Summary
- The idea of global payments is not a new one. This was attempted in the 1990's as part of insurer/provider risk-sharing arrangements.
- The dollars that providers will be given will have to be less than the amount the insurer spent on member care or no savings will be achieved.
- Providers will be required to recreate the administrative infrastructure of an insurance company along with the accompanying expense.
- Gatekeeper model managed care failed in the 1990s for all of these reasons.
Analysis
As the article states, the idea of global payments is not a new one. This was attempted in the 1990's as part of insurer/provider risk-sharing arrangements. Companies such as Oxford Healthplans (now United Healthcare) and US Healthcare were at the forefront of these novel risk-sharing arrangements.
The basic problem with these financial arrangements is that in order to save money insurers have to pass less money to providers than they themselves have used to manage these same members. Otherwise no savings are achieved.
Unfortunately, the providers then have to create an insurers infrastructure and all the administrative expense that goes along with it, just to manage the risk dollars and members that they are given. This adds an additional administrative cost to the providers that are already receiving less dollars than they would have under a fee for service arrangement.
Finally, in order to balance the risk, providers need significant pools of members in order to avoid adverse risk selection. Which is the sole purpose of insurers to begin with--to manage the risk. If the networks of providers can achieve a statistically stable membership the volume of services they will be forced to deliver will create service shortages, long office waits and the typically unsatisfactory results that gatekeeper model managed care generated in the 1990s.
So my question is--will we never learn from our past mistakes or are we destined to keep repeating them?
Martin Gold consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
