Once I knew the cast and the people, the next question was obvious: follow the money. Who pays whom, and — the question that explains everything — for what?
Start with the basic flow. You — or more likely your employer — pay a monthly premium to a health plan. The plan pools everyone’s premiums into one giant pot. When you get care, your doctor bills the plan, and the plan pays out of the pot. You cover part of it directly: the deductible, the copay, the coinsurance. (I decoded all of those here.)
Now the important part: how the plan pays the provider. The default setting of American healthcare is fee-for-service: a price for every thing done. An office visit has a price. A blood test has a price. An MRI has a price. Do more things, get more money. The incentive is volume — not health, volume.
Once you see that, a lot of strange behavior stops being strange. The system doesn’t get paid to keep you healthy. It gets paid when you’re sick and receiving services.
The alternatives all try to fix this one flaw. Capitation: the plan pays a provider group a fixed amount per patient per month, and the group keeps what’s left after delivering care. Suddenly prevention is profitable. Bundled payments: one fixed price for a whole episode, like a knee replacement — surgery, hospital, rehab, one check. Go over, you eat it; come under, you keep it. Shared savings: the ACO model — beat the budget while hitting quality targets, split the difference with Medicare.
The umbrella term for all of these is value-based care: pay for the outcome, not the activity. It’s the direction the industry claims to be moving. The reality is messier — most dollars still flow fee-for-service, and the new models layer on top rather than replacing.
Here’s the lens I now carry everywhere: every weird behavior in healthcare makes sense once you ask how does this person get paid. The hospital that keeps you one more day. The plan that denies the claim. The specialist who orders one more scan. Follow the money, and the mystery dissolves.
Previously: the cast, the people. Next: the insurance card, decoded.