End Insurance's Bad Incentives
By Steffie Woolhandler and David Himmelstein
The New York Times
Room for Debate
June 18, 2009
There are a variety of bad ways of paying doctors, but no particularly good ones. Fee-for-service health care rewards the overprovision of care; capitation (a set monthly fee per patient) rewards underprovision; and salaries reward just showing up. The minority of physicians (and hospital administrators) who are motivated mostly by money will find a way to game an incentive system rather than do the hard work of providing excellent care.
Even paying doctors based on quality measures (using data from medical records that the doctors themselves create) can be fudged. For example, if you pay doctors more for care of patients with diabetes with extra incentives for controlling blood sugar, some doctors will neglect to properly instruct patients to fast before their morning blood tests, falsely diagnosing them as ill. These false diabetics will appear to have superb outcomes since they weren’t sick to begin with.
At the same time, most of the myriad details of care and small kindnesses that make for good doctoring would inevitably go unrewarded, making their neglect essential to a doctor’s financial success.
The Medicare payment system illustrates the false hope of financial savings or improved quality through manipulating financial incentives. The system, which pays health care providers based on “diagnosis-related group,” altered hospitals’ incentives, rewarding short hospital stays instead of long ones. But hospitals quickly adapted, and while Medicare patients’ length of stay plummeted, costs continued to skyrocket.
Financial incentives are not necessary for cost control, and are expensive to administer. A single payer system like Canada’s — in which individuals choose their doctors and other health care providers, but the providers bill one agency for their services — limits entrepreneurial rewards and penalties, covers everyone, and saves much on bureaucracy and profits.
Many American doctors now support a single payer approach because it would improve health and remove the crushing paperwork burden that private insurers impose. Paperwork consumes 31 percent of U.S. health spending, nearly double that of Canada. Our nation wastes $400 billion annually on insurance overhead and useless bureaucracy, money that single-payer reform could shift to patient care. That’s enough to cover all of the uninsured, and to eliminate copayments and deductibles for everyone else. A single payer system would allow doctors to return to the patient-centered care that motivated us to go to medical school in the first place.
In contrast, the Senate Democrats’ proposal to require the purchase of coverage would leave private insurers in charge, and hence sharply increase costs while leaving millions uninsured, or covered by skimpy policies. In 2007, illness and medical bills contributed to 62 percent of personal bankruptcies; most of the medically bankrupt were middle-class families with private insurance. Copayments, deductibles, and loopholes that let insurers deny claims leave millions of Americans in financial ruin. The individual mandate now popular in Congress would merely force the uninsured to buy defective policies – boosting revenues for insurers but not protecting patients.
Unfortunately, adding a public plan option would not correct these flaws. The bureaucratic savings would be minuscule. Moreover, a public plan would be forced to either emulate the bad behavior of its private insurance competitors, or fail in the marketplace — swamped by private insurers that dumped sick, expensive patients onto the public. This kind of tinkering around the edges of our insurance company-dominated system won’t fix it.
Steffie Woolhandler and David Himmelstein are associate professors of medicine at Harvard Medical School, primary care doctors in Cambridge, Mass., and co-founders of Physicians for a National Health Program.
http://roomfordebate.blogs.nytimes.com/2009/06/18/better-medical-care-for-less/