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New Report: Health Care Payment Reform Could Save U.S. $200 Billion-$600 Billion Over Coming Decade, But Implementation Challenges Are Substantial

Americans could realize net savings in health care costs of around $200 billion to $600 billion cumulatively over the next 10 years if concerted action is taken to reform care provider payment incentives, including moving away from the traditional fee-for-service model, according to a new working paper by UnitedHealth Group’s (NYSE: UNH) Center for Health Reform & Modernization.

The working paper, “Farewell to Fee-for-Service? A ‘Real World’ Strategy for Health Care Payment Reform,” is being launched at today’s Forbes ‘Healthcare in the USA Forum’ in New York. (To read the full report, go to: www.unitedhealthgroup.com/reform.)

Underlining the size of the opportunity, the report also finds that U.S. physicians say that care costs could be cut by an average of 18 percent without any impact on quality, and 59 percent of physicians report there are meaningful differences in the quality of care provided by doctors in their local areas – although only 44 percent of consumers are aware of them.

“It is time to move past talk and convert the broad national consensus about the need to ‘pay for value not volume’ into action. Payment reform is only going to move the needle on U.S. health spending growth if it is implemented on a massive, industrial scale,” said Simon Stevens, chairman of the UnitedHealth Center for Health Reform & Modernization, executive vice president of UnitedHealth Group, and one of the paper’s authors.

Speaking at today’s Forbes Health Forum, Stevens said, “We will need to provide doctors and hospitals with constructive support during the transition, but savings ultimately have to flow to consumers and can’t just be recycled and retained within the health care system.”

The federal government projects that national health spending will rise from $2.8 trillion to $4.8 trillion over the coming decade, accounting for nearly 20 percent of the U.S. economy. Paying health care providers on a fee-for-service basis is one of the key contributors to the quality and cost shortfalls in the current health system, recently documented by the Institute of Medicine, among others. This new UnitedHealth Group research therefore sheds light on three important debates on U.S. health care and government entitlement program reform:

  • Under what scenarios could provider payment reform make a meaningful fiscal impact on Medicare, Medicaid and overall U.S. health spending?
  • What do the emerging ‘real-world’ data reveal about the success – or failure – of new payment models as tools for improving health care quality and affordability?
  • How can gains from payment reform be achieved in practice, recognizing that hospitals and physicians will need support in making the transition, and their uncertainties and tradeoffs about how best to do so?

Key findings

1. Care provider payment reform has the potential to slow U.S. health spending growth and improve the sustainability of Medicare and Medicaid – but it won’t be a ‘silver bullet.’

By looking at different scenarios for net savings and speed of adoption, the report estimates that care provider payment reform could slow U.S. health spending by between $70 billion and $1.01 trillion cumulatively over the coming decade, with more likely savings in the $200 billion to $600 billion range. Around half of these savings might accrue to Medicare and Medicaid.

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