I’m going to use this space today to discuss two healthcare reform initiatives. One was just recently announced and one has been a policy for several years.

The former is happening right here in North Carolina. It involves value-based care which I have written about before on the blog (see here, here, and here). Value-based care is a shift from the traditional “fee-for-service” insurance model, where insurers reimburse providers for each service they perform on a patient. This type of reimbursement model incentivizes volume which means unnecessary tests and procedures. This leads to increased health costs for the entire system. In a value-based model, insurers and providers take on a portion of the risk in the process where if optimal health outcomes aren’t achieved, both the provider and insurer take on the loss of money. If the patient is able to achieve optimal health outcomes under budget, the insurer and the provider share in this savings. This incentivizes better health outcomes, compared to the “fee-for-service” model.

Blue Cross Blue Shield of North Carolina, the state’s largest insurer, announced early this week a brand new product called “Blue Premier.” This is a new type of insurance contract, in which 5 healthcare systems have agreed to enter into a value-based contract with Blue Cross to serve the insurers patient. This is a massive shift in how the insurer pays for its customers care. It will change the way providers and patients receive care and hopefully will incentivize lower costs through better health outcomes.

The latter reform is one that has been a policy in a California health care system for a few years. MemorialCare in California requires that physicians who contract with their facilities to contract with the same insurers. Why is this important? You have probably often heard about the network adequacy problems that people face in hospitals. For example, you go to a hospital for some outpatient procedure. You check, the hospital accepts your insurance and so you have the procedure. Later you receive a huge bill because the anesthesiologist who participated in your procedure is not “in-network” and therefore your insurer does not cover that part of the procedure. This phenomenon happens all too often.

By requiring physicians who want to use the MemorialCare facilities, the hospital is listening to the patient complaints and ensuring that they will not receive surprise medical bills when they thought their insurance would cover everything. Why doesn’t every hospital implement this policy? This seems like a simple policy to ensure that patients can have a procedure done without fear of surprise bills. I applaud MemorialCare for this policy.

So, what do these two policies have in common? They are meaningful reforms that started in the private sector without regulation. So much of the healthcare debate focuses on what can government do to bring down the cost of healthcare. However, enough patient pressure has forced BCBSNC and MemorialCare to take the initiative to implement these policies on their own. That is an example of the market responding without government regulation. Our healthcare system is all based on incentives. These two healthcare entities have rearranged the incentive to benefit the patients. More of this private initiative will be necessary to stave off a shift to complete government control of the healthcare industry which is the direction we are heading if we don’t get costs under control. Instead of giving up and moving to a “Medicare-for-All” system, let’s reform the bad incentives that plague our system.