5.4 Chapter Summary

Government involvement in the economy is typically analyzed through the lens of market failure. Market failures in healthcare include externalities, commitment, adverse selection, moral hazard, drug quality, doctor quality, patents, market power, equity, and fairness. Governments intervene by allowing employees tax-free health insurance benefits provided by an employer and subsidizing healthcare through income taxes. The government also intervenes through regulations that influence demand and supply by providing insurance and information to the public about health matters. The Patient Protection and Affordable Care Act was signed into law in 2010 to reduce the number of people without insurance and decrease the overall cost to the healthcare system. The three primary goals were to make affordable health insurance available to more people, expand the Medicaid program, and support innovative medical care delivery methods designed to lower healthcare costs. The provisions of the Act address the triple aim: increase access, improve the quality of care, and reduce the cost of care.

Payers are increasingly looking to providers to assume financial risk, in addition to the risk of clinical quality and outcomes of their managed populations. Numerous types of contracts are being signed between providers and payers: pay for quality, pay for performance, shared risk and shared savings arrangements, bundled payments, accountable care, and capitation. A value-based initiative reduces the cost of care in exchange for incentive payments to providers. Laws and initiatives promoting different value-based initiatives include the Medicare Improvements for Patients and Providers Act (MIPPA), Affordable Care Act (ACA), Bundled Payments for Care Improvement (BPCI), Protecting Access to Medicare Act (PAMA), The Medicare Access and CHIP Reauthorization Act (MACRA), Medicare’s direct contracting model: Global and Professional Direct Contracting Model (GPDC), and Accountable Care Organization Realizing Equity, Access, and Community Health Model (ACO REACH).

Key terms included in this chapter are also listed in the Glossary at the end of the book.

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Exploring the U.S. Healthcare System Copyright © 2023 by Karen Valaitis is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License, except where otherwise noted.

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