National Academy of Medicine
By Mark McClellan, Rahul Rajkumar, Marion Couch, Diane Holder, Peter Long, Rhonda Medows, Amol Navathe, Mai Pham, Lewis Sandy, William Shrank, and Mark Smith
May 17, 2021 | Discussion Paper
Credit for the image on top: ucsf magazine
Key messages:
To improve the resiliency and equity of health care financing in America for COVID-19 and beyond, the authors have identified a series of priority actions for policymakers, including
- accelerating the transition to value-based payment,
- extending flexibilities for virtual health services and capabilities,
- rethinking benefit design using the principles of value-based insurance,
- aligning incentives and investments to address health inequities,
- creating mechanisms for collective action during public health emergencies, and
- coordinating payment reforms with public health functions.
Regulators and sector leaders can use these policy considerations to begin shoring up America’s payment and delivery systems to weather both the financial aftershocks of COVID-19 and the forthcoming population health challenges of the 21st century.
EXECUTIVE SUMMARY
- Introduction and Sector Overview
- Conclusion
Introduction and Sector Overview
In contrast with other high-income countries, health care insurance and payment in the United States is highly fragmented.
America’s multi-payer system spans an array of entities, including publicly financed programs (e.g., Medicare, Medicaid) and commercial insurers and health plans. Figure 1 provides an overview of the different types of payers and populations in the U.S. [1]
This paper will focus on the perspective of payers covering Medicare, Medicaid, and adults with fully insured employer health plans, which together encompass the majority of Americans.
These payers aim to serve several functions in the U.S. health care system, including offering protection against the financial impact of unexpected health events, providing patients with access to a broad set of health services delivered by a network of health care professionals, coordinating those services, and using measurement and incentives to increase the affordability and quality of care delivery [2].
Yet the common functions of payers can take many different forms with regards to operational arrangements e.g.,
- stand-alone plans versus joint ventures with delivery organizations,
- benefit design (e.g., covered services, cost distribution), and
- payment methodologies (e.g., volume- versus population-based payments).
A key area of change for payers over the past decade has been the advent of so-called “value-based care,” in which payers in both the public and private sector have sought to transition away from fee-for-service (FFS) arrangements to alternative payment models (APMs) that link reimbursement to the quality and outcomes of care delivery [3].
It is amidst this period of renovation to the architecture of the U.S. health care system that COVID-19 struck.
The public health emergency-which remains ongoing at the time of this paper’s publication-has had tremendous consequences for the health of American society and the financial stability of the American health care system.
During the spring of 2020, payers took steps based on regulatory requirements and recommendations to expand access to health services for both COVID-19 and non-COVID-19 health conditions e.g.,
- waiving administrative requirements,
- reimbursing telehealth.
Many payers also independently deployed financial support and capital to stabilize providers, and leveraged their technological capabilities and community relationships to support outbreak response, from coordinating non-medical services to supporting immunization campaigns.
However, payers’ pandemic response capabilities and their obligations to regulators, employers, providers, and patients evolved as high caseloads persisted and the downstream consequences of COVID-19 began to manifest.
- For example, trends in medical spending and utilization shifted as outbreaks escalated over the course of 2020.
Payers initially experienced cost reductions due to care delays, but then experienced a subsequent increase in operating expenses due to the growing volume of COVID-19 patients and the resumption of deferred health services.
- Likewise, as insurance is an industry premised on forecasting and risk assessment, the fundamentally unpredictable nature of a pandemic created significant challenges for payer operations in 2021 (e.g., pricing, enrollment).
In this paper, leaders from the payer sector seek to describe the experience of health insurers during COVID-19 and identify the key challenges and opportunities learned from the pandemic and beyond.
It is important to acknowledge that as an ongoing public health emergency, empirical evidence on health care costs and payment policies for COVID-19 remains nascent at this time, and data on the specific actions of payers may vary according to differences in health insurance products, local market needs, and regulatory requirements.
Nevertheless, one year into the pandemic, it is evident that the unprecedented disruption to the health care system as a result of COVID-19 provides a unique opportunity for payers to improve the efficiency and equity of health care financing in America.
Consequently, the goal of this paper is to provide a preliminary review of payers’ experiences during COVID-19 to date and to highlight the key lessons for how payers and regulators can navigate the uncertainties of COVID-19 and leverage the newfound momentum for health care reform, with a particular focus on improving affordability and accessibility.
Development & Discussion
See the full version of the paper
Conclusion
COVID-19 has illustrated how misaligned financial incentives and the fragmentation of services across sectors contribute to inefficiencies and inequities in the American health system.
The pandemic has both provided momentum to implement long-overdue changes in health care delivery (e.g., flexibilities for virtual care) while highlighting the need to accelerate ongoing efforts to transform payment systems (e.g., the transition to APMs).
Notably, COVID-19 has also fostered new, innovative partnerships between payers and other sectors, such as
- collaborations with public health departments to improve disease surveillance,
- coordination with community-based organizations to meet patients’ social needs, and
- joint ventures with the pharmaceutical industry to advance biomedical innovation.
Yet while these initiatives highlight the potential for COVID-19 to drive the transformation of policy and practice in the U.S. health care system, meaningful change will require payers to navigate the still-evolving volatility of insurance markets, balance competing obligations and relationships to parties across sectors, and overcome longstanding inertia within the health care system.
In this paper, leaders from the payer sector have sought to highlight the range of regulatory flexibilities and health plan responses to the pandemic, and outline how preexisting obstacles and COVID-19-specific vulnerabilities create short- and long-term challenges for the sector.
To improve the resiliency and equity of health care financing in America for COVID-19 and beyond, the authors have identified a series of priority actions for policymakers, including
- accelerating the transition to value-based payment,
- extending flexibilities for virtual health services and capabilities,
- rethinking benefit design using the principles of value-based insurance,
- aligning incentives and investments to address health inequities,
- creating mechanisms for collective action during public health emergencies, and
- coordinating payment reforms with public health functions.
Regulators and sector leaders can use these policy considerations to begin shoring up America’s payment and delivery systems to weather both the financial aftershocks of COVID-19 and the forthcoming population health challenges of the 21st century.
FULL VERSION — INDEX
- The Payer Response to COVID-19
- Key Pandemic-Era Challenges for Payers
- Opportunities for Sector-Wide Performance Improvement
- Transformative Sector-Wide Policy, Regulatory, and Legal Changes
- Conclusion
Suggested Citation
McClellan, M., R. Rajkumar, M. Couch, D. Holder, P. Long, R. Medows, A. Navathe, M. Pham, L. Sandy, W. Shrank, and M. Smith. 2021. Health Care Payers COVID-19 Impact Assessment: Lessons Learned and Compelling Needs. NAM Perspectives. Discussion Paper, National Academy of Medicine, Washington, DC. https://doi.org/10.31478/202105a
Author Information
Mark McClellan, MD, PhD, is Robert J. Margolis Professor of Business, Medicine, and Policy and Director of the Duke-Margolis Center for Health Policy at Duke University. Rahul Rajkumar, MD, JD, is COO of Care Solutions at Optum. Marion Couch, MD, MBA, is SVP and CMO of Cambia Health Solutions, and former Senior Medical Advisor of the Office of the Administrator at the Centers for Medicare & Medicaid Services. Diane Holder, MS, is President and CEO of UPMC Health Plan. Peter Long, PhD, is SVP of Healthcare and Community Health Transformation at Blue Shield of California. Rhonda Medows, MD, is President of Population Health at Providence St. Joseph Health and CEO of Ayin Health Solutions. Amol Navathe, MD, PhD, is Assistant Professor, Health Policy and Medicine at the University of Pennsylvania. Mai Pham, MD, MPH, is former VP of Provider Alignment Solutions at Anthem. Lewis Sandy, MD, MBA, is EVP of Clinical Advancement at UnitedHealth Group. William Shrank, MD, MSHS, is CMO of Humana. Mark Smith, MD, MBA, is Professor of Clinical Medicine, University of California San Francisco.
Acknowledgments
The authors would like to thank Meredith Rosenthal, Harvard School of Public Health; Sherry Glied, New York University; Donald Berwick, Institute for Healthcare Improvement; and David Grossman, Kaiser Permanente for their valuable contributions to this paper.
The authors would also like to thank Jennifer Lee and Kushal Kadakia from the National Academy of Medicine for their valuable support.
Originally published at https://nam.edu on May 17, 2021.
