Humana recently shifted its model from fee-for-service to value-based payments. The result? Seniors enrolled in Medicare Advantage are seeing their costs reduced and their quality of care improved, according to an internal study. But what does this all mean?

The Fee-for-Service Model

What many insurers are doing now is something called the “fee-for-service” model. Essentially, a health insurer pays your health care provider for every test, for every appointment, and every procedure they do. In other words, insurers pay providers for volume.

This system basically provides an incentive for providers to continue scheduling more visits and tests with you than what may be necessary. This leads to costs being driven up for the rest of us because these fees are eventually paid by patients through insurance premiums. Not that providers are trying to drive up costs intentionally, but the current system does not make providers stop and think about the costs to patients.

What is Value Based Reimbursement?

Value Based Reimbursement is the idea of incentivizing quality in health care over quantity. This is a system wherein the provider takes on some of the cost of providing you with more appointments and test. You are still getting quality care for a price, but now doctors and providers are having to think about how much it is going to cost them to send you to more tests and appointments. They are incentivized to give you only the treatment you need.

In other words, it is up to the provider to use that money efficiently to make sure the patient receives the services they need, but no more.

So What’s Happening with Humana?

Humana is converting its contracts with doctors and other providers from fee-for-service to value-based reimbursement—specifically among its Medicare Advantage memberships. Seniors are seeing the good that the shift is doing. Medical costs dropped by as much as . Not only that, but the quality of health care is improving because insurers are reimbursing providers for their services with additional pay if they improve health outcomes for their patients, meet quality measures, and control their costs.

“Historically, payers and providers have fought in a more confrontational way and then unfortunately the patient can get caught in the middle. What we're focused on is how we partner with providers. For example, a contract like an accountable care organization. What that means is the hospital, health system, and doctors are going to be jointly responsible with us for the quality and the total cost for your care.” says Dr. Patrick Conway, President and CEO of Blue Cross and Blue Shield of North Carolina. With more seniors flocking to the Medicare Advantage plan, more attention is being called to how value-based reimbursement can take over the current system. Either way, this benefits the rest of us paying our insurance premiums because we are no longer having to pick up the bill stemming from unnecessary or inefficient health care.

If you are interested in learning more on what’s happening with value-based reimbursement in North Carolina, click here to read our podcast with Dr. Conway.

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