News

Toward a value-based system: Michael Porter weighs in on health care reform — MedCity morning read, June 5, 2009

Michael Porter, the well-known efficiency expert at Harvard Business School, has been thinking about health care reform for many years. "True [health care] reform will require both moving toward universal insurance coverage and restructuring the care delivery system," Porter writes in a New England Journal of Medicine article.

By Mary Vanac on June 05, 2009

BOSTON, Massachusetts — Michael Porter, the well-known efficiency expert at Harvard Business School, has been thinking about health care reform for many years.

In a New England Journal of Medicine article, Porter talks about what he thinks is needed to do meaningful reform.

“True reform will require both moving toward universal insurance coverage and restructuring the care delivery system,” Porter writes.

presented by

Here’s how we get there:

  1. Change the nature of health care competition.Insurers — both private and public — should succeed only if they improve subscribers’ health. Today, health plans compete by choosing healthier participants, denying services, negotiating deeper discounts and shifting more cost to subcribers, Porter said. Instead, we need regulations that end coverage and price discrimination, based on health risks. Insurers should measure and report their subsribers’ health outcomes. These reports could help consumers choose the most valuable insurance plans for staying healthy.
  2. Keep employers in the insurance system. Employers have a vested interest in their employees’ health. Employers can create value by encouraging healthy living habits in the workplace and direct employees to high-value providers. Employers also can foster more competition in the health care system, Porter said. To keep employers in the system: Reduce the higher insurance premiums they now pay to cover the uninsured and to subsidize government programs. Create a level playing field by penalizing employers that don’t offer health insurance. (Porter calls these employers “free riders.”)
  3. Address the unfair burden of people who have no access to employer-based coverage.These people face higher premiums and find it more difficult to get coverage. “This means first equalizing the tax deductibility of insurance purchased by individuals and through employers,” Porter writes.
  4. Make individual insurance affordable. We need large statewide or multi-state insurance pools that offer premiums as affordable as large employer plans, Porter said. Competition among insurers for these pools would foster value, he said. We also need reinsurance that fairly spreads the cost of insuring Americans who have expensive medical conditions across regional and employer insurance pools.
  5. Income-based subsidies will be needed to help lower-income people buy insurance. These subsidies could be offset by employers that do not offer health insurance but whose employees require public assistance.
  6. Everyone must buy insurance. The young and healthy must opt in to the system. This would generate new revenue for the health care system, lowering premiums for everyone and reducing the need for subsidies, Porter said.

More stories worth a read:

[Havard University Gazette photo by Justin Ide/Harvard University News Office]