By Theodore R. Marmor
Philadelphia Inquirer (Philly.com), April 13, 2015
In recent weeks, reform legislation that proposes to change how Medicare pays physicians drew much attention. The prod to action was the imminent expiring of the present fee schedule.
For many years, Congress had failed to reach agreement about the rate of increase in physician payments under Medicare. This, in turn, prompted annual, ad hoc “fixes” while postponing decisions on how Medicare should operate as a “purchaser” of medical care.
The surprise of 2015 is that the House of Representatives did agree, in bipartisan fashion, on a remedy. After five years of persistent and contentious debate over the Obama health reform we now know as Obamacare, the sight of Speaker John Boehner (R., Ohio) embracing Minority Leader Nancy Pelosi (D., Calif.) over a health-care bill is indeed newsworthy.
But here, as in other instances, the problem is faulty reasoning from misleading assumptions.
Take the definition of what’s wrong with our current payment arrangements. Many lawmakers say that Medicare should reject the fee-for-service method, the mode Medicare has used since its inception – and the way many industrial nations pay their doctors.
Instead, these lawmakers argue, Medicare should reward doctors for the “quality” rather than the “quantity” of their work, and reward “value” over “volume.” Sylvia Burwell, secretary of Health and Human Services, has fervently embraced “value-based payment.”
This seeming agreement on the need to do away with fee-for-service has prompted much discussion of alternative payment models, such as “capitation,” “bundled payments,” and monetary incentives for exemplary physician behavior.
Sounds plausible, doesn’t it? But the problem is – as all other industrial democracies have learned in the last three decades – there is no single payment panacea. Each method of compensating doctors has the vice of its virtue.
If you pay physicians per capita – known as capitation, an annual or monthly amount for each patient signed up with a practice – the hope is that the doctors will care more about the health of their patients and less about the number of procedures they perform.
But there is little or no evidence to back up this hope. Many other countries use fee-for-service payments, but spend far less on health care than we do, and yet get decent results, without alarming problems of excess procedures.
Under Britain’s National Health Service, physicians were once paid almost exclusively by capitation, and it generally served them well. Now general practitioners get paid partly per capita, partly by meeting targeted actions, and partly by the equivalent of a “salary” for being available on weekends and evenings. They are experimenting with a mix of payment methods.
So the international evidence shows there is no one obvious way to pay doctors. How to manage sensibly the mix of methods is the important challenge.
The celebration of paying for “value over quantity” assumes we know how to identify value and pay for it. Yet, there is considerable disagreement in modern medicine about how much one way of working is better than another.
For example, an attempt to establish a standardized cost-benefit analysis of treatments for Medicaid patients in Oregon in the late 1990s fell apart upon implementation. There was no agreed-upon list of what treatments were more valuable on grounds of both cost and quality, and physicians were rightfully indignant when their professional knowledge about what was best for their individual patients was upended by a rulebook.
In reading the bill that the Senate will soon vote on, I can’t help but notice how the new prescriptions for physician behavior represent marketing jargon more than considered thought. For decades, one has seen prepaid group practice redefined as “managed care,” while actually what was going on were mostly efforts to reduce the costs of care.
We have now seen a whole series of reforms celebrated for giving the patient financial “skin in the game,” based on a vision of a medical-care marketplace where large deductibles force patients to make choices among goods and services that earlier forms of health insurance did not do.
As if these issues weren’t enough to abandon this bill and start over, there are a couple of specific provisions that represent a Trojan horse for the further undermining of traditional Medicare. One is the imposition of deductibles on Medigap plans that the majority of Medicare beneficiaries buy to help with cost-sharing, a reform that will discourage seniors from seeking needed care. The other is a measure that would require wealthier people to pay higher Medicare premiums – a measure that could further erode universal political support for the program.
The Senate should take this legislation back to the drawing board.
Ted Marmor is a professor emeritus of political science and public policy at Yale University and a coauthor, with Rudolf Klein, of “Politics, Health and Health Care.” He can be reached at email@example.com.