PA 574: Health Systems Organization
Session 4 – April 24, 2013
 Collecting
resources
 Distributing

Resources
Both should seek to support and not
driving the system – i.e. reflect system
goals, not create them…
 Goals:
• Protect against financial risk (income and/or health
based)
• Provide health services to populations

Purpose
• Risk: Economic fairness
• Services: Population health
 Mechanisms
(generally)
• Risk: More individual/market justice/private good
• Services: More population/social justice/social good

Broad public taxes (income)
• Generally progressive and least related to health states (risk)

Specific public taxes (wages)
• Less progressive, may have some relation to health states

Specific private “taxes” (insurance premiums)
• Not progressive, tied to health states (groups or individual)

Direct payment (out-of-pocket)
• Regressive(?), directly linked to health states

Any of these can be mixed together…
 Means
of collecting resources can be
used to define system types
• Finance aligns with and supports system goals
and underlying structure
• Direction of determinism is important – support
or driver?

Universalism as important goal
• Universalism requires “fair” collection policy
• Guard against selection – avoiding unhealthy or
letting people use without contributing
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Beveridge Classic – Broad public tax based collection tied
to public run universal system
Beveridge Neo-Classic – Broad public tax based collection
disbursed through private universal system
Bismark Classic – Specific public tax based collection run
through private universal collection and disbursement
systems
Bismark Neo-Classic – Specific public and private tax
based collection run through private universal collection
and disbursement systems
Mixed systems – combinations of above
“Not-so-classics” – versions of above, or mixed but not
universal and usualy very limited
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Beveridge Classic – Broad public tax based collection tied
to public run universal system
Beveridge Neo-Classic – Broad public tax based collection
disbursed through private universal system
Bismark Classic – Specific public tax based collection run
through private universal collection and disbursement
systems
Bismark Neo-Classic – Specific public and private tax based
collection run through private universal collection and
disbursement systems
Mixed systems – combinations of above
“Not-so-classics” – versions of above, or mixed but not
universal and usually very limited
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Beveridge Classic – British NHS,
Norway/Sweden(?)
Beveridge Neo-Classic – France, Canada, New
Zealand
Bismark Classic – Germany, Austria
Bismark Neo-Classic – Netherlands,
Switzerland
Mixed systems – US, Australia
“Not-so-classics” – Many developing countries
and parts of US system (market?)
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Beveridge Classic – VA
Beveridge Neo-Classic – Medicaid
Bismark Classic – Medicare
Bismark Neo-Classic – Most large
businesses, PPACA
“Not-so-classic” – US individual/small
business market before PPACA?
 Universal coverage through:
• Individual mandate to purchase insurance
• Tax based support for insurance purchase up to
400% FPL
• Works through existing private insurers/providers
Looks mostly like Bismarck Neo-classic
model (as would Massachusetts)
 Vermont looking to do Beveridge NeoClassic
 Overall upgrade for individual/small
business insurance market from “not-soclassic”?
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Not much discernible difference
All (but not-so-classics) can accommodate universal
coverage
No clear differences in Triple Aim outcomes
• France has been rated best and its Beveridge Neo-classic
• Use of private provider systems seems to have some edge in patient
experience of care
• Single payer (Beveridge) seems to have slight edge in cost

Slight differences in approaches regarding fairness/equity
• Beveridge really only income based (general taxes, little direct pay
• Bismarck is generally income & health status based, with more direct
payment

Bismarck may be more administratively complex
• Example: Health insurance exchanges under PPACA – price of
individual satisfaction(?)
 Two considerations:
• “Fair” payment to provider
• Best “value” to payer/consumer
 History:
• “Natural”/”Open” approach to reimbursement
• “Fair” payment = pay providers based on what they
decide to do (“open”) and what they see as “fair”.
• Best “value” determined by “natural” system of
professional ethics.
• Cost inflation with limited value challenges this
• How to create reimbursement that embraces Triple
Aim?
 “Piecemeal” Payment – Fee-for-Service:
• Payments for increments of treatment process
• Based on use of “structure” – process piece done by
whom/where
• Retrospective – based on what was done
 Examples:
• “Natural” – Usual and Customary Charges (UCC),
market/contract based fees
• “Rational” – Resource Based Relative Value Units
(RBRVU) – establish fee based on constructed
average efficient provider/practice financials
 Medicare
did RBRVUs – raised primary care
fees and lowered specialty fees

Episode or Case Rate Payment:
• Payments for discrete but locally complete pieces of care
• Combines pieces of treatment into “whole” cases or
episodes of care
• Prospective – based on what you should do in specific
case/episode
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Examples:
• “Natural” – place/process specific – Diagnostic Related
Groups (DRGs) for inpatient care, Resource Utilization
Groups (RUGs) for nursing home care, Pre-natal global
fees – single fee for all pre-natal care
• “Rational” – Place/Process spanning – “true” episode –
“bundled” payments – single fee for knee/hip
replacement that includes pre- and post-surgical care

Global Budgets/Capitation Payments
• Payments for comprehensive care of specific population
• Payment per individual whether they use services or not
(capitation), sums to total payment (global budget)
• Prospective – based on expectation of
population/individual outcomes – not specifically what is
done
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Examples:
• “Natural” – personal health specific – private insurance
premiums
• “Rational” – community health based/income neutral –
“universal” (whole group) coverage – large business
model, Medicare/Medicaid, managed care/ACOs/CCOs
 Achieving
Triple Aim requires
reimbursement that embraces,
incentivizes, and supports all three aims
• Fee-for-service worst – doing more means more
money regardless of value
• Case/episode better – doing more likely is
better
• Global budget best – doing more (or less) isn’t
the issue – doing better is…

But..organization/system & payment interrelated,
so must be aligned:
• Need orgs that can “handle” new, better payment
•
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
methods
Need new data and measurement effort – identifying
episodes, populations, and actual outcomes
Need numbers – larger orgs – prospective payment
based on risk
Need boundary spanning orgs/relationships
Whole system perspective – how one thing effects other
things across system (“true” value assessment)
This is where we are going – or trying to – Triple
Aim orgs/systems supported by appropriate
financing and reimbursement