We need a system that encourages providers to work to cure the sicker people, says Kaiser Permanente CEO George Halvorson.

Question: Is there a foreign model that should be held up as a paradigm?

George Halvorson: You know, I’ve spent a lot of time looking at foreign models. I actually chaired this year, the Health Governors of the World Economic Congress in Davos, and I’m the current chair of the International Federation of Health Plans. And that’s health plans from 80 countries around the world. And so I meet all the time with health plans from those other countries. And I have been looking hard to figure out which attributes of those plans would fit in the U.S. and one of the things I’ve learned from working from all of those countries is that every single one does it a little differently.

So, the model in Germany looks a lot like the Netherlands, but it’s not quite the same. Austria, different than both of those, but quite similar. In fact the model that Governor Schwarzenegger proposed in California last year looks suspiciously like the Austrian model. Every country does it slightly differently.

But if I were going to pick a model that I think would transplant well, it’s actually the Dutch model. I think the Dutch have done some really good things. And the thing that they have added to their model more recently is a risk adjuster between the health plans. So, when the health plans go out and recruit members and enroll people, the government in the end does an assessment of who got the healthy people and who got the less healthy people. And if any health plan got a disproportionate number of healthy people, they have to actually pay some money back into the pool. And any health plan that got too many sick people they get more money from the pool. And so what that does is strongly encourage, as we were saying earlier, the health plan to go after the sicker people and do a really good job taking care of sick people because they know in the end they get a risk adjuster from the other plans that enrolled healthier people. So, I think the Dutch model of having payroll deduction, individual choice health plans and then a risk adjuster in the back end has a lot to offer.

It’s a federal model. They basically, in the end of the year, run the core information about each health plan, about how many diabetics do they have, how many congestive heart failure patients, how many asthmatics. They sort through the whole thing and then basically run a formula and if you have enrolled a disproportionate number of people with those expensive diseases in a high level of morbidity, they increase your payment, or if it’s a low level, they decrease your payment. And actually, we do that to some degree in this country on our Medicare Advantage program. We have a risk adjuster formula that works in America, it’s a pretty good formula, it’s not perfect, but it’s a lot better than no formula, and so we already have a history of doing that. We could adapt to the Dutch model fairly easily.

Recorded on:  September 21, 2009