The role of payers in controlling healthcare systems costs

Phyllis Yale

Partner Bain & Company

What role can payers play in controlling system costs?

The role of payers in reforming the system is absolutely essential. Because when you think about what a health plan does, the health plan is essentially creating all of the incentives for everyone in the system.

Create incentives for providers

First, they can create very different incentives for providers, so they move away from a fee-for-service system of today, which is all about doing more, and more-intensive services, and paying providers instead for delivering the right care. And there are all sorts of exciting new experiments that show that change in providers’ incentives can change the way they practice medicine.

So that’s the first way a payer can make a difference.

Create incentives for patients

The second thing is, payers can really give patients incentives for changing their own behavior through a combination of carrots and sticks. It’s interesting. There are a handful—not more than 3% to 5% of all large employers—there are a handful of employers who are really the lone bright spots in managing medical inflation. These large employers have really engaged their employees in their healthcare; and, again, through carrots and sticks have given incentives to members to live healthy lives, comply with therapies, go to low-cost, high-quality providers, and to really think twice about some of the resources they’re consuming.

And they create these incentives and then educate, educate, educate. And engage. And they’ve really shown a huge impact on medical inflation. When the rest of the country is going up to 8% to 10%, these employers are seeing increases of as little as 0% to 5% over the last few years.

And it’s not just large employers who should be able to get the benefits of this. Health plans can, in a way, “shrink wrap” some of these innovations on behalf of small and midsize employers so that they can take advantage of them as well.

Use data to improve member health

The third best practice, which, again, we’re just starting to see payers really embrace, is developing a much more integrated database around members, and then using that in very productive ways.

There is exciting new ground that payers are just starting to plow around understanding what motivates their members to take action.

For example, they could call a variety of patients with heart disease to remind them to make an appointment with their doctor. And they can deliver that message in all sorts of ways: 1) The financial risk if they don’t; 2) The hope if they do it well; 3) The fear if they don’t do it, and so on.

And they can communicate these messages in all sorts of ways and then see the action; see whether the patient actually had the doctor’s appointment. And by doing this again and again and again, they could start to draw a picture of really what will motivate people to take action. And that, I think, is the next frontier for payers. This kind of information can be put in the database, helping health plans know not only when to intervene, but how to intervene.