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Government should set the rules, not play the game

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In the comments to my earlier post on health care, Wisewon, who's always worth reading on these matters, offered a fair critique of positing Medicare as the answer to our health-care woes:

Medicare is comfortable with just simple pricing pressures using leverage and calling it a day. So its not like a more rational compensation system is on the horizon -- particularly from Medicare. One underdiscussed topic is how far behind Medicare is around paying for outcomes. There are a number of payers that are moving much further in the direction that you suggest.

So ... you've got a proposal to push physicians to have patients in the 55-64 category be accepted via Medicare, using the hammer approach to reimbursement, rather than anything sensible that you've suggested. So even physicians that would agree that the reimbursement system should be reformed, could still reasonably be concerned with Medicare buy-in.

This is right, so far as it goes. Medicare isn't an innovative payer, and it's not doing the cool, wonkish stuff that policy types would like. If you're looking for an end to fee-for-service medicine, Kaiser Permanente is a lot further along than Medicare. Hopefully, the Medicare Commission, alongside some of the other delivery-system reforms, will change that. But the transition won't be quick, if it happens at all.

That, however, is why I emphasized the importance of bring the health-care system within the confines of a budget, rather than simply changing the way doctors get paid. There are plenty of other countries where doctors get paid for volume but the system is a lot cheaper than it is here. And statist though I am, I'm not confident that the government, or health wonks, really know how to design delicate policies that will change behavior enough to bring costs.

That's why I like the idea of caging the health-care system within a budget -- and it doesn't have to be Medicare's budget. It could also be a voucher plan that still uses private insurers, as Zeke Emanuel and Victor Fuchs have suggested.

The fact that the majority of the system -- workers and people on Medicare, and Medicaid -- don't feel the cost of their premiums makes it impossible to control costs. A budget that we actually stick to, for better or for worse, would force the system to spend something close to what we can pay. And I'm happy to let the private market figure out how to do that, or at least try to figure out how to do that. The government should set the constraints and the private market should decide how to live within those constraints. It's possible that that won't work in health care and more detailed interventions will be necessary, but we should at least give it a shot.

Photo credit: Li Ming Xz -- Imaginechina.

By Ezra Klein  |  December 11, 2009; 11:59 AM ET
Categories:  Budget , Health Reform  
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Comments

I agree. I have Kaiser Permanente as my health provider and health insurer. It is a great system that has been out in front of all others in containing costs. They have an excellent user friendly system where physicians are on a payroll and not trying to run a business and collect fees. The system is prevention front loaded with the focus on primary care. If this country is really serious about improving health care delivery and containing costs, Kaiser points the way.
An example of what I am speaking of. Know what I paid for my colonoscopy? Zip, zero. My shingles vaccine, also zip. Five dollars co-pay for most medications. I communicate with my Dr. online and get home delivery on prescription meds also ordered online. My health record is available to me online, and testing results posted online within 24 hours. Kaiser competes in a public employee exchange in Oregon and offers the most services for the lowest cost premiums.

Posted by: cmpnwtr | December 11, 2009 12:26 PM | Report abuse

What about the debt that doctors in the US start with that they don't have, or at least not close to the degree we do, in other countries? Shouldn't reform of provider payments be coupled with some sort of control or subsidy of medcial school costs? If MDs are starting their careers with 200k in debt and their expected salaries drop significantly, aren't you going to be pushing providers out of the system? And what are the effects of that going to be?

Posted by: senkiri | December 11, 2009 12:33 PM | Report abuse

I too like wisewon's comments but I think he/she is wrong on the issue of medicare payment reform. There is a strong and concerted effort right now, within Medicare and in the Administration -- and supported by dozens of CEOs of key health care systems around the country -- to accelerate payment reform in Medicare. I do not think it will be slow. If we can get the new Medicare Advisory Board the power it needs to push this along, it could have the same response from the private sector that we saw with Reagan's PPS/DRG reforms. Within a year or two, LOS in hospitals had dropped significantly. Mark my word. Once payment reforms are allowed within Medicare on a pilot basis, change will accelerate rapidly in the private sector as well. What is happening behind the scenes right now proves that this is a real priority for HHS and CMS.

Posted by: LindaB1 | December 11, 2009 12:36 PM | Report abuse

Frankly, I think that using leverage is going to be a better way of cutting costs than any of the wonkish stuff thats been proposed. Whats interesting to me about how this debate developed is that the left, who for so long held up single payer as the gold standard for cost cutting because of its enhanced bargaining, became so wrapped up in the technocratic approach that they now see this approach as backsliding. If you ask me, this is the best idea yet (of any of the ideas that actually had a chance of making it into legislation.)

Beyond using leverage as a tool to cut costs, Medicare also cuts costs by taking out profits and by taking out a substantial ammount of overhead. To be fair, I think Medicare's overhead is probably a little less than it should be in order to operate as efficiently as possible, but even if they increased it a little, it would still be significantly less than the overhead of private insurance.

At the end of the day, I don't really care what path is taken as long as it results in increased access to quality health insurance and lower systemic costs. The medicare buy-in isn't enough because it only covers people from 55-64, but its a positive step on both counts.

Posted by: Matt40 | December 11, 2009 12:42 PM | Report abuse

If doctors are willing to be paid less over their careers, I'd be happy to subsidize the education needed to begin them, particularly for primary care docs. But that's not a deal you often hear docs promote.

Posted by: Ezra Klein | December 11, 2009 12:44 PM | Report abuse

Ezra,

the title of your post almost sounds "Republican-esque".

As far as compensating doctors fairly based upon their outstanding debt from medical school why can we not set up a system that allows providers to work off their medical school debts in community health centers. I know its been suggested but in other places but not taken up anywhere.

Posted by: visionbrkr | December 11, 2009 12:46 PM | Report abuse

The fundamental problem with Medicare is that its spending is ultimately determined through the political process. The U.S. political system – for better or worse -- allows the health care industry (or any other well-funded interest groups) to use its financial resources and lobbying power to increase the flow of government funds into the health sector. The idea that Medicare has a “hammer” to force providers to accept lower payment rates is an illusion. Medicare can do this only because there is a safety valve, i.e., the private insurance segment that pays much higher rates to providers. The larger that Medicare (or Medicaid) gets, the less opportunity there is to use the safety valve, so providers will turn their attention to using political pressure to increase payment rates in Medicare. Likewise, establishing some kind of global budget for the entire health care system – both public and private – is unlikely to contain health care costs, since the budget is ultimately set through the political process. There is simply no strong countervailing force that would exert sufficient political pressure to hold down costs.

Is there a solution to this? Unless we change the U.S. political system by reducing the effect of money on elections and legislation, the only potential solution lies in healthy competition in the private market. Government has an important role in setting the “rules of the game” to ensure that the markets are competitive and will benefit consumers. The current Senate and House bills implicitly embrace this approach. For example, the insurance reforms prohibiting medical screening will eliminate “unhealthy” competition based on risk management. This should help to encourage “healthy competition” based on cost, service and quality. Another example is the creation of insurance exchanges, which should offer increased choice and information to consumers, thereby stimulating healthy competition. As the competitive market evolves, insurers (both public and private) will develop new approaches to paying providers. This will probably involve some kind of bundled payment or capitation, which is a “budget” at a micro level rather than the national level. This has a much greater chance of success since it is removed from the political process.

It’s hard to do this right and the results are uncertain, but it’s the best chance we have to design a financially sustainable health care system.

Posted by: BillKramer1 | December 11, 2009 1:27 PM | Report abuse

i think this statement of yours is part of the problem

"The fact that the majority of the system -- workers and people on Medicare, and Medicaid -- don't feel the cost of their premiums makes it impossible to control costs."

i think this statement gets at the heart of the problem

the fact that the costs of the system are driven by the GOVERNMENT PROTECTED "profit" ambitions of the insurers, pharmaceutical companies, medical device companies, medical supplies companies, hospitals, and doctors makes it impossible to provide efficient and effective health care in the united states

the united states congress and the administration puts citizens lives at risk to protect private enterprises

and now i am going to have a temper tantrum

it is outrageous pharmaceutical drug development is be based on a continuous supply of clinical trial participants from the pool of people who cannot afford
health care

you would think the scientific method depended upon the exploitation of sick people

Posted by: jamesoneill | December 11, 2009 1:38 PM | Report abuse

"I'm not confident that the government, or health wonks, really know how to design delicate policies that will change behavior enough to bring costs."

100% agreed. That's a core reason why I'm opposed to single-payer and why European single-payer health budgets are still on an unsustainable path (although much better than ours).

"That's why I like the idea of caging the health-care system within a budget -- and it doesn't have to be Medicare's budget. It could also be a voucher plan that still uses private insurers, as Zeke Emanuel and Victor Fuchs have suggested. "

For the same reasons, the voucher plan is highly preferred, IMO. A national budget still ultimately requires national central planning on cost control, whereas a "minimum benefits value" voucher puts more of the cost control elements in the hands of a diverse market. If we get even better regulations and transparency of insurance companies, we can have them competing on the right things-- effective cost control while maintaining/improving quality.

PS Love the title. That's essentially my approach to health reform in a nutshell.

Posted by: wisewon | December 11, 2009 2:02 PM | Report abuse

"Medicare isn't an innovative payer, and it's not doing the cool, wonkish stuff that policy types would like. If you're looking for an end to fee-for-service medicine, Kaiser Permanente is a lot further along than Medicare."

I'd suggest the more relevant payers-- Kaiser is essentially a capitated, integrated, closed system which may be hard to replicate-- is more like the BCBA MA-Partners arrangement: incentives in place for health IT, performance/outcomes measures, etc.-- all encompassing an increasing percentage of total compensation. You don't need full compensation arranged in this manner, just enough to change behavior. There are a number of innovative payers that are pushing the bounds and getting to a 5-10% level of reimbursement on these measures. Or alternatively, the capitated approach still exists more in California than other places-- spend some time on the website of Hill Physicians Group, read their annual report-- and you'll see many of the behaviors we'd like to see nationwide.

That'd be my only additional comment to LindaB1-- while I appreciate that there is momentum to try this via pilots in Medicare, there are a number of payers that are ALREADY doing this in practice. Medicare is behind the insurance companies today on innovative reimbursement approaches, even if they're starting to be receptive to trying something themselves.

Posted by: wisewon | December 11, 2009 2:10 PM | Report abuse

And I'm happy to let the private market figure out how to do that, or at least try to figure out how to do that.

They have no moral authority and they fight transparency tooth and nail. The gubmint may not be loved, but at least it can be forced to be transparent. Everyone should read Best Care Anywhere and they'll know immediately that to control costs we need a strong authority at the top - but that authority has to be able to be held accountable.

Posted by: eRobin1 | December 11, 2009 2:31 PM | Report abuse

Government: "We know what is best for you"

Citizen: "But, we don't like what we are hearing"

Government: "This is what you NEED"

Citizen: "I'm not sure, it doesn't really make sense"

Government: "Doesn't make sense? Providing coverage to 30 million more people, lowering premiums, bending the cost curve and lowering the deficit while cutting $500 B from Medicare doesn't make sense?"

Citizen: "That sounds nice in a pink unicorn purple fart utopian world, but it doesn't sound practical or realistic"

Government: "But we know what you NEED"

Citizen: "I'm sorry, but we don't support this bill"

Government: "You stupid, teabagging obstructionist"

Citizen: "See you in the Nov. 2010 elections"

Posted by: Magox | December 11, 2009 2:58 PM | Report abuse

erobin,

really? Insurers fight transparency? Insurers are the ones trying to tell everyone that costs have been destroying the system for years. You want transparency in insurers. Look here.

http://findarticles.com/p/articles/mi_m0EIN/is_2008_March_27/ai_n24961137/

This dates back to 2005.

Again the grunts out there that say "uh, insurers evil, governemnt good" really need to pay attention. Neither one is inherently bad, they just need to be able to work more cost effectively together. There are pluses and minuses to both sides.

Posted by: visionbrkr | December 11, 2009 4:40 PM | Report abuse

I have high hopes for the medicare commission, but the track record for the existing committee isn't very good. Medicare continues to reimburse for non-evidence based treatments, mostly in response to industry lobbying and the anxieties of the public.

Without a firm committment to cut costs at a certain rate, the committee is extremely unlikely to make the hard decisions we all expect of it.

Posted by: jdworkin1 | December 11, 2009 9:49 PM | Report abuse

By the way, this doctor would be happy to accept a salary or reimbursement at a certain rate throughout my career (i.e. physician cost control) in exchange for help with student debt and residency work hours. Throw in reform of the tort system, a major source of anxiety for young docs, and now you're really cookin.

Of course the details matter here, but I think it's an inaccurate assumption that we're all against this. The Democrats - and Obama in particular - are driving the grand debate in healthcare. If they want a compromise along these lines they should pursue it, not write a bill that allows costs to go up while whining about physician intransigence.

Posted by: jdworkin1 | December 11, 2009 10:06 PM | Report abuse

"There are plenty of other countries where doctors get paid for volume but the system is a lot cheaper than it is here. And statist though I am, I'm not confident that the government, or health wonks, really know how to design delicate policies that will change behavior enough to bring costs."

Don't these two sentences contradict each other or is it just that other countries have not only better health care systems, not only better politicians, but a more mature population?

Posted by: lensch | December 12, 2009 11:30 AM | Report abuse

What you leave out Ezra, is that physicians don't actually take home more than their western European colleagues in the context of American salaries (i.e. U.S. docs get paid a bit more than the European docs in the same specialty, but then so do U.S. engineers, dentists, accountants, professors, and so forth)(1). American docs have, OTOH, substantially higher overhead; costs of training, costs of malpractice insurance, costs of business (I have to pay rent on the office at American rates rather than French rates, surprisingly!), and -- the really big one -- the cost of getting myself paid by the insurance companies. The French doc doesn't need a billing department, a staff of "insurance verifiers", and a coding specialist. American docs spend somewhere between 20 and 30% (2) of their gross revenues on acquiring their gross revenues.

I was talking to my husband's old dissertation advisor a few weeks ago. His daughter works in Wales for the NHS as a GP. Her base pay is $160K with up to 25% bonus for productivity and pay-for-performance. My base pay for the same job is normally $145K (lower this year because of the economy and so that we didn't have to lay of staff) with up to about $20K for bonus (no bonuses this year -- we aren't bankers). I make a lot of money, but since my undergraduate degree was in engineering rather than political science, I have a hard time labeling $160K as "less" than $145K. You may have a different definition of "less".

1)http://www.oecd.org/dataoecd/51/48/41925333.pdf
2)http://www.rwjf.org/about/product.jsp?id=42728

Why can't I embed links?

Posted by: J_Bean | December 12, 2009 11:43 AM | Report abuse

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