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Delivery System Day: Judy Feder

JudyFeder.JPGJudy Feder is a former congressional candidate and dean of the Georgetown Public Policy Institute, and a health-care policy expert at the Center for American Progress. "I fear this will be terribly boring," she said when I asked her to contribute. Not to worry, I assured her. My blog readers like boring. Why else would they read the blog?

In their appropriate concern for dramatic action to slow cost growth, too many analysts have missed the path in the House bill -- strengthened in the Finance mark -- that will actually do the job. Medicare has to lead the way in moving away from a system that rewards low value, high cost services and undercompensates for time spent with patients to help manage or even prevent illness. Provisions in the Finance bill encourage innovation -- not just by creating a Center for that purpose -- but by empowering it to broadly experiment with new payment mechanisms, requiring their evaluation, and authorizing their broader implementation.

But equally important -- and likely totally unnoticed -- are the provisions in both the House and Senate bills to authorize changes in the existing payment system to re-price services that are just plain over-priced. Until we stop paying too much for the wrong kind of service, we won't get providers to deliver the right kind of service. Getting the current payments right, then, is as important to change as putting new kinds of payments in place.

In other words, it's not just getting the newfangled advances in payment theory right. It's wrangling the prices we already pay into alignment with the worth of what we're buying. Got it.

Photo credit: The Robert Woods Johnson Foundation.

By Ezra Klein  |  September 22, 2009; 10:39 AM ET
Categories:  Health Reform  
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Next: Delivery System Day: Henry Aaron

Comments

Ezra / Dr. Feder -
While it's clear that there is overpayment in numerous ways under Medicare, what's not at all clear is the degree to which moving away from a Fee for Sevice ("FFS") model and readjusting payments will solve our issues. Looking at international comparisons, we do a lot more procedures than other countries. But low-cost countries, especially rich ones, also tend to use the FFS model. I'm wondering if there are simply other aspects that have a greater impact on cost than payment rates and payment models. Guwande's article and the Atlas studies also point to more institutional practices, such as coordination between various specialists, peer review, etc.

Posted by: GrandArch | September 22, 2009 11:01 AM | Report abuse

"It's wrangling the prices we already pay into alignment with the worth of what we're buying." Exactly.

One issue that receives little attention is that physicians' salaries in the US are three times that of (for example) Germany.

The worth of what we're buying, and therefore the price of services, also has to somehow relate to the median household income: would it be helpful to state service fees in terms of percentage of median household income?

Posted by: rmgregory | September 22, 2009 11:17 AM | Report abuse

--"It's wrangling the prices we already pay into alignment with the worth of what we're buying."--

You haven't said anything there, Klein. Nor has Judy Feder. You need an economic *mechanism*, not wishful thinking, to reconnect the buyer with the seller, and government can't give that to you, because all government can do is insulate one side of the transaction from the other side. You and your guest commenters can prattle on all day long but until the real economic incentive of free choice is restored to both customers and providers (by getting government *out* of the health care business), the "problem" will not go away. One cannot force markets outside the laws of economics. However, well intentioned, but less than completely clever people can wreck markets, and that, I'm afraid, is what's about to happen to health care in the U.S.

Posted by: msoja | September 22, 2009 11:17 AM | Report abuse

msoja: Health care isn't a 'market' in any meaningful sense. A few years ago, I had two falls, 10 months apart, which each resulted in complicated multiple arm fractures. The 'list price' for putting my arms back together (before insurance negotiated discounts) was in excess of $75,000. Would it have been 'worth' $75,000 to me to regain the use of my arms? Sure it would have, but there is no way I could have paid it. The argument about need for market mechanisms and consumer price awareness to reduce costs seems to ignore the fact that, in other advanced countries with costs far lower that ours, consumers do not know the costs of individual health care procedures - they either pay through taxes or the employer pays a levy. Why are we so d_mn different? Health care in advance industrial societies is no less a public utility than water and electricity, and we are going to be screwed until we can deal with that reality.

Posted by: exgovgirl | September 22, 2009 11:58 AM | Report abuse

Msoja - I take it you're not an economist? Ackerlof (1970), for example, shows that in situations of imperfect information you often cannot have markets or competition without the state. The state provides some of the support for markets in such situations - it enforces standards, clarifies information, enforces contracts and laws. Similarly, government can deal with principal-agent problems (like patient-doctor or insurer-patient) and externalities.

Health care markets are particularly difficult, because of the expense of some items it's rarely individuals paying all by themselves. Furthermore, there's horrible information about the effectiveness of treatments - similar to the lemons problem - which government can deal with by contributing toward the public good we call comparative effectiveness research.

Lastly, I'd point out that Feder's points regarding Congress deal with Medicare - a government-run system, not private payors. It's looking at better running its own system to get more out of public dollars. It's not telling private payors what to do with their money.

Posted by: GrandArch | September 22, 2009 11:58 AM | Report abuse

and exgov girl- think about how much healthcare you have consumed over the past 10 years and divide it by 10. I don't think that you would be able to afford the average even if the bumps were spread out. THe real thing we need to focus on is how to lower the costs for procedures that people need.

Posted by: spotatl | September 22, 2009 12:08 PM | Report abuse

Feder's main point here, I think, is that Medicare needs to lead the way. It has done so in the past (RBRVS, DRG, etc) and this is one reason why private payers tend to link their payments to a percentage of Medicare. We change Medicare, we change the system.

And exgovgirl asks a great (rhetorical) question: "why are we so different?" We aren't. I consulted with Fortune 500 companies for years on their heath care issues. They all thought they were radically unique. 90% of their issues were common.

Posted by: scott1959 | September 22, 2009 12:23 PM | Report abuse

--"Would it have been 'worth' $75,000 to me to regain the use of my arms? Sure it would have, but there is no way I could have paid it."--

So, you get your Congressmen to steal the money for you. Nice.

Broken arms will only cost more and more as government grows around health care. Just how much of it, exactly, are you willing to foist on your neighbors?

You know, not too many years ago, your broken arms would have meant death to you. Now you get to threaten your neighbor's life with impoverishment or incarceration if he refuses to take care of you. Advances in medicine!

Posted by: msoja | September 22, 2009 12:53 PM | Report abuse

msoja: Geez, you are a real _ssh_ole! Do you think you're immune to accident or disease? Do you carry health insurance? (I have paid our the ying-yang for comprehensive insurance for over 40 years, and strongly support single payer, which would probably cost me even more than my insurance does, if it were financed by progressive taxes, as I think it should be.) As much as it would pleasure me to see people like you rot on the side of the road if they were injured or ill, it's way to messy to have that happen in an advanced, industrial society, so we just all need to chip in our share, and have our DEMOCRATICALLY ELECTED GOVERNMENT take on the responsibility of seeing that we don't get screwed. Unless and until that happens, however, I certainly hope that you are one of the tens of thousands of people who die each year from lack of access to health care.

Posted by: exgovgirl | September 22, 2009 1:20 PM | Report abuse

GrandArch - Pfffffffft. Government has done nothing but distort the health care market (and every other market into which it's injected itself) and perverted everyone's incentives. "Reform" will not make it better. It can't. The problem *is* the government.

Read the clowns here. Klein and crew have a million vapid ideas and no idea how any of 'em will crank out the end of the tube. But they're willing to try, god love 'em, right? And drag everyone into the barrel of misery with them.

They ought to mind their own petty businesses, take care of themselves to the best of their abilities, and be altruistic on their own dimes.

Posted by: msoja | September 22, 2009 1:22 PM | Report abuse

--"I certainly hope that you are one of the tens of thousands of people who die each year from lack of access to health care."--

Scratch a collectivist, find a death panel.

exgovgirl, why in god's name would *anyone* put their trust in a health care "system" that people like you would vote for? You wish me death because I criticize your vapid opinions?

Wow. And I thought it was the Repugs who were uncivil.

Posted by: msoja | September 22, 2009 1:34 PM | Report abuse

msoja..it is not the insertion of the government that creates instability in the health care market. It is the nondiscretionary and unbudgetable nature of the expense. None of us know when we are going to have a heart attack and run up a $100,000 bill. so we buy insurance. As soon as we introduce that third party into the "system" we have the distortion.....now we have less incentive to care what something costs because the bulk of the cost is being paid by someone else.

One answer would be incredibly cruel: no insurance, everyone pays cash. Then we would have severe rationing based on ability to pay.

Another answer is to reform the system as is being attempted here with these bills.....but to suggest that the reforms that are being proposed would increase costs beyond the astronomical increases we have seen to date is illogical.

Posted by: scott1959 | September 22, 2009 2:34 PM | Report abuse

scott1959 - Yer confused on several counts. 1. It *is* meddling government that distorts markets. It's ridiculous to assert otherwise. 2. There is no distortion per se when a person buys an insurance policy if it's stipulated that both parties are free to set their own terms in the matter, which is not the case in this country since about 1942 when government granted businesses the ability to offer insurance free of tax, and then spent the next sixty plus years jerking the industry every which way but loose. 3. Your "rationing based on ability to pay" is a nice conflation of concepts which ignores several distinctions from the more usual type of "rationing" (specifically, the ability of the individual to make choices about whatever is most important at any particular time, and the inherent efficiencies of the free market in supplying what's needed, all versus the stupidity and inefficiency of centralized command and control, etc.), and your "severe" is unsupported, emotional, conjecture. Get the government out of health care (and education, agriculture, housing, etc.) and prices will come down. And... 4. Your "illogical" is itself illogical. The Massachusetts experiment has health costs there rising far above the national average.

All that is happening in the health care world now was predicted in the early sixties when Medicare and Medicaid were dropped on the nation. As surely as night follows day, one health care "crisis" after another has led to one meddling intrustion after another, until here we are, at yet another denouement. Government currently pays fifty percent of the health care bill in the U.S., with money forced from one taxpayer or another, and all along the way costs have risen faster than expected. Medicare and Medicaid weren't supposed to be the biggest bills that the states would have to pay, but there they are, just as people predicted. Well, the latest scam, pushed under the name "reform", is going down the same gold bricked road.

When the bottom falls out, pretend you haven't a clue. It'll be so cute.

Posted by: msoja | September 22, 2009 5:20 PM | Report abuse

Wow, is msoja misinformed. First, the proposal was not for more government involvement in price-setting but less stupid government involvement. Even if you think government is a less efficient and responsive resource allocator than markets you must allow that government can do a better or worse job at what it does. We agree monarchies are a bad form of government, but some are worse for their people than others.

But more importantly, you completely missed the market the change in pricing is aimed at! It is not aimed at consumers/patients. It is aimed at doctors. It is doctors who will respond to the clear changes in prices to favor treatments and approaches to care that become relatively more remunerative than before. It doesn't get more Econ 101 than that

Posted by: jdhalv | September 23, 2009 6:40 AM | Report abuse

--"[Y]ou completely missed the market the change in pricing is aimed at!"--

I didn't, and it makes no difference, anyway. Once a government starts rolling around in them, markets become like breached pigsties, and no one knows how all the little piggies will run. Government intervention is a de facto suspension of the basic rules you're supposed to learn Econ 101.

Posted by: msoja | September 23, 2009 9:13 AM | Report abuse

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