By NextBestFitBase budget plus activity payments
A budget covers fixed costs; extra procedures above a baseline are paid per case to reward throughput.
Activity payments on top of budgets.
Review ledgerHow this path connects
This path
Base budget plus activity payments
Requires:
Pay for activity on top of budgetsLonger waits if demand grows faster than capacityChosenConcrete changes if chosen
What would actually have to change in law, agencies, payment rules, or systems.
- Pay base budgets plus activity payments
Effects
Each effect has its own page: the evidence, the case that it is or isn't a real cost, and whom it affects.
What it fixes
- Fixed budgets can ration care
Using a budget for fixed costs and per-case payments above a baseline balances spending control with productivity and cuts queues.
- Longer waits if demand grows faster than capacity
Paying for additional procedures above a baseline rewards throughput and cuts queues.
What it creates or worsens
- Raises spending or loosens control over it
Paying per case above a baseline can lead to growing procedure volume.
- About $1 trillion a year in administrative cost
Per-case payments for additional procedures require more billing.
21 paths soften this
One claims system and standard rulesAbout $1 trillion a year in administrative costChosenStandardize across many payersAbout $1 trillion a year in administrative costChosenSingle public payer for everyoneTens of millions of people have no coverageChosenRegulated multi-payer: everyone must have a non-profit or tightly regulated planTens of millions of people have no coverageRejectedPublic option alongside private insuranceTens of millions of people have no coverageRejectedContinuous eligibility (12-month or multi-year) in Medicaid and CHIPPeople lose coverage when their life changes (churn)ChosenCoverage tied to residence, not job or incomePeople lose coverage when their life changes (churn)ChosenNo cost sharing at the point of careUnderinsurance: covered, but can't afford to use itChosenEvery licensed provider is in-networkNarrow networks and out-of-network surprisesChosenPrevent new debt by ending point-of-care billsMedical debt affects about 100 million peopleChosenEliminate out-of-network statusSurprise billing and a runaway arbitration systemChosenEliminate prior authorization except for a short listPrior authorization delays and blocks careChosenPublic administration with a cost targetInsurer overhead and profitChosenPublic review of hospital budgetsExecutive pay and nonprofit statusChosenCut documentation and billing burdenClinician burnout from paperwork and EHR workChosenGlobal budgets for hospitalsU.S. prices are far higher than in other countriesChosenLower costs for clinicians, not only payProviders leave, retire, or go cash-only if pay dropsChosenFast transition in one or two yearsTransition disruption: jobs, companies, and familiar coverageRejectedAutomatic exemptions and annual collection through taxesCopays keep billing systems alive and still deter poorer patientsChosenDrop point-of-care charges entirelyCopays keep billing systems alive and still deter poorer patientsChosenReport measures publicly without tying pay to themTargets and quality metrics invite gamingRejected
Who's affected
Who gains
- People with ongoing or specialist care needs
- Fixed budgets can ration care: Hospitals may slow elective procedures when demand exceeds fixed budgets.
- Longer waits if demand grows faster than capacity: They need specialists and procedures most often.
- People with employer coverage
- Longer waits if demand grows faster than capacity: They are seen fastest today and would share one queue with everyone.
- Health insurers, brokers, and their shareholders
- About $1 trillion a year in administrative cost: Insurers, billing firms, and clearinghouses earn from the complexity.
- Insurance and billing workers
- About $1 trillion a year in administrative cost: Their jobs exist because of the complexity.
Who loses
- Taxpayers and public budgets
- Fixed budgets can ration care: Global budgets cap spending.
- Raises spending or loosens control over it: Public budgets pay the added spending.
- About $1 trillion a year in administrative cost: Public programs pay for it too.
- Doctors, nurses, and other clinicians
- About $1 trillion a year in administrative cost: Time goes to billing and insurer rules instead of patients.
- People with employer coverage
- About $1 trillion a year in administrative cost: Premiums pay for the administration.
Where it has been tried
- Norway, Sweden: Mixed budgets plus activity-based funding after long waits in the 1990s.
- Norway: Norway introduced activity-based hospital funding in July 1997; since 2006 it has reimbursed 40% of estimated treatment costs.Sources: Health Policy (2010)