Growing up, I was a big fan of Pac-Man. I played the video game. I watched the cartoon TV show. I even ate the sugary breakfast cereal, with marshmallow ghosts and corn puff “pac-dots.” Pac-Man was a cultural phenomenon, capturing the Zeitgeist of the 1980s. Powered-up with a “power pellet,” nothing could stop this pixelated yellow disk with the big, chomping mouth.
When I think of our out-of-control health care spending in this country, I think of Pac-Man. Runaway health care costs are eating through the budgets of individuals, families, employers and governments like a turbo-charged Pac-Man plowing through barriers, consuming everything in his path. If we as a society don’t get a handle on spiraling health care costs, additional health care spending could actually lower our standards of living. We are on the edge of this now. Over the last decade, 100 percent of real wage increases for Americans went to cover increasing health care costs. Our current health care system is unsustainable.
To change course, we must change how the health care game is played. Today, our health care system is built on a fee-for-service structure. We pay health care providers, typically through an insurance company, when they provide specific medical services. On the surface, the health care market appears to function like any other market, with consumers paying only for those services they consume. The problem is that health care consumers often don’t know what services they actually need or how much they cost, and are forced to rely on the health care professionals to decide for them.
In addition, critically ill patients are often not in the best position to make informed decisions about their own health care. Given these unfortunate realities, combined with the fact that health care providers in a fee-for-service market stand to gain financially by providing the maximum amount of care, it is no surprise that health care costs are out of control. It’s estimated that up to 30 percent of the health care provided in the United States is unnecessary care, and in many instances, providing extra health care actually harms patients.
To fix our health care system, we have to stop paying health care providers exclusively based on how much “health care” they provide to their patients. Instead, we need to pay health care providers for keeping people healthy.
Four years ago, Utah’s Medicaid program began its migration away from the traditional fee-for-service structure towards a fee-for-value system with the unanimous passage of SB180 — Medicaid reform. Two years later, after obtaining the appropriate federal waivers, the Utah Department of Health contracted with four different Utah-based accountable care organizations (ACOs) to provide health care services for the Medicaid population along the Wasatch Front. These ACOs have accepted the accountability for managing both the health and the overall medical expenses for their respective Medicaid populations. They have also agreed to statutory cost growth caps that will hold Medicaid cost growth below the rate of general inflation.
According to recent numbers released by the Utah Department of Health and the Legislative Fiscal Analyst Office, these Medicaid ACOs are already saving the state tens of millions of dollars off of its historical and unsustainable Medicaid cost trends. And they are doing this while at the same time improving quality and customer satisfaction. The experiment appears to be working.
Unless we opt for wholesale health care rationing, we cannot solve the issue of runaway health care costs without addressing how we compensate health care providers for their services. To contain the explosive costs of health care — to constrain this devastating financial Pac-Man — we have to look for ways to pay health care providers for helping keep people well. So far, Utah’s Medicaid ACOs appear to be on the right track.
Dan Liljenquist is a former state senator and former U.S. Senate candidate.