Let's talk about something that impacts all of us: how we pay for healthcare. It's not just about bills and insurance cards; it's the invisible engine that dictates everything from the treatments we receive to the innovations that actually make it to the doctor's office. We’ve all been hearing about the big shift away from the old fee-for-service model towards something better—alternative payment models designed to reward quality over quantity. But if that's the case, why does it feel like we're stuck in neutral?
Key Highlights
- ✓ Current value-based care models are often voluntary, allowing large health systems to "game the system" by only participating when they know they'll profit.
- ✓ A core issue is the payer incentive model, where profitability is tied to the total dollars spent on care, creating a conflict of interest against cost-saving measures.
- ✓ Providers are drowning in a sea of metrics that are costly to track but often fail to measure actual patient health, satisfaction, or engagement.
- ✓ Employers, the second-largest spenders on healthcare after payroll, are often too passive in managing costs, simply accepting annual premium hikes from payers.
- ✓ Experts at the Digital Medicine Society’s Healthcare 2030 Summit argue for mandatory models, better incentives, and simplified metrics to make real progress.
Well, a recent discussion at the Digital Medicine Society’s Healthcare 2030 Summit in D.C. pulled back the curtain on this exact problem. Leaders from across the industry got refreshingly honest about the fundamental roadblocks preventing these new models from truly taking off. It turns out, even the best intentions can crumble under the weight of a broken system.
Why 'Optional' Value-Based Care Just Isn't Working
One of the most eye-opening points came from Lee Fleisher, the former chief medical officer at CMS and now CEO of Rubrum Advising. He argued that a huge part of the problem is that most of these new payment models are voluntary. This creates a situation where savvy health systems can essentially pick and choose, ensuring they only play the games they know they can win.
He shared a candid story from his time as the chair of anesthesiology at Penn Medicine. He admitted, “We would only join models in which we would win — because we were a big center that could calculate that and never join models in which we would lose.” If everyone is doing that, the system as a whole never truly moves toward real value. It’s like a casino where the house only lets people play the slots they know are about to pay out.
Fleisher's solution is blunt and simple: you have to make participation mandatory. He declared, “If you game the system that way, you’re never going to get to value-based care, as we call it. Therefore, you need to mandate that people be in the models.” It seems this idea is gaining some traction, as he noted the Trump administration had already taken steps in this direction, with an executive order directing the CMS Innovation Center to develop a mandatory model for certain high-cost drugs.
The Billion-Dollar Incentive Problem Holding Healthcare Hostage
Even if you make the models mandatory, there's another, deeper issue: the money trail. Nate Paulsen, from Oshi Health, laid out how fundamentally misaligned incentives are sabotaging the entire effort. Here's the kicker: for commercial insurance companies, profits are tied to something called the medical loss ratio. In simple terms, this means they get to keep a certain percentage of the total money spent on healthcare.
Paulsen explained it perfectly: “When your profitability is tied to 15 cents on the dollar, the fastest way to grow your profitability is to grow the number of dollars spent.” Think about that for a second. The very entities we rely on to manage costs actually profit more when costs go up. This creates a massive, built-in conflict of interest that works directly against the goals of value-based care.
He argued that until we decouple profitability from spending growth, we're just spinning our wheels. Since payers control the vast majority of the cash flow in the system—whether it’s from CMS, employers, or states—their incentives are the linchpin. If they aren’t motivated to save money, meaningful progress becomes nearly impossible.
Are We Measuring What Really Matters?
On top of the structural and financial problems, there’s the sheer administrative nightmare of metrics. Mona Siddiqui, a senior VP at Highmark Health, pointed out a troubling paradox. Over the last 30 years, the number of quality measures we track has exploded. Yet, in that same period, the cost of care has steadily climbed, access has worsened, and patient satisfaction has dropped.
Her take was refreshingly direct: “I’m not sure that measurement is the way to go.” Providers are buried in paperwork, tracking things like the percentage of patients who got a flu shot or were given discharge instructions. While these things aren't bad, they don’t actually tell us if patients are healthier, happier, or more engaged in their own care. It's an enormous burden on the system that isn't delivering results for anyone.
Siddiqui wonders why we aren't just focusing on the basics: total cost of care and patient satisfaction. Lee Fleisher echoed her sentiment, jokingly blaming the “quality measure industrial complex” for the mess. He pointed out that while we obsess over screenings and medical codes, we completely ignore crucial metrics like patient engagement—despite clear evidence that engaged patients have better outcomes and lower costs.
The Critical Role Employers Must Play
So, who else has a stake in this fight? Turns out, it's the employers. Jonathan Taylor, from the professional services firm Aon, delivered a wake-up call, emphasizing that companies have to step up. He pointed out that for most businesses, “Healthcare is the second largest expenditure for any company behind payroll.” Yet, it's often managed passively.
Experts are predicting that employers' healthcare expenditure will jump by a staggering 9-9.5% next year, the biggest increase in 15 years. Taylor posed a powerful question: if you told your employees their wages would increase by 10% every year, you'd be laughed out of the room. But that's exactly what happens with insurance premium hikes, and companies just accept it.
This leaves employers with two bad choices. They can pass the entire 10-15% increase to employees, which tanks morale, or absorb it and cut into their own profitability. Taylor argues for a third way: empower HR departments to manage healthcare spending like a core business function. That means aggressively managing vendor contracts, seeking out innovative care models, and incentivizing employees to engage in preventive care instead of waiting for a high-cost crisis.
Conclusion
The bottom line is that the promise of value-based care is being held back by some deep, systemic flaws. It's not just one thing, but a combination of factors that have created a frustrating gridlock. As the experts at the summit made clear, we can't just tinker around the edges anymore.
Achieving a system that truly rewards quality over quantity will require bold moves. This includes making payment models mandatory to prevent gaming the system, fundamentally realigning payer incentives so they benefit from lower costs, drastically simplifying our measurement madness to focus on what truly matters for patients, and empowering employers to use their massive purchasing power to demand better value. The time for half-measures is over.
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