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4 Ways Health Payers Could Decrease Medical Spending Growth

Value-based care reimbursement, health and wellness, and a decrease in duplicative testing could help payers reduce the rising rates of medical spending.

By Vera Gruessner

Health insurance companies are often looking for key methods and best practices to reduce rising healthcare costs. Payers could avoid the continual increase in medical spending by reducing the rates of unnecessary and duplicative services, adopt new models of healthcare delivery and payment, cut administrative costs, and stress disease prevention along with wellness.

Value-Based Care Reimbursement

Results from recent years show that health insurance costs are still rising. For example, data from the Citizen’s Council for Health Freedom shows that medical spending will grow significantly by the year 2024. Twila Brase, R.N and Co-Founder and President of Citizen’s Council for Health Freedom, explained in a press release that 20 percent of the federal government’s budget will be used solely on healthcare spending within the next eight years.

Additionally, the provisions of the Affordable Care Act are expected to bring a rise in premium rates among health plans sold on the exchanges.

“With the mandate and penalties in place in all 50 states with or without a state exchange, all of us will see the result of allowing a flawed government health care system to continue to operate, even though it redistributes income, puts our private medical data at risk, ties the hands of doctors and medical professionals, and leaves Americans with less money in their pockets to pay for the higher cost of health care,” Brase said in a public statement.

The Robert Wood Johnson Foundation showed in a dataset how Silver Plan premium rates rose an average of 11.3 percent in 2016 while Gold Plan premiums jumped 13.8 percent and the Bronze Plan premiums landed in the middle at a 12.6 percent hike.

READ MORE: Prescription Drugs Account for 22% of Payer Premium Spending

In recent years, there have been a wide number of reforms and new healthcare payment strategies adopted by payers and providers alike. However, the high influx of changes due to the Affordable Care Act and the HITECH Act are posing challenges to medical institutions unable to quickly transition to new models of healthcare delivery and payment.

With fee-for-service payments being a rather cemented method of reimbursement for many decades, it may take more time for providers and payers to successfully transition to value-based care reimbursement and reduce medical spending growth.

While some payers have been investing in high-deductible health plans and shifting more medical spending onto the consumer through cost sharing or higher out-of-pocket costs, Mary Richards, Executive Director at Partners for Better Care, described how this type of cost shifting along with a lack of price transparency could actually decrease patient satisfaction.

“I think one of the things that we think as important as Partners for Better Care is transparency of cost and information,” Richards told “We want people to have access to good information during enrollment periods and also throughout the year. Simply making sure that a fairly detailed level of information is available and essential prior to enrollment is a real necessity.”

“Partners for Better Care will be digging into ways to answer that question further. We are finalizing a patient charter to rally around and build an action agenda. I do expect payers can ensure patients have access to cost as well as value, which is a core function of what we’ll be advocating for,” Richards concluded.

READ MORE: Impact of Wage Level Variation on Employer-Sponsored Plans

Reduce duplicative healthcare services

Some more beneficial solutions that could reduce the growth in medical spending revolve around decreasing redundant healthcare services and adopting alternative payment and healthcare delivery models. A report from the American College of Physicians recommends for providers and payers to reduce unnecessary testing and technology use that has not shown improved patient care or outcomes.

Payers should take a look at any new technologies before adoption and analyze the costs versus benefits of the tools. For instance, automation technology could significantly improve efficiency among health insurance companies and would likely be beneficial despite implementation costs. Additionally, health plan benefits should be centered around evidence-based information that reflect better patient outcomes.

Implement value-based care

Value-based care reimbursement and alternative payment models such as bundled payments are also becoming vital among payers as they address the need to reduce high medical spending. Instead of fee-for-service, bundled payments enable payers to reimburse providers based on an episode of care instead of each, individual test or protocol.

READ MORE: Out-Of-Pocket Healthcare Spending on the Decline Since 2000

Cut administrative costs

The American College of Physicians also recommends uniformity in the way health insurance claims are processed while keeping administrative burden low among their provider network. Adopting web-based communication channels for addressing benefit concerns will also help reduce administrative cost among payers.

Promote wellness and prevention

Another method that payers could use to reduce medical spending growth is to emphasize preventive care and wellness among their consumer base. For example, payers could send reminder cards to their members when it’s time for them to schedule an annual physical exam, mammogram, or other screening test.

Additionally, payers could reduce premium costs for members who have gym memberships. These steps could go a long way in promoting health and wellness, which could reduce the rates of healthcare use and medical spending.

If health insurance companies can successfully implement these strategies, they may decrease medical spending rates and the healthcare industry as a whole would benefit.


Dig Deeper:

How Payers Should Prepare for Value-Based Reimbursement

How to Overcome the Challenges of Bundled Payment Models


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