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Monday, January 3, 2011

Seeing the light: let's use Medicare to change the world

In medicine, third party payers have been partly if not mostly responsible for price inflation and inefficiency. Because an individual does not pay for most of his or her medical care, there is no incentive for that person to insist on fair pricing and excellent service. Because the third party--an insurance company that may be private or government funded--is not actually receiving services, there is no incentive for that payer to insist on quality, and in most cases higher costs can simply be passed on to the insured.

A solution to this problem could be direct payment for services by the patient, but such a transition would be difficult since prices are already so high that services are unaffordable, and we are deeply entrenched in the third party payment system.

So how do we get our third party payers to act as individuals, and insist on good quality and affordable costs? Right now there is a significant pressure on Medicare to reduce its costs, and so Medicare is a very good place to start.

People love their Medicare.  They may complain about it, but the vast majority of folks are very happy to have a large portion of their medical costs taken care of and to be able to count on care when they are sick or in pain. Medicare's costs, though, are going up faster than nearly any other area of government spending, and Medicare pays doctors and hospitals less than private insurance companies, making Medicare-insured patients less desirable to providers and limiting their choices of providers. Often physicians will not accept new Medicare patients and these patients can't even find providers in the communities where they live.

Much of the excessive costs associated with medical care are associated with coding and billing and generally partitioning care into billable units so that providers can submit requests for reimbursement to insurance companies. This focuses providers on the units of care rather than on the care of the patient, is time consuming and counter-productive. The most efficient way to pay for medical care is to pay the provider directly for care of a patient, either by the month or by the year, and have that provider be responsible for the care of that person in the area of their expertise.  A physician who cares for 1000 patients can make a very adequate living, including covering his or her overhead, for $200 per patient per year. Hospital costs can be high, but most patients rarely or never use a hospital, so their costs are quite affordable, per capita, as well.  Pharmacy costs are high, but much of that is due to insurance billing issues and often use of brand name medications where generics would do, and pharmacies could be quite efficient if they were paid to serve a community rather than per prescription.

What if Medicare offered a comprehensive program to pay for primary care, hospital costs, pharmacy costs and specialty costs? A fixed fee could be paid to providers to deliver services including pharmacies and hospitals and even high volume specialists, and in turn the providers would need to give Medicare administrators data about the overall health of the patients they served, but not bills. If this program were to happen nationwide, patients who were out of town on vacation or who moved from community to community could receive care from Medicare providers without difficulty.  Such a program could be started relatively small, as a Medicare option. Medicare would need to fund tertiary care and care outside of the funded providers if it were necessary, which would give Medicare incentive to make sure that health care delivery was effective, that their patients stayed healthy. Providers would have an incentive to keep patients healthy as well, since more health care would not mean more money. Patients would be more likely to see their primary care physician and get to know that person better so there would be more personalized care.

I would love to be a Medicare provider in such a system.  My record keeping focus would be on the health of my patients, rather than on billing issues. I would be paid to keep these patients healthy, and would get a regular salary. My case load would be lower since I would have to treat fewer patients to receive a salary, and I could be more efficient since I would be spending less time with billing issues. I would spend more time with each patient since I would be providing true comprehensive primary care.

Those who worry about socialized medicine could use traditional third party fee for service plans either through Medicare or privately, though the number of people who prefer this option would likely drop. This system would be an option only. It would start small so bugs could be worked out, and certainly there would be bugs. But after bugs were worked out by Medicare, private insurance would begin to offer such plans. Medicare was an innovator when it first came into existence, providing comprehensive medical coverage to a whole class of people who had been struggling to receive care. It has now become a poorly functioning and ruinously expensive program with a need to make changes.

I think this idea will happen. It will  happen under the auspices of the Center for Medicare and Medicaid Innovation, a program developed under the health care reform law to change the way care is delivered and paid for. It will happen because it is really the only way to deliver care that makes sense without entirely scrapping publicly funded health care and the third party payment system. This system will have to learn from the mistakes of previous experiments with capitation and managed care. Lessons could be learned from the successes of health care cooperatives as well. Such things as massage, home visits and health club membership would be included in benefits, since all of these things efficiently contribute to maintaining health. Nevertheless, patients will have to be patient since major change is never easy. If this works it will work because many committed people put their backs into it, and it will happen slowly.

A system like this will be much less costly and will have a significant impact on our economy in both negative and positive ways. The vast number of people involved in the business of billing and paying bills will need different jobs. The number of people employed by the health care sector will eventually shrink.  Money spent on health care mostly stays in the US economy, and if health care is less expensive it will be important to capture that income in some other way.  Freeing up workers to do truly useful work will be a challenge and an opportunity.


Brian Leekley said...

This is an excellent idea. Back in the 1950s my father, a cooperatives organizer, organized the trade unions based Union Eye Care Center in Chicago. It was successful, and its guiding principle, as I recall my dad expressing it, was that the doctors got paid for keeping members healthy, not for fixing them up when they weren't. He probably meant the same as described above -- a flat monthly or annual salary. And doesn't Mayo Clinic operate that way?

Janice said...

Brian--there are health care cooperatives that do function in this way. Group Health Cooperative and Kaiser are two staff model cooperatives. They're not cheap, though. Mayo clinic has doctors on salary who provide pretty well integrated care, but they are paid as insurance companies pay them, which is piece work, I think.

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