health care
costs that are much greater for
American business than for our global competitors, weigh on our
whole economy as well as on
individual industries. Poor health outcomes hinder our vitality,
individually and as a nation. Our
bankruptcy and foreclosure rates are swelled by devastating personal
medical expenses, not
seen in other industrialized countries.
Balanced Choice concepts take what has worked in other countries
and add features that
engage our healthy reliance on the marketplace. The two Options
in a single public payer
system, coordinated by the Balanced Funding Mechanism, bring freedom
of choice, quality
of care, healthy competition, and market forces to the way we
pay for our health care. The
clarity of the base and gap payments combination brings cost awareness
and transparency to
our medical decisions, encourages personal responsibility, and
addresses over- and underutilization
of services.
As a nation we are struggling to attain an acceptable and sustainable
path to universal health
care. Balanced Choice concepts can enhance the model for a parallel
public payer approach
on a state or national level. It is most effective as a single
payer system, again on either a state
or national level. The hybrid approach of Balanced Choice gives
us integration of administrative
efficiency and market forces so we all can afford the quality
health care that we need.
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