PNHP

Common Ground for Legal Adversaries on Health Care

Common Ground for Legal Adversaries on Health Care

By ADAM LIPTAK
The New York Times, September 29, 2011

WASHINGTON — The 2010 health care overhaul law has provoked an unprecedented clash between the federal government and 26 states, dividing them on fundamental questions about the very structure of the federal system. But the two sides share a surprising amount of common ground, too, starting with their agreement in briefs, filed on Wednesday, that the Supreme Court should resolve the clash in its current term.

Until just days ago, it was hardly clear that the Obama administration would agree with the states on the need for prompt review, as there were good political reasons for moving slowly. The court’s decision is now most likely to come just months before the 2012 presidential election.

Their briefs also reflect agreement on matters of substance. The two sides, along with the judges in the majority in the appeals court decision most likely to be reviewed by the justices, all said the dispute is about means rather than ends. There are other ways, they said, for Congress to achieve near-universal health coverage, some of them more expansive than what was enacted.

“Both sides agree that Congress has the constitutional power to enact a national health care system that raised taxes to support a single government agency that pays all medical bills, just like Medicare,” said Walter Dellinger, who served as acting solicitor general in the administration of President Bill Clinton and supports the law.

Randy E. Barnett, a lawyer for some of the plaintiffs who on Wednesday sought Supreme Court review, made essentially the same point. “What I’ve said from Day 1,” he said, “is that if Medicare is constitutional then Medicare-for-everyone is constitutional.”

Mr. Dellinger said there was irony in this harmony. “The constitutional attack is focused on a mandate that was necessary if the new system was to utilize the existing private market, which had traditionally been a conservative and Republican proposal for how to deal with health care,” he said.

To be sure, the two sides dispute whether Congress has the power under the Constitution’s commerce clause to require people to buy insurance through what the federal government calls a minimum coverage provision and the plaintiffs call an individual mandate. But they agree that Congress could have achieved much the same thing through a slightly different mechanism, as Judge Stanley Marcus wrote in his dissent from the 2-to-1 decision issued in August by a panel of the United States Court of Appeals for the 11th Circuit, in Atlanta.

“The plaintiffs and, indeed, the majority have conceded, as they must, that Congress has the commerce power to impose precisely the same mandate compelling the same class of uninsured individuals to obtain the same kind of insurance, or otherwise pay a penalty, as a necessary condition to receiving health care services, at the time the uninsured seek these services,” Judge Marcus wrote.

Judge Jeffrey S. Sutton, one judge on the United States Court of Appeals for the Sixth Circuit in the majority in a 2-to-1 decision in June upholding the law, said the difference between the concededly proper approach and the disputed one was not enough to strike down a major piece of legislation.

“Requiring insurance today and requiring it at a future point of sale amount to policy differences in degree, not kind, and not the sort of policy differences removed from the political branches,” Judge Sutton wrote.

Other judges have acknowledged the distinction but found it legally significant.

“Congress cannot require individuals who choose not to purchase health insurance or individuals who are not currently seeking or receiving services in the health care market to purchase health insurance in order to stabilize the health insurance market,” Judge Christopher C. Conner of Federal District Court in Harrisburg, Pa., wrote this month. “Congress cannot mandate or regulate in anticipation of conduct that may or may not occur in the future.”

The decision of the 11th Circuit is the one most likely to be reviewed by the Supreme Court, if only because it is the one that involves 26 states. It also helps that Solicitor General Donald B. Verrilli Jr. on Wednesday urged the justices to grant a review of that decision rather than the one from the Sixth Circuit. It does not hurt, either, that the states are represented by Paul D. Clement, who served as solicitor general in the administration of President George W. Bush.

Mr. Verrilli and Mr. Clement appear to have areas of agreement about what should follow if the Supreme Court strikes down the requirement to purchase insurance. Both sides have questioned whether the court can surgically remove the heart of the current law without also killing parts of the rest of it.

The 11th Circuit majority, on the other hand, left in place every part of the law except the requirement to purchase insurance, even as it noted that Congress had found the requirement essential to the operation of two other provisions — one forbidding insurers to turn away applicants, the other barring them from taking account of pre-existing conditions.

Lawyers for the federal government have called the three provisions “absolutely intertwined.” In his brief filed Wednesday, Mr. Clement wrote that the 11th Circuit’s decision “erroneously leaves the entire act in place — even provisions that the federal government concedes cannot be divorced from the mandate — notwithstanding compelling evidence that Congress intended the mandate to function as the act’s essential lynchpin and would never have passed the act without it.”

There is agreement on some broader points, too, including that the law, the Affordable Care Act, is one of unusual sweep, ambition and complexity.

In his brief for the administration, Mr. Verrilli said the law was “a comprehensive program of economic regulation and tax measures.”

Mr. Clement said much the same thing, but more vigorously. The law, he wrote, “is a massive collection of sweeping changes that impose substantial new federal obligations on every corner of society and compel financial action from nearly every citizen of the United States.”

The two sides have a final point in common. Each seems quite confident that it will win in the Supreme Court.

http://www.nytimes.com/2011/09/30/us/health-care-adversaries-have-common-ground.html

Medicaid/CHIP patients are shoved out of the office faster

The Effects of Public Health Insurance Expansions

The National Bureau of Economic Research
NBER Digest OnLine, October 2011

In the United States, public health insurance programs cover over 90 million individuals. Changes in the scope of these programs, such as the Medicaid expansions under the recently passed Patient Protection and Affordable Care Act, or in the generosity of these programs, may affect physician behavior.

In “The Doctor Might See You Now: the Supply Side Effects of Public Health Insurance Expansions” (NBER Working Paper No. 17070), Craig Garthwaite finds that after the 1990s implementation of the State Children’s Health Insurance Program (SCHIP) – a partnership between federal and state governments intended to increase insurance coverage for low-income Americans under the age of 19 – more physicians participated in the program, but their total number of hours spent with patients declined as a result of shorter office visits.

Garthwaite finds that there were fewer visits that lasted more than 10 minutes after this public program expansion. The evidence on shorter office visits is consistent with economic models of physician behavior in a system with both public and private payers.

The negative effects of reductions in physician labor supply, such those observed in this study, may be particularly important for Medicaid patients because they are covered by a program that is increasingly not accepted by physicians.

http://www.nber.org/digest/oct11/w17070.html

Most of us who support a single payer national health program do so primarily because it would provide high quality, comprehensive care for everyone. Although the Affordable Care Act will not cover everyone, much of the expansion in coverage that it does accomplish is through increased eligibility for the Medicaid and CHIP programs, chronically underfunded welfare programs. This study demonstrates that such an approach does result in a system with at least two tiers, the lower tier patients facing shorter visits and a decline in access to participating physicians.

There is already enough money in our health care system to provide a single level of comprehensive, high quality care for everyone. We should reject the concept of a separate, underfunded, lower tier program for low-income individuals and families, with a higher tier of great care for the rest of us (though the Affordable Care Act certainly doesn’t ensure that either).

Private Medicare plans shockingly game risk adjustment

The Consequences of Risk Adjustment in the Medicare Advantage Program

The National Bureau of Economic Research
NBER Digest OnLine, September 2011

Since the 1980s, people eligible for Medicare have been able to choose between the regular fee-for-service plan, under which the federal government pays a set fee to health care providers for each service provided, and Medicare Advantage (MA), whereby the government pays private health plans a fee for each individual they enroll. Almost one quarter of Medicare beneficiaries are currently enrolled in Medicare Advantage plans.

Paying the same amount for every person enrolled in a health plan encourages plans to enroll low-cost people and to avoid high-cost ones. Because of this, the federal government historically overpaid for MA enrollees relative to their costs in traditional Medicare. So, in 2004 the Medicare program began to adjust its payments to private plans for enrollees health status. As a result, a plan would, for example, receive a higher “risk-adjusted” payment for a recipient with diabetes or heart disease than for an otherwise identical person without these conditions.

In “How Does Risk Selection Respond to Risk Adjustment? Evidence for the Medicare Advantage Program” (NBER Working Paper No. 16977), Jason Brown, Mark Duggan, Ilyana Kuziemko, and William Wollston study individual-level data for 55,000 people in the Medicare Current Beneficiary Survey (MCBS) from the period 1994 to 2006. Prior to risk adjustment, insurers simply had an incentive to enroll individuals with low costs. After risk adjustment, insurers instead had an incentive to enroll individuals with low costs conditional on their medical conditions. The main reason for this is that the risk adjustment formula pays the plans the average cost of the average person in a particular risk category. The authors demonstrate that, because individuals with less costly cases of diabetes and other health conditions enrolled in MA plans after the move to risk adjustment, overpayments to these plans actually increased.

The risk adjustment formula that is used also explains only 11 percent of an individual’s fee-for-service costs in the year after risk is assessed. The formula systematically over-predicts costs for those with below average costs, and systematically under-predicts costs for those with above average costs. The authors find that individuals who are more expensive than the average person to insure are less likely to enroll in Medicare Advantage plans. So on balance, the government ends up paying the average cost for people who, had they stayed in fee-for-service Medicare, would have cost the government much less.

Before risk-adjustment began in 2004, switching from fee-for-service Medicare to Medicare Advantage increased average individual Medicare spending by $1,800. The authors calculate that using risk adjustment formulas on the population that enrolled before 2004 would have reduced Medicare Advantage overpayments by more than $800 a person. But when the reimbursement formula changed, so did the pattern of enrollment in Medicare Advantage plans. After 2004, switching from fee-for-service to Medicare Advantage increased Medicare spending by approximately $3,000 per person. Thus the shift to risk adjustment actually increased Medicare spending.

Although Medicare Advantage plans did enroll people with higher “risk scores” after risk adjustment was instituted, those people still tended to be significantly below the average cost in their risk category. Furthermore, both before and after risk adjustment, MA enrollees in poor health expressed greater dissatisfaction with their medical care relative to their counterparts in traditional Medicare. This pattern suggests that MA plans invest more resources in their relatively healthy enrollees, perhaps to differentially retain them. Thus the authors conclude that the Medicare Advantage program both increased total Medicare spending and transferred Medicare resources from the relatively sick to the relatively healthy, and that risk-adjustment was not able to address either of these problems.

http://www.nber.org/digest/sep11/w16977.html

And…

How does Risk Selection Respond to Risk Adjustment? Evidence from the Medicare Advantage Program

By Jason Brown, Mark Duggan, Ilyana Kuziemko, William Woolston
NBER Working Paper No. 16977, April 2011

We close by returning to the potential distributional consequences of our results. Regardless of how the surplus described above is split, the MA program appears to expand the cost of Medicare while also transferring relative expenditures from the FFS population toward the financing of care for the MA population. As those switching into MA have, throughout the sample period, lower baseline costs and better self-reported health than do those remaining in FFS, the MA program transfers Medicare expenditure to those who likely have less need for it.

Moreover, as we show in Section 7, the gradient of satisfaction with one’s health care is a more positive function of self-reported health for MA enrollees than FFS enrollees, consistent with MA plans treating their healthier (and thus more profitable) enrollees better so as to differentially retain them. Indeed, exit rates out of MA plans are differentially higher among those in poor health. Therefore, the MA program appears not only to transfer aggregate Medicare expenditures from the relatively higher-cost FFS population to the relatively lower-cost MA population, but it seems to effect a similar transfer within the MA population.

These results suggest that governments may wish to take special care in “contracting out” social insurance. Imperfect pricing – whereby the government overpays a private firm relative to the cost and quality of in-house production – is, of course, a potential concern every time governments contract with a private party and has received great attention in the literature (see, for example, Hart et al. 1997). In the case of, say, paving a road, the consequences of imperfect pricing would seem limited to whatever amount the government overpaid. With social insurance programs, however, imperfect pricing can induce private firms to cream-skim, exacerbating the utility consequences of the underlying inequality the program was initially intended to mitigate. At least in the case of Medicare, we find little evidence that risk adjustment has solved this problem.

http://www.nber.org/papers/w16977

Comment:

By Don McCanne, MD

Never underestimate the ability of the private insurance industry to stick it to us. This shocking study on risk adjustment in the Medicare Advantage program should have been a front page story across the nation. It shows us how the private insurers have used risk adjustment – designed to correct their cheating through favorable selection – to further reap their own rewards by upending the adjustments so that they steal even more funds from us!

How could this be? Some history.

Congress was sold on the concept that private insurers could provide higher quality at lower costs than could the traditional, government-run Medicare program. The Medicare + Choice program was established to do this. Even though the plans were able to selectively enroll healthier, lower-cost patients (favorable selection), the concept still was a failure and plans began withdrawing from the markets. They could not fulfill their promise of lower costs for comparable care.

The conservatives would not give up. It was essential that a robust market for private Medicare plans be established as an initial step toward privatizing the entire Medicare program (a concept still very much alive in the Paul Ryan proposal which was approved in the House of Representatives). They wer
e successful in passing legislation that gave private Medicare plans (now Medicare Advantage) a new life by paying them about 13 percent more per beneficiary than it costs to provide care for them in the traditional fee-for-service program.

As is that weren’t enough, the plans continued to selectively enroll healthier, less expensive patients, further expanding their margins. To counter this, risk adjustment was applied to the payment rates. If the plans’ beneficiaries were healthier than average, they would be paid less. If they were subject to adverse selection – enrolling a greater portion of sicker patients – they would be paid more.

Enter this study. Although it is 55 pages of a very heavy read, seriously testing your math skills, the conclusions can be gleaned from the summary and excerpts above. The plans continued to favorably select their patients, not only by enrolling the healthy, but even more by selecting fairly healthy patients that had just a touch of illness that would allow the insurers to move them into intensified diagnostic groups that increased their payments much more than the level of illness would warrant.

The authors explain that firms have been able to decrease “extensive-margin” selection and increase “intensive-margin” selection. These terms might be obscure to us, but what isn’t obscure is that this chicanery on the part of the insurers allowed them to escape the risk adjustments that would have reduced their overpayments from $1,800 to $800 per beneficiary (still an overpayment), and replace it with a $3,000 per person overpayment!

The authors conclude that “governments may wish to take special care in ‘contracting out’ social insurance.” They are far too kind. We need to throw the damn crooks out, fix our traditional Medicare program, and then provide it for everyone.

Private Medicare plans shockingly game risk adjustment

The Consequences of Risk Adjustment in the Medicare Advantage Program

The National Bureau of Economic Research
NBER Digest OnLine, September 2011

Since the 1980s, people eligible for Medicare have been able to choose between the regular fee-for-service plan, under which the federal government pays a set fee to health care providers for each service provided, and Medicare Advantage (MA), whereby the government pays private health plans a fee for each individual they enroll. Almost one quarter of Medicare beneficiaries are currently enrolled in Medicare Advantage plans.

Paying the same amount for every person enrolled in a health plan encourages plans to enroll low-cost people and to avoid high-cost ones. Because of this, the federal government historically overpaid for MA enrollees relative to their costs in traditional Medicare. So, in 2004 the Medicare program began to adjust its payments to private plans for enrollees health status. As a result, a plan would, for example, receive a higher “risk-adjusted” payment for a recipient with diabetes or heart disease than for an otherwise identical person without these conditions.

In “How Does Risk Selection Respond to Risk Adjustment? Evidence for the Medicare Advantage Program” (NBER Working Paper No. 16977), Jason Brown, Mark Duggan, Ilyana Kuziemko, and William Wollston study individual-level data for 55,000 people in the Medicare Current Beneficiary Survey (MCBS) from the period 1994 to 2006. Prior to risk adjustment, insurers simply had an incentive to enroll individuals with low costs. After risk adjustment, insurers instead had an incentive to enroll individuals with low costs conditional on their medical conditions. The main reason for this is that the risk adjustment formula pays the plans the average cost of the average person in a particular risk category. The authors demonstrate that, because individuals with less costly cases of diabetes and other health conditions enrolled in MA plans after the move to risk adjustment, overpayments to these plans actually increased.

The risk adjustment formula that is used also explains only 11 percent of an individual’s fee-for-service costs in the year after risk is assessed. The formula systematically over-predicts costs for those with below average costs, and systematically under-predicts costs for those with above average costs. The authors find that individuals who are more expensive than the average person to insure are less likely to enroll in Medicare Advantage plans. So on balance, the government ends up paying the average cost for people who, had they stayed in fee-for-service Medicare, would have cost the government much less.

Before risk-adjustment began in 2004, switching from fee-for-service Medicare to Medicare Advantage increased average individual Medicare spending by $1,800. The authors calculate that using risk adjustment formulas on the population that enrolled before 2004 would have reduced Medicare Advantage overpayments by more than $800 a person. But when the reimbursement formula changed, so did the pattern of enrollment in Medicare Advantage plans. After 2004, switching from fee-for-service to Medicare Advantage increased Medicare spending by approximately $3,000 per person. Thus the shift to risk adjustment actually increased Medicare spending.

Although Medicare Advantage plans did enroll people with higher “risk scores” after risk adjustment was instituted, those people still tended to be significantly below the average cost in their risk category. Furthermore, both before and after risk adjustment, MA enrollees in poor health expressed greater dissatisfaction with their medical care relative to their counterparts in traditional Medicare. This pattern suggests that MA plans invest more resources in their relatively healthy enrollees, perhaps to differentially retain them. Thus the authors conclude that the Medicare Advantage program both increased total Medicare spending and transferred Medicare resources from the relatively sick to the relatively healthy, and that risk-adjustment was not able to address either of these problems.

http://www.nber.org/digest/sep11/w16977.html

And…

How does Risk Selection Respond to Risk Adjustment? Evidence from the Medicare Advantage Program

By Jason Brown, Mark Duggan, Ilyana Kuziemko, William Woolston
NBER Working Paper No. 16977, April 2011

We close by returning to the potential distributional consequences of our results. Regardless of how the surplus described above is split, the MA program appears to expand the cost of Medicare while also transferring relative expenditures from the FFS population toward the financing of care for the MA population. As those switching into MA have, throughout the sample period, lower baseline costs and better self-reported health than do those remaining in FFS, the MA program transfers Medicare expenditure to those who likely have less need for it.

Moreover, as we show in Section 7, the gradient of satisfaction with one’s health care is a more positive function of self-reported health for MA enrollees than FFS enrollees, consistent with MA plans treating their healthier (and thus more profitable) enrollees better so as to differentially retain them. Indeed, exit rates out of MA plans are differentially higher among those in poor health. Therefore, the MA program appears not only to transfer aggregate Medicare expenditures from the relatively higher-cost FFS population to the relatively lower-cost MA population, but it seems to effect a similar transfer within the MA population.

These results suggest that governments may wish to take special care in “contracting out” social insurance. Imperfect pricing – whereby the government overpays a private firm relative to the cost and quality of in-house production – is, of course, a potential concern every time governments contract with a private party and has received great attention in the literature (see, for example, Hart et al. 1997). In the case of, say, paving a road, the consequences of imperfect pricing would seem limited to whatever amount the government overpaid. With social insurance programs, however, imperfect pricing can induce private firms to cream-skim, exacerbating the utility consequences of the underlying inequality the program was initially intended to mitigate. At least in the case of Medicare, we find little evidence that risk adjustment has solved this problem.

http://www.nber.org/papers/w16977

Never underestimate the ability of the private insurance industry to stick it to us. This shocking study on risk adjustment in the Medicare Advantage program should have been a front page story across the nation. It shows us how the private insurers have used risk adjustment – designed to correct their cheating through favorable selection – to further reap their own rewards by upending the adjustments so that they steal even more funds from us!

How could this be? Some history.

Congress was sold on the concept that private insurers could provide higher quality at lower costs than could the traditional, government-run Medicare program. The Medicare + Choice program was established to do this. Even though the plans were able to selectively enroll healthier, lower-cost patients (favorable selection), the concept still was a failure and plans began withdrawing from the markets. They could not fulfill their promise of lower costs for comparable care.

The conservatives would not give up. It was essential that a robust market for private Medicare plans be established as an initial step toward privatizing the entire Medicare program (a concept still very much alive in the Paul Ryan proposal which was approved in the House of Representatives). They were successful in passing legislation that gave private Medicare plans (now Medicare Advantage) a new life by paying them about 13 percent more per beneficiary than it costs to provide care for them in the traditional fee-for-service program.

As is that weren’t enough, the plans continued to selectively enroll healthier, less expensive patients, further expanding their margins. To counter this, risk adjustment was applied to the payment rates. If the plans’ beneficiaries were healthier than average, they would be paid less. If they were subject to adverse selection – enrolling a greater portion of sicker patients – they would be paid more.

Enter this study. Although it is 55 pages of a very heavy read, seriously testing your math skills, the conclusions can be gleaned from the summary and excerpts above. The plans continued to favorably select their patients, not only by enrolling the healthy, but even more by selecting fairly healthy patients that had just a touch of illness that would allow the insurers to move them into intensified diagnostic groups that increased their payments much more than the level of illness would warrant.

The authors explain that firms have been able to decrease “extensive-margin” selection and increase “intensive-margin” selection. These terms might be obscure to us, but what isn’t obscure is that this chicanery on the part of the insurers allowed them to escape the risk adjustments that would have reduced their overpayments from $1,800 to $800 per beneficiary (still an overpayment), and replace it with a $3,000 per person overpayment!

The authors conclude that “governments may wish to take special care in ‘contracting out’ social insurance.” They are far too kind. We need to throw the damn crooks out, fix our traditional Medicare program, and then provide it for everyone.

Consensus on the constitutionality of Medicare for all

Some Common Ground for Legal Adversaries on Health Care

By Adam Liptak
The New York Times, September 29, 2011

The 2010 health care overhaul law has provoked an unprecedented clash between the federal government and 26 states, dividing them on fundamental questions about the very structure of the federal system. But the two sides share a surprising amount of common ground, too, starting with their agreement in briefs, filed on Wednesday, that the Supreme Court should resolve the clash in its current term.

Their briefs also reflect agreement on matters of substance. The two sides, along with the judges in the majority in the appeals court decision most likely to be reviewed by the justices, all said the dispute is about means rather than ends. There are other ways, they said, for Congress to achieve near-universal health coverage, some of them more expansive than what was enacted.

“Both sides agree that Congress has the constitutional power to enact a national health care system that raised taxes to support a single government agency that pays all medical bills, just like Medicare,” said Walter Dellinger, who served as acting solicitor general in the administration of President Bill Clinton and supports the law.

Randy E. Barnett, a lawyer for some of the plaintiffs who on Wednesday sought Supreme Court review, made essentially the same point. “What I’ve said from Day 1,” he said, “is that if Medicare is constitutional then Medicare-for-everyone is constitutional.”

http://www.nytimes.com/2011/09/30/us/health-care-adversaries-have-common-ground.html

Comment:

By Don McCanne, MD

The Affordable Care Act represents the most expensive model of reform and yet falls short on universality and affordability, and now it is being challenged as a violation of the Constitution. Why are we defending it when the least expensive model that actually would accomplish our goals has been declared by all parties to be compliant with the Constitution?

Fast tracking the decision is great. Once the legal issues are dispensed with, we can look at the mess we have left, reject it, and move on to enacting an improved Medicare for all.

Additional comment from Merrill Goozner:

What’s interesting about rising insurance premiums is that they are way out of line with the rise in costs, which was only around 4% last year in nominal dollars, which in inflation-adjusted dollars would be just a 2% increase. Both Medicare total expenditures and insurance total expenditures rose (which, after adjusting for inflation was the same rate as economic growth; GDP rose 2.6% in 2010). It was one of the lowest increases in decades, as health care’s share of the economy did not increase for the first time in many years.

So why the hike in premiums. A Goldman Sachs analyst quoted in the WSJ story earlier this week attributed the outsized premium increases to insurance
companies padding their bottom lines.

I blogged on it here: http://gooznews.com/?p=3215

Consensus on the constitutionality of Medicare for all

Some Common Ground for Legal Adversaries on Health Care

By Adam Liptak
The New York Times, September 29, 2011

The 2010 health care overhaul law has provoked an unprecedented clash between the federal government and 26 states, dividing them on fundamental questions about the very structure of the federal system. But the two sides share a surprising amount of common ground, too, starting with their agreement in briefs, filed on Wednesday, that the Supreme Court should resolve the clash in its current term.

Their briefs also reflect agreement on matters of substance. The two sides, along with the judges in the majority in the appeals court decision most likely to be reviewed by the justices, all said the dispute is about means rather than ends. There are other ways, they said, for Congress to achieve near-universal health coverage, some of them more expansive than what was enacted.

“Both sides agree that Congress has the constitutional power to enact a national health care system that raised taxes to support a single government agency that pays all medical bills, just like Medicare,” said Walter Dellinger, who served as acting solicitor general in the administration of President Bill Clinton and supports the law.

Randy E. Barnett, a lawyer for some of the plaintiffs who on Wednesday sought Supreme Court review, made essentially the same point. “What I’ve said from Day 1,” he said, “is that if Medicare is constitutional then Medicare-for-everyone is constitutional.”

http://www.nytimes.com/2011/09/30/us/health-care-adversaries-have-common-ground.html

The Affordable Care Act represents the most expensive model of reform and yet falls short on universality and affordability, and now it is being challenged as a violation of the Constitution. Why are we defending it when the least expensive model that actually would accomplish our goals has been declared by all parties to be compliant with the Constitution?

Fast tracking the decision is great. Once the legal issues are dispensed with, we can look at the mess we have left, reject it, and move on to enacting an improved Medicare for all.

Additional comment from Merrill Goozner:

What’s interesting about rising insurance premiums is that they are way out of line with the rise in costs, which was only around 4% last year in nominal dollars, which in inflation-adjusted dollars would be just a 2% increase. Both Medicare total expenditures and insurance total expenditures rose (which, after adjusting for inflation was the same rate as economic growth; GDP rose 2.6% in 2010). It was one of the lowest increases in decades, as health care’s share of the economy did not increase for the first time in many years.

So why the hike in premiums. A Goldman Sachs analyst quoted in the WSJ story earlier this week attributed the outsized premium increases to insurance
companies padding their bottom lines.

I blogged on it here: http://gooznews.com/?p=3215

Denver Post editorial on battle over health care costs

Editorial: Pointing fingers over health costs

The Denver Post
September 29, 2011

When critics insist the growth of this nation’s health care burden is unsustainable, this is what they mean: The average cost of an employer-provided family insurance plan soared by 9 percent in 2011. That’s far higher than the rate of inflation or the average growth of wages.

Nor is this year’s increase out of line with recent history.

In a word, it’s a looming disaster. And yet our political leaders mostly still refuse to come to terms with it.

Some Republicans immediately sought to blame the Affordable Care Act, which critics call Obamacare, for the latest news, although unsustainable health-care inflation predated the legislation and indeed was one of the main arguments offered in support of its passage.

But many Democrats appear equally determined to sidestep reality when discussing health care costs, insisting — in the face of all early evidence — that the Affordable Care Act will restrain costs over time, if we are patient enough.

We opposed that legislation because we were convinced — and have seen nothing since to change our opinion — that it will not, unfortunately, rein in costs to any major extent. The Congressional Budget Office certainly doesn’t think so, either.

Although both parties are still largely in denial on health care, there are exceptions. Democrats who favored a single-payer system understood that it would have a better chance of achieving cost control than most alternatives, given the experience in other countries. And other Dems have prioritized cost containment.

Some Republicans also understand the need for fundamental reform, with Rep. Paul Ryan, chairman of the House Budget Committee, leading the charge. We take issue with elements of Ryan’s approach — block grants to states for Medicaid and premium subsidies for Medicare coverage that patients would then purchase in the private market — but at least he appreciates the necessity of revamping incentives.

“At its core,” Ryan said in speech this week at the Hoover Institution, “the health care problem is one of inflation, driven by the over-utilization of services, dramatic underpayments, and massive inefficiency.”

And if nothing is done to address those issues, this nation’s future will be bleak indeed.

http://www.denverpost.com/opinion/ci_18998740

Comment: 

By Don McCanne, MD

The Kaiser Family Foundation report on the 9 percent increase in family health insurance premiums brought back to the front pages the issue of unsustainable health care cost increases. The Denver Post had previously opposed the Affordable Care Act (ACA) because they “were convinced — and have seen nothing since to change our opinion — that it will not, unfortunately, rein in costs to any major extent.” So what do they see as our options?

They dismiss the political battle between the Republicans who are blaming ACA for this year’s premium increases, and the Democrats who are defending ACA as a (certainly dubious) vehicle for cost restraint.

They do give credit to Republican Paul Ryan for recognizing the problem, but they “take issue with elements of Ryan’s approach.”

And Democrats? The Denver Post editors state, “Democrats who favored a single-payer system understood that it would have a better chance of achieving cost control than most alternatives, given the experience in other countries.”

The Denver Post falls short of endorsing single payer, but it’s the only truly effective option that they seem to offer.

The better people understand the single payer model, the greater the support that we’ll see. Keep spreading the word.

Schweitzer calls for universal health care

Associated Press
Billings Gazette, September 28, 2011

HELENA, Mont. – Gov. Brian Schweitzer said Wednesday he will ask the U.S. government to let Montana set up its own universal health care program, taking his rhetorical fight over health care to another level.

Like Republicans who object to the federal health care law, the Democratic governor also argues it doesn’t do enough to control costs and says his state should have more flexibility than the law allows. But Schweitzer has completely different plans for the Medicare and Medicaid money the federal government gives the state to administer those programs.

The popular second-term Democrat would like to create a state-run system that borrows from the program used in Saskatchewan. He said the Canadian province controls cost by negotiating drug prices and limiting nonemergency procedures such as MRIs.

Schweitzer said the province’s demographics and economy are similar to Montana in several ways – yet its residents live longer while spending far less on health care.

A Republican state senator heavily involved in crafting GOP measures aimed at undermining the federal health care law said he will have to see Schweitzer’s specific proposal before passing judgment.

“We need state flexibility. Let’s get that flexibility and then we can argue whether we will have more role for the government or a larger role for individual,” said Sen. Jason Priest, the Republican from Red Lodge. “I don’t want to reject it before I see the details. I am just glad he is thinking about it.”

Schweitzer told a federal official Wednesday that he will be asking for a waiver allowing the state to abandon the federal programs in favor of one the state will design itself. Schweitzer said details would be coming in the next few months when the request is complete.

The governor said he expects the request will be rejected, like the feds recently did with his proposal to let him sell prescription drugs at Medicaid prices to all Montanans.

“At the least it will create some dialogue, some discussion,” Schweitzer said.

It is not the first time Schweitzer has criticized the federal health care law, nor is it the first time he has called for some form of cheap government-run insurance.

During the health care debate in Washington, D.C., two years ago, only the most liberal lawmakers were calling for some form of the doomed proposals for “Medicare for all.” But Schweitzer continues to argue that a program like that makes much more sense than the one signed into law by President Barack Obama.

The governor told Marguerite Salazar, a regional director of the Department of Health and Human Services, that Congress has designed a “pack of crap” that gives away far too much to the pharmaceutical industry.

Salazar said she would convey the message to Health and Human Services Secretary Kathleen Sebelius.
Schweitzer said Montanans with private insurance could drop that coverage if they choose and buy into the state-run plan at a cheaper rate. He envisioned a system that would cover, with copays for service, all the uninsured in Montana.

Republican governors have also called getting rid of the federal health care law. They want the feds to send the states a lump sum payment to let them run the Medicaid program how they choose.

Vermont has been creating plans, supported by liberals, to establish a state-run single-payer health care system.

http://billingsgazette.com/news/state-and-regional/montana/article_cf63727a-ea09-11e0-85fd-001cc4c03286.html#ixzz1ZM2C8Y7g

Denver Post editorial on battle over health care costs

Editorial: Pointing fingers over health costs

The Denver Post
September 29, 2011

When critics insist the growth of this nation’s health care burden is unsustainable, this is what they mean: The average cost of an employer-provided family insurance plan soared by 9 percent in 2011. That’s far higher than the rate of inflation or the average growth of wages.

Nor is this year’s increase out of line with recent history.

In a word, it’s a looming disaster. And yet our political leaders mostly still refuse to come to terms with it.

Some Republicans immediately sought to blame the Affordable Care Act, which critics call Obamacare, for the latest news, although unsustainable health-care inflation predated the legislation and indeed was one of the main arguments offered in support of its passage.

But many Democrats appear equally determined to sidestep reality when discussing health care costs, insisting — in the face of all early evidence — that the Affordable Care Act will restrain costs over time, if we are patient enough.

We opposed that legislation because we were convinced — and have seen nothing since to change our opinion — that it will not, unfortunately, rein in costs to any major extent. The Congressional Budget Office certainly doesn’t think so, either.

Although both parties are still largely in denial on health care, there are exceptions. Democrats who favored a single-payer system understood that it would have a better chance of achieving cost control than most alternatives, given the experience in other countries. And other Dems have prioritized cost containment.

Some Republicans also understand the need for fundamental reform, with Rep. Paul Ryan, chairman of the House Budget Committee, leading the charge. We take issue with elements of Ryan’s approach — block grants to states for Medicaid and premium subsidies for Medicare coverage that patients would then purchase in the private market — but at least he appreciates the necessity of revamping incentives.

“At its core,” Ryan said in speech this week at the Hoover Institution, “the health care problem is one of inflation, driven by the over-utilization of services, dramatic underpayments, and massive inefficiency.”

And if nothing is done to address those issues, this nation’s future will be bleak indeed.

http://www.denverpost.com/opinion/ci_18998740

The Kaiser Family Foundation report on the 9 percent increase in family health insurance premiums brought back to the front pages the issue of unsustainable health care cost increases. The Denver Post had previously opposed the Affordable Care Act (ACA) because they “were convinced — and have seen nothing since to change our opinion — that it will not, unfortunately, rein in costs to any major extent.” So what do they see as our options?

They dismiss the political battle between the Republicans who are blaming ACA for this year’s premium increases, and the Democrats who are defending ACA as a (certainly dubious) vehicle for cost restraint.

They do give credit to Republican Paul Ryan for recognizing the problem, but they “take issue with elements of Ryan’s approach.”

And Democrats? The Denver Post editors state, “Democrats who favored a single-payer system understood that it would have a better chance of achieving cost control than most alternatives, given the experience in other countries.”

The Denver Post falls short of endorsing single payer, but it’s the only truly effective option that they seem to offer.

The better people understand the single payer model, the greater the support that we’ll see. Keep spreading the word.

How much should physicians be paid?

Higher Fees Paid To US Physicians Drive Higher Spending For Physician Services Compared To Other Countries

By Miriam J. Laugesen and Sherry A. Glied
Health Affairs, September 2011

Abstract

Higher health care prices in the United States are a key reason that the nation’s health spending is so much higher than that of other countries. Our study compared physicians’ fees paid by public and private payers for primary care office visits and hip replacements in Australia, Canada, France, Germany, the United Kingdom, and the United States. We also compared physicians’ incomes net of practice expenses, differences in financing the cost of medical education, and the relative contribution of payments per physician and of physician supply in the countries’ national spending on physician services. Public and private payers paid somewhat higher fees to US primary care physicians for office visits (27 percent more for public, 70 percent more for private) and much higher fees to orthopedic physicians for hip replacements (70 percent more for public, 120 percent more for private) than public and private payers paid these physicians’ counterparts in other countries. US primary care and orthopedic physicians also earned higher incomes ($186,582 and $442,450, respectively) than their foreign counterparts. We conclude that the higher fees, rather than factors such as higher practice costs, volume of services, or tuition expenses, were the main drivers of higher US spending, particularly in orthopedics.

http://content.healthaffairs.org/content/30/9/1647.abstract

And…

Letter

Alliance of Specialty Medicine
September 26, 2011
To:  Glenn M. Hackbarth, J.D., Chairman
Medicare Payment Advisory Commission

(excerpts)

The Alliance of Specialty Medicine (Alliance) and its member organizations are writing to express our opposition to the Chairman’s recommendations on the Sustainable Growth Rate System (SGR) proposed at the MedPAC meeting of September 15, 2011.

The Alliance recognizes that MedPAC has called for repeal of the SGR repeatedly and we welcome your understanding of the critical need to rationalize physician payment to assure stability of patient access to quality physician care. However, we were dismayed to hear the Chairman’s first recommendation to slash the conversion factor for specialist services by 5.9 percent each year for three years to be followed by a freeze for seven years. The cumulative cut to specialty physician payments would be 18 percent over the first three years. The recommendations seek to shield a small percentage of primary care services furnished by primary care specialties by imposing only a 10-year freeze rather than an absolute cut on these services.

Furthermore, while the Alliance understands MedPAC’s desire to support primary care, we have serious objections to the recommended proposal to essentially hold primary care “harmless” while cutting specialty physicians’ reimbursement.

Private Contracting with Physicians Under Medicare

The Alliance strongly supports empowering patients with the ability to obtain medical services from the physician of their choice. To that end, we believe that patients and physicians should be allowed to privately contract for Medicare services without penalty.

Sincerely,

American Academy of Facial Plastic and Reconstructive Surgery
American Association of Neurological Surgeons
American Gastroenterological Association
American Society of Cataract & Refractive Surgery
American Society of Plastic Surgeons
American Urological Association
Coalition of State Rheumatology Organizations
Congress of Neurological Surgeons
Heart Rhythm Society
North American Spine Society
Society for Cardiovascular Angiography and Interventions

http://thehill.com/images/stories/blogs/healthwatch/specialtymedpac.pdf

Comment: 

By Don McCanne, MD

Today’s message on physician income does not delve into the important topics of fee-for-service, capitation, salary and other such considerations, but rather is intended to provide a perspective on how much money physicians should take home. Having said almost nothing in this first sentence, just opening the topic undoubtedly has already provoked controversy, but we do need to take a look at this.

Before discussing physicians’ net incomes, we should first stipulate that our health care system should be designed to provide all necessary care to everyone. Since health care now is so expensive, that means that we must have some method of pooling funds, and the financing must be progressive. Medicare is an example of pooled funds with progressive financing.

Some of us can remember when Medicare was first established, physicians were allowed to set their own fees. The cost of the program skyrocketed far beyond even the highest cost projections. Medicare was forced into a system (under continual refinement) that controlled fees. Likewise, escalating costs in the private sector forced the insurers into provider contracting as a means of controlling fees. Even the plans that expose patient/consumers to the costs of health care still have limits on how much the physicians can receive.

We need to learn from other nations that have been successful in covering essentially everyone, while spending far less than the United States. The Health Affairs article demonstrates that one important difference between us and those other nations is that we pay physicians more, even with our current private insurance and public program controls on spending.

What is even more alarming is that procedure-oriented specialists are paid much more than primary care physicians. The Health Affairs study cited above looked at orthopedics as a proxy for procedure-oriented specialists. Other studies have shown that very high fees also apply to most other such specialties.

Unfortunately, this is setting up a battle between the primary care and specialty sectors of medicine. The letter to MedPAC (Medical Payment Advisory Commission) sent by the professional organizations representing high-fee specialists states, “we have serious objections to the recommended proposal to essentially hold primary care ‘harmless’ while cutting specialty physicians’ reimbursement.” It’s war.

Worse, the specialists want Medicare rules changed so that they can set their own fees and collect from the patient the full balance beyond the Medicare allowed fees. If you have looked at any Medicare payment statements recently, you know that the amounts that the patient would be responsible for are staggering. Yet this unreasonable demand is from a sector of physicians that are already paid far more than similar specialists in other nations.

How much should physicians be paid? Under our current fragmented system, Medicare is not able to determine the costs of providing care to the beneficiaries since such costs are not segregated, and it is difficult to determine how much of the practice costs should be paid by the private insurers and by cash-paying patients. If Medicare were the only payer (single payer) then pricing could be based on legitimate total practice costs and fair profits (physician net income). This method would provide the greatest value in our health care purchasing – paying enough to be sure that physicians would be there when you need them, but not paying egregiously excessive profits.

Although it would be foolish to try to specify here precise levels of physicians’ incomes for the United St
ates, we can say that adopting an efficient system of financing health care would bring us far closer to getting the levels right. This is partly what we mean by “improved” in an “improved Medicare for all.”

Eliminate the Profit Motive in Health Care

Arnold S. Relman, M.D.
Professor Emeritus of Medicine and Social Medicine, Harvard Medical School
Former Editor-in-Chief, New England Journal of Medicine
Tikkun, September 24, 2009

There are two interrelated critical issues in health reform right now: how to extend and improve insurance coverage, and how to control the unsustainable rise in health care expenditures. Virtually all of the current legislative attention is focused on the first issue but, notwithstanding claims to the contrary, none of the proposals now on the table offers any credible solution for the control of rising costs. Without control of health cost inflation, the present system will not be viable much longer.

Expansion of coverage is of course a highly desirable goal, but it inevitably increases expenditures even beyond today’s exorbitant levels. President Obama has repeatedly said he would veto any health proposal that is not “budget neutral” over the next decade. The legislation now under consideration claims to meet that requirement through savings promised by the insurance, drug and hospital industries and through reductions in Medicare expenditures (excessive payments to private insurers for Medicare Advantage plans would be a major target), possibly supplemented by taxes on employment-based health plans for high income employees. However, critics question whether these measures would fully pay for the almost one trillion dollars of new costs for covering most of the uninsured over the next decade.

But the estimate of the costs of expanded coverage does not include the cost of the constant inflationary rise in all medical expenditures, lately about 6 – 8 percent per year. This would increase total health spending by roughly another two trillion dollars over the next decade. Administration policy-makers speak hopefully of savings to be generated in the long term by switching to electronic records, using more preventive measures, and applying the information gained from studies of comparative effectiveness. But skeptics might call this “faith-based” savings, because there is no solid evidence to support such hopes. The sobering fact remains that something more must be done soon to slow medical inflation or the entire health system will inevitably slide into bankruptcy. And yet none of the legislation currently being considered addresses that problem. Adding more benefits to the system, and covering more people with public and private insurance, are certainly important, but even if those improvements were paid for, they would not slow down the numerous inflationary forces that make our medical care system unsustainable.

What are those inflationary forces? I believe the most important among them are the incentives in the payment and organization of medical care that cause physicians, hospitals and other medical care facilities to focus at least as much on income and profit as on meeting the needs of patients. I have discussed this subject in a recent book (A Second Opinion. Rescuing America’s Health Care. Public Affairs, New York, 2007). The U.S., more than any other advanced country, has come to rely mainly on private markets to deliver medical care, and on fee-for-service to pay its physicians. The incentives in such a system reward and stimulate the delivery of more services. That is why medical expenditures in the U.S. are so much higher than in any other country, and are rising more rapidly. Our business-oriented system inevitably drives up expenditures because in medical care the balancing tensions between the suppliers and consumers of services that constrain costs in ordinary business markets do not exist. Physicians, who supply the services, control most of the decisions to use medical resources, and patients, who are the consumers of those resources, do not pay most of the costs.

The economic incentives in the medical market are attracting the great majority of physicians into specialty practice, and these incentives, combined with the continued introduction of new and more expensive technology, are a major factor in causing inflation of medical expenditures. Physicians and ambulatory care and diagnostic facilities, are largely paid on a piecework basis for each item of service provided. Hospitals also bill insurers according to the days of care and the services they provide, although payments for treatment of an illness may be aggregated. However, all providers compete for income and market share, often advertising and marketing for that purpose. They almost never compete on prices because public and private insurers, not patients, pay most of the costs. Competition in the current medical market therefore tends to drive up total costs because it results in greater use of services, while rarely lowering prices.

Control of medical expenditures is unlikely without a major reform of the payment and organization of medical care. Expanding and improving the medical insurance part of the health system will not solve the expenditures problem unless the perverse incentives in the delivery of care are also corrected. In fact, expansion of insurance benefits without this other reform would probably make matters even worse. A so-called “public option” will not solve this problem either, although its competition might force private insurers to reduce their premiums or increased benefits. But even if some sort of low-cost not-for-profit insurance plan were offered as an optional choice for the uninsured and those dissatisfied with their present coverage, the inflationary effects of fee-for-service payments and an entrepreneurial medical care system would still be operating. After all, Medicare is a low-overhead plan that costs its beneficiaries less than private plans, but the rate of inflation in its expenditures is nearly as rapid as the inflation in private medical insurance expenditures. The benefits of Medicare are just as threatened as those of the private insurance system because costs are rising rapidly in both the public and private sectors of health care.           

Judging from the current debate in Washington, there is little evidence that lawmakers are aware of these facts or, if they are, that they have the stomach for resisting the powerful vested interests that stand in the way of major reform. That is why the Goldman Sachs prediction of a compromised legislative outcome is likely to be correct. At the end of this Congress we will probably end up in a position not unlike that facing the Commonwealth of Massachusetts. Over three years ago it enacted legislation that greatly expanded insurance coverage, but from the outset it faced serious financial problems in funding the increased costs. A special state commission has recommended to the Massachusetts legislature that it consider ways to eliminate fee-for-service payment of physicians in favor of some type of system that would be based on organizations of physicians and hospitals that could accept global prepayments for comprehensive care. It remains to be seen whether and how these recommendations can be implemented, but it is telling that Massachusetts seems now to realize what our national lawmakers have not yet grasped: Sustainable universal, or near-universal, coverage requires more than fixing the insurance system. It needs major reform in the payment and organization of medical care as well.

In my book, and in a recent article in the New York Review of Books (July 2), I have proposed a system of medical reforms that would deal with the cost problems in both the insurance and medical care sectors of our health care system and would ensure good care for everyone. I recommend replacement of the curre
nt mix of public and private insurance plans with universal coverage for comprehensive care that would be funded by a progressive national health insurance tax. Medical care would be provided through community-based not-for-profit multi-specialty group practices, which would be staffed by salaried physicians. When medical insurance is no longer a for-profit business, when physicians no longer are paid on a fee-for-service basis, and when the entire health care delivery system is not-for-profit, economic incentives to over- or underserve the needs of patients can be eliminated by appropriate regulation and we can expect improved quality of care at lower costs. The total national expenditure on medical care can be controlled by the level of national funding, while decisions about the proper use of medical resources can be safely left where they belong, in the hands of physicians and their patients.

Carrying out such a transformation of the health care system would of course be a formidable task, probably achievable only in gradual steps. It would require a sea change in the current political climate. A large part of the public, supported by most business leaders who are outside the medical-industrial complex, and by an awakened medical profession, would have to be convinced that a major reform of this kind offers the only chance for an equitable but affordable medical care system of good quality. In a just-published commentary in the New England Journal of Medicine (“Doctors as the Key to Health Care Reform”, NEJM, September 24, 2009) I explain how crucial change in the organization and payment of medical services is to achieving a sustainable health care system. The medical profession will have to be a willing and active partner in carrying out these reforms.

Lawmakers need votes and public support even more than the money from vested interests, so they probably would act if a majority of voters were to make its wishes clear and if the medical profession were part of this awakening. But before public opinion can be galvanized to demand a sweeping change of this kind we may, unfortunately, have to experience a disastrous financial collapse of the health care system, with widespread loss of benefits. An expansion of coverage without changing the medical care delivery system and controlling medical inflation, might very well hasten such a collapse.

Doctors as the Key to Health Care Reform

By Arnold S. Relman, M.D.
New England Journal of Medicine 2009; 361:1225-1227, September 24, 2009

Experts agree that sustainable health care reform requires reining in rising costs, but few people understand that the control of medical expenditures is largely in the hands of the medical profession. Doctors, in consultation with their patients — not insurance companies, legislators, or government officials — make most of the decisions to use medical resources, thereby determining what the United States spends on medical care.

Most doctors are paid on a fee-for-service basis, which is a strong financial incentive for them to maximize the elective services they provide. This incentive, combined with the continued introduction of new and more expensive technology, is a major factor in driving up medical expenditures. The same incentive is attracting more and more young doctors into specialties that command much higher fees — and therefore guarantee much greater income — than those earned by primary care practitioners. Primary care is rapidly becoming an endangered specialty; an important, but not the only, reason is its relatively low economic rewards.

A system like ours, which is grossly deficient in primary care physicians and dominated by specialists who are trained to use expensive tests and procedures, is inevitably costly, particularly when most specialists practice as independent small businesses, competing for patient referrals and for income. Adjusting the fees paid by insurers, with increases for primary care and decreases for specialized procedures, or basing fees on the quality or outcome of care won’t solve this problem, because specialists can easily control the volume and kinds of services they provide. Furthermore, competition doesn’t lower prices in medical care as it does in other markets, because physicians usually choose the services to be provided and are paid largely by insurance — not by the consumers for whose business they would compete if this were an ordinary market.

To judge from the health care reform proposals getting serious attention in Washington, there is little evidence that lawmakers are aware of, or understand the significance of, these facts — or that, even if they did, they would have the stomach for the major reforms needed to solve this problem.1 Having surveyed all the current legislative proposals for slowing the continued inflation of costs, the Congressional Budget Office is not optimistic. Why should it be? We are not likely to control medical inflation unless the incentives in the traditional fee-for-service payment of doctors are eliminated, but nothing on the table in the health care reform debate even comes close to eliminating them. This fact explains why the private insurance and drug industries have so far been willing to support the Obama administration’s reform proposals. These proposals would expand coverage and increase total health care expenditures, which means more income for insurers and drug manufacturers. Even after their promised help in reducing the increase in costs, these industries will make more money in the reformed system than they do now.

Massachusetts, often mentioned as a model for the nation, enacted legislation more than 3 years ago that achieved nearly universal insurance coverage but from the outset found itself struggling to keep up with rising costs. To control expenditures, a special state commission on health care payment has recommended the elimination of traditional fee-for-service payment.2,3 The commission envisions the creation of new, as-yet-undefined medical management entities that it calls “accountable care organizations” (ACOs), which would organize physicians into multispecialty teams with strong primary care staffing. ACOs could include hospitals, could be for-profit or not-for-profit, and would be expected to take risks only for their performance. Insurance carriers would continue to hold the insurance risk for their contracts with ACOs, and they would pay the latter on a per capita, risk-adjusted basis for comprehensive care. They would also use “pay for performance” as an incentive to promote quality and efficiency. The commission does not specify how physicians in ACOs would be paid, but a salary system is implied by the report’s emphasis on the argument that Massachusetts cannot afford fee-for-service payment of its doctors if it wants to provide near-universal health insurance. Whether the commission’s proposals will prove acceptable to stakeholders and, if so, whether they will ever be implemented remain to be seen.

As it moves to expand insurance coverage, the federal government will soon face the financial difficulty now confronting Massachusetts. However, I believe there is a much simpler national solution that would control costs by eliminating profit incentives and traditional fee-for-service payment while achieving all the advantages of integrated practice. It would allow physicians and their patients to control medical care with less interference by insurers or government than the recommendations of the Massachusetts commission would probably require.

I have proposed a reformed health care system based on tax-supported, universal insurance, with medical care provided by a national network of community-based, private, not-for-profit, multispecialty, doctor-managed group practices.4 The insurance would pay for comprehensive care by the groups. Successful examples of multispecialty group practices already exist in our current health care system: the Mayo Clinic, the Cleveland Clinic, the Permanente Medical Group, the Geisinger Health System, the Marshfield Clinic, the Scott and White Clinic, the Billings Clinic, Denver Health, and many others. However, most of these groups are not prepaid for comprehensive care, and they bill many different payers for their services.

Groups in the system that I propose would pay their staff physicians a salary for doing what doctors ought to be doing: providing patients with the best, most cost-effective care, within the limits of a publicly determined budget. Physicians would not be influenced by the effects of each medical decision on their own income. The groups would enable primary care physicians and specialists to work together, without competition or turf warfare, but with compensation that would be acceptable to specialists and generalists alike.

Groups would compete for patients and for published ratings of their quality — but not for income, because they would not be allowed to keep any net income. In addition, capital improvements would require approval, and groups would be held harmless for any losses due to adverse selection by patients with, or at high risk for, expensive conditions. Capitated prepayment of the groups would allow a central public agency to control the country’s total medical expenditures. This agency would establish standards for group organization, administrative operations, and accountability but would leave individual medical care decisions where they belong — in the hands of physicians and patients. Private insurance plans and employers would have no role in this system.

Achieving reform of this kind would be a major task that would probably have to be carried out in stages. The opposition by vested interests and conservative ideologues would be fierce. To persuade lawmakers to act, the majority of the public, the medical profession, and the business community would have to unite in advocating this change. But without such a political awakening, I believe that the economic incentives and organization of medical care cannot be changed, and the current slide of the system toward bankruptcy will continue. That decline, however, might ultimately cause a disaster that would generate popular demand for real reform.

http://www.nejm.org/doi/full/10.1056/NEJMp0907925