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Decoding the language of health-care financing: a primer

Decoding the language of health-care financing: a primer

By Dr. Dimitri Drekonja
MinnPost.com, June 21, 2013

It would be helpful if the public, and certainly medical professionals, understood the basic ways in which we finance health care.

After what seemed like a short hiatus, health-care stories are creeping back into the news, with numerous (and often contradictory) claims: The Affordable Care Act (aka  Obamacare) will stop small businesses from hiring. It is slowing the rise in health-care costs. It will destroy the American medical system. It is a huge gift to the insurance industry. It is socialized medicine. What to believe?

To start, it would help if more people could speak the arcane language of health-care financing. I recently was the attending physician at a local hospital. Since this piece is about translating the language of medicine into plain English, I should clarify that this means that medical students and residents (doctors-in-training) see and examine the patients first, then we talk about them, adjust plans as needed, and thus they learn the practice of medicine.

During these discussions, the topic of health-care financing recently came up, and I was surprised that the medical students had little understanding of how we pay for health care in the United States. They were well aware that we spend more than any other country, and that our outcomes are certainly not better because of this spending. But when asked about the differences between universal coverage, private insurance, Medicare, Medicaid, single-payer health care, socialized medicine, and Obamacare they quickly became confused.

This is not surprising — the topic is confusing, the terms often overlap, and they are frequently used incorrectly by public figures, including politicians and the media. However, it is unfortunate. We need the public to understand the language of health-care financing, since what path we ultimately choose has enormous implications for the physical and financial health of the U.S. population.

To this end, it would be helpful if the public, and certainly medical professionals, understood the basic ways in which we finance health care, and examples of each one. So, here is a primer. People more versed in health policy than I am will likely find errors (hopefully small ones) or oversimplifications, but I hope this will be offset by the fact that more casual readers will understand the difference between socialized medicine and single-payer health care, and that universal coverage can be achieved in many different ways.

Universal coverage. This is not a type of financing. Rather, it is a description, and most people agree, a goal. It means that everyone has some sort of insurance coverage to pay for health care. It can be achieved via private insurance, public insurance, charity, or some combination. People disagree about just how far the U.S. is from universal coverage, but only the most dishonest of observers would say that we have it with our current system.

Private health insurance. This comes in many flavors, and indeed is provided by many (hundreds) of companies. Some are for-profit. Our hometown UnitedHealth Group is one. Minnesota does not allow for-profit insurers to sell plans in Minnesota, so I’ll skimp on details. Suffice it to say that the name is descriptive, and reflects the fact that the primary focus of such insurers is to make money. This introduces an inherent conflict of interest (if care is denied, profits rise), and this is largely why Minnesota does not allow for-profit insurers to sell their products here.

The private health insurers we do have selling their plans in Minnesota include Blue Cross Blue Shield, HealthPartners, and many others. As nonprofits, they are supposed to return excess revenues to their policy-holders, or to invest such revenues in providing better care. These nonprofit private insurers negotiate different reimbursement rates both with care providers (local hospitals, clinics, nursing homes, etc.) and with customers (large businesses, small businesses, and individuals). This negotiation (on both ends) is why comparison shopping between plans is difficult, and entails reading multiple 90-100 page PDF’s describing each plan. If the company you work for is large and has good negotiators, you likely have a cheaper plan than the small business with 75 employees, let alone than an individual.

Public health insurance. Public insurance also comes in two main flavors: Medicare and Medicaid. Both are ways to pay for coverage — they are not government-run health care, they are government-run insurance plans that pay for health care. That care is delivered in the same facilities where people with private insurance go — next time you are in a clinic waiting room, you are likely sitting among patients with both private and public insurance. The care they get is the same. It is simply how the payment is handled that differs. Because Medicare and Medicaid cover many people, and because the government can negotiate rather well, the rates they pay are almost invariably cheaper than the rates private insurers pay.

Medicare is available to all those 65 and older (plus some others, including those with end-stage kidney disease), without restrictions based on pre-existing conditions, ability to pay, etc. In overly simple terms, Medicare part A covers hospital costs, Medicare part B covers outpatient costs, Medicare part C (Medicare+choice) is an option allowing beneficiaries to instead opt for plans provided by private insurers, and Medicare part D is a prescription drug benefit. Parts C and D were added later; thus, Medicare A and B are sometimes called “traditional Medicare.” A little-known feature of Medicare is that it also funds the majority of graduate medical education in the U.S. — i.e., the salary of the physicians-in-training.

The other main public health-insurance plan, Medicaid, is aimed at those with low-incomes, the disabled, and their children. Whereas Medicare is funded through federal payroll taxes, Medicaid is funded by a combination of federal and state dollars. Those people who have low incomes and are over 65 are “dual-eligible,” meaning they can receive benefits from both programs. Since those on Medicaid are by definition without a lot of financial resources, copayments and out-of-pocket expenses are generally smaller than those seen with Medicare, or private insurance plans.

Single-payer health care. This is something that does not exist in the U.S. For full disclosure, I think it should be, and I belong to Physicians for a National Health Program, a group that advocates for a single-payer approach. The closest example is to the north (Canada), but many others exist around the world. Under a single-payer plan, instead of negotiating with and billing several hundred nonprofit and for-profit private insurers, hospitals and doctors bill a single government-run organization, just as they do now with Medicare. The funds come from a population-based tax, again, just as with Medicare. Given the similarities, some have referred to single-payer care as “Medicare for all.”

Socialized medicine. Socialized medicine, which can occasionally be the “S word” of health-care reform, actually does exist in the U.S. In contrast to single-payer health care, where many different hospitals and providers provide care but send the bills to a single insurer, socialized medicine is government-run-and-owned health care. The U.S. example is the Veterans Affairs Administration (again, full disclosure, I am a physician at the Minneapolis VA). This means that the buildings and equipment are owned by the government, and the providers are government employees. In addition to providing health care, the VA also administers disability payments, something that needs to be taken into account when looking at what the VA spends for medical care. The British
National Healthcare System is another example of socialized medicine, among many others.

Finally, Obamacare. What is it? Grossly oversimplified, it is a plan to move toward universal coverage, primarily through an expansion of private health insurance. It expands private health insurance by several means, including: allowing young people to stay on their parents’ plans for a longer time, eliminating the ability of insurers to exclude patients with pre-existing conditions, subsidizing the cost of private insurance for those making too much for Medicaid (but not enough to afford private insurance on their own), and creating insurance exchanges that are supposed to allow for easier comparing of plans. As written, it will not reach universal coverage, and the financial implications are uncertain.

Which system will ultimately help us reach the obvious goal of universal coverage? Who knows. The current system leads to the U.S. spending twice the money of any other country, for inferior results. Obamacare will improve access to health insurance, but will not lead to universal coverage without significant changes. If costs are not decreased, it seems unavoidable that something else will have to be tried, since the alternative would be unaffordable. In my opinion, a single-payer system is the logical next thing to try. If we do, we may want to remember the words of Winston Churchill: “We can always count on the Americans to do the right thing, after they have exhausted all the other possibilities.”

Dimitri Drekonja, MD, MS, FACP, is a staff physician, Minneapolis VA Health Care System, and an assistant professor of medicine, University of Minnesota. The views expressed are his own, and not necessarily representative of the VA, the University of Minnesota, or Physicians for a National Health Program.

http://www.minnpost.com/community-voices/2013/06/decoding-language-health-care-financing-primer

When insurance is too expensive no matter what

By Dan Gorenstein
Marketplace, American Public Media, June 21, 2013

Sunday marks 100 days until millions of Americans can start signing up for subsidized health insurance for the first time in their lives.

The whole point of the Affordable Care Act is to expand health insurance. But here’s the thing, even after the law has taken effect, about 30 million people — almost all of them U.S. citizens — still won’t be covered.

Dr. Steffie Woolhandler, who co-authored a recent report about the uninsured under the new health care law in the journal Health Affairs, explains who will be out of luck.

“The majority are white. Eighty percent are citizens. The majority are employed,” she says. Woolhandler notes most of the 30 million people would get federal money to help pay for insurance. But, she says, with salaries averaging $22,000 for most of them, that won’t be enough.

“Even if you are subsidized, you still have to pay thousands of dollars out of pocket and lots of low- and middle-income people won’t be able to do that,” she says. Woolhandler says many of these people work in industries that don’t offer insurance, such as agriculture, forestry, and the service sector. She says between premiums, co-pays and deductibles, health costs will easily run into the thousands.

“That would be hard,” says Russ, a New York-based musician who says he already has trouble paying his medical bills.

Russ has a bad heart. He says because he only brings in $30,000 a year, some months he skips his blood thinners, other months it’s the cholesterol pills.

“When you have very few alternatives, you tend to take the choice you have to take. The best of a lousy bunch,” he says.

For people like Russ, less insurance means less care. According to the Urban Institute, the uninsured get about half the care they would get if they had insurance.

What does that mean for the rest of us?

“Strictly economically, having 10 percent uninsured means that health care spending will be lower,” says economist Paul Ginsburg, who runs the Center for Studying Health System Change.

And most economists agree lowering health care costs is good for the nation’s economy. But, it might not be that simple.

“We usually want to save money through delivering care more efficiently. Not by having people who need care go without,” says Ginsburg. Ginsburg adds while 30 million uninsured people will save money, there will be costs: sicker patients.

Dan Gorenstein is the senior reporter for Marketplace’s Health Desk. You can follow him on Twitter @dmgorenstein.

You can listen to this story here: http://www.marketplace.org/topics/economy/health-care/when-insurance-too-expensive-no-matter-what

AcademyHealth's ill-judged choice of the 2013 Article-Of-The-Year

From: Health Affairs <healthaff@projecthope.org>
Date: Thu, Jun 20, 2013 at 4:37 PM
Subject: Health Affairs Wins AcademyHealth’s ‘Article-of-the-Year’ Award

AcademyHealth has chosen a Health Affairs article as its 2013 Article-Of-The-Year!

The ‘Alternative Quality Contract,’ Based On A Global Budget, Lowered Medical Spending And Improved Quality
By Zirui Song, Dana Gelb Safran, Bruce E. Landon, Mary Beth Landrum, Yulei He, Robert E. Mechanic, Matthew P. Day and Michael E. Chernew
Web First July 11, 2012; print August 2012

****

The ‘Alternative Quality Contract,’ Based On A Global Budget, Lowered Medical Spending And Improved Quality

By Zirui Song, Dana Gelb Safran, Bruce E. Landon, Mary Beth Landrum, Yulei He, Robert E. Mechanic, Matthew P. Day and Michael E. Chernew
Health Affairs, August 2012

Abstract

Seven provider organizations in Massachusetts entered the Blue Cross Blue Shield Alternative Quality Contract in 2009, followed by four more organizations in 2010. This contract, based on a global budget and pay-for-performance for achieving certain quality benchmarks, places providers at risk for excessive spending and rewards them for quality, similar to the new Pioneer Accountable Care Organizations in Medicare. We analyzed changes in spending and quality associated with the Alternative Quality Contract and found that the rate of increase in spending slowed compared to control groups, more so in the second year than in the first. Overall, participation in the contract over two years led to savings of 2.8 percent (1.9 percent in year 1 and 3.3 percent in year 2) compared to spending in nonparticipating groups. Savings were accounted for by lower prices achieved through shifting procedures, imaging, and tests to facilities with lower fees, as well as reduced utilization among some groups. Quality of care also improved compared to control organizations, with chronic care management, adult preventive care, and pediatric care within the contracting groups improving more in year 2 than in year 1. These results suggest that global budgets with pay-for-performance can begin to slow underlying growth in medical spending while improving quality of care.

From the Discussion

In year 1, total Blue Cross Blue Shield payouts to groups in the contract probably exceeded savings under the global budget. In year 2, savings achieved by the intervention group were generally larger than the surplus payments received. However, total payments to groups from Blue Cross Blue Shield of Massachusetts, including surplus sharing, quality bonuses, and infrastructure support, probably exceeded the savings achieved by most groups that year. This outcome reflects the design of the contract, which set targets based on actuarial projections to save money over its five-year duration, accounting for anticipated quality bonuses and other payments.

In addition, health care spending growth in Massachusetts slowed in this period as a result of general economic factors.

This model is informative for the broader movement toward accountable care organizations.

http://content.healthaffairs.org/content/31/8/1885.abstract

Published response:

Misleading Title And Abstract

By Kip Sullivan

In this article about the effect of the Alternative Quality Contract (AQC) administered by Blue Cross Blue Shield of Massachusetts (BCBS), the authors reported savings in what they variously referred to as “medical spending” and just “spending,” but they also reported that non-medical payments to providers (“surplus sharing, quality bonuses, and infrastructure support”) “probably” exceeded the savings in medical spending. They concluded: “Our findings do not imply that overall spending fell” (p. 1891).

In an earlier paper published in the New England Journal of Medicine, these authors offered the identical caveat.

Despite the authors’ warnings, Health Affairs’ editors permitted the phrase “lowered medical spending” to appear in the title of the paper, they permitted the unadorned word “spending” to appear numerous times in the abstract and text, and they failed to include in the title or the abstract the warning that “overall spending” (medical plus nonmedical costs) probably rose. This combination of errors was extremely misleading.

Health Affairs’ editors compounded these errors by permitting authors of two papers published in the next edition (the September edition) to make misleading statements about Song and colleagues’ article. Citing them, Markovich asserted that the AQC “slowed the…growth in medical spending” (p. 1974), and Sood and Higgins claimed the AQC has “demonstrated…a slowdown in the growth rate of health care spending” (p. 2043). Neither paper warned readers that medical spending is not synonymous with total spending, and that BCBS’s total spending may have gone up.

In a letter to the editor published in the November edition of Health Affairs, Rachel Nardin et al. criticized Song et al. for inserting “lowered medical spending” into the title when in fact total spending probably rose. In their reply, Song and Chernew agreed that “total payments are important” and that they probably rose. But rather than simply conceding that their title and abstract were misleading and that a few simple edits would have fixed the problem, Song and Chernew presented an illogical justification for confusing readers about the difference between medical and total spending. They argued that the need to know how providers respond to the AQC somehow justifies conflating medical with total spending. There is no justification for such an easily avoidable error.

Finally, I note that Song et al. made no effort to measure the cost to the providers of participating in the AQC, or if they did, they did not inform their readers of the outcome of this effort.

The three Health Affairs articles I have cited here are not isolated examples of scholars and editors downplaying or totally ignoring administrative or intervention costs and blurring the distinction between medical and total spending. This problem has plagued the health policy literature for four decades. It reached epidemic proportions in the 1990s.

There is an illogical but widespread assumption within the health policy community that if an intervention, such as the AQC, lowers medical spending, it must also have lowered total spending. But interventions designed to change provider behavior, be they HMOs, pay-for-performance schemes, electronic medical records, utilization review, or “medical homes,” are not free. They create new costs for both insurers and providers. Ignoring these costs, or obscuring them by celebrating reductions in medical spending and saying little or nothing about increases in total spending, should be no more acceptable than ignoring the side effects of drugs and procedures.

http://content.healthaffairs.org/content/31/8/1885.full/reply#healthaff_el_475857

****

Medical Spending And Global Budgets

By Rachel Nardin, David Himmelstein and Steffie Woolhandler
Health Affairs, November 2012

The title of the article by Zirui Song and colleagues (Aug 2012) claims that “The ‘Alternative Quality Contract,’ Based on a Global Budget, Lowered Medical Spending and Improved Quality.” But the Alternative Quality Contract (AQC) only lowered spending if you accept the authors’ idiosyncratic definition of the term medical spending.

In calculating medical spending, the authors exclude three categories of payments that Blue Cross Blue Shield of Massachusetts made to AQC providers: “surplus payments” to providers who kept fee-for-service billing below targets; bonuses for meeting quality goals; and special p
ayments to support providers’ infrastructure to implement the AQC. The authors note, in passing, that these extra payments probably exceeded the “medical” savings. Unfortunately, they report no actual figures for the extra payments (although these figures were presumably available to the two coauthors who are executives at Blue Cross Blue Shield). In other words, Blue Cross Blue Shield’s total costs under the AQC went up by some undisclosed amount, not down.

Global budget payment strategies are currently being promoted as a way to lower total health care costs. The fact that the AQC failed to do this was probably overlooked by many readers and was clearly lost in media reports of these findings and hence in the policy debate.

The case for global budget payment strategies such as the AQC remains unproven.

http://content.healthaffairs.org/content/31/11/2592.3.full

Comment:

By Don McCanne, M.D.

The health policy community has hung its hat on accountable care organizations as being the be-all and end-all for reducing spending and improving quality in health care. Little does it matter that there is a dearth of objective evidence for this concept; they have continued to push it anyway in their support for the Affordable Care Act.

The ultimate gall of the policy community is shown in their selection of this article by Song et al, trumpeting the savings of this Massachusetts Blue Cross Blue Shield Alternative Quality Contract, when, buried in the article, we learn that the savings were burnt up by “surplus sharing, quality bonuses, and infrastructure support.”

Although the program costs, including additional administration, wiped out the medical savings, it is important to look at what the actual medical savings were. These savings were primarily due to “lower prices achieved through shifting procedures, imaging, and tests to facilities with lower fees.” There was virtually no accountable care magic here. They merely extracted better prices from some of the providers. At that, it was only 2.8 percent, a negligible amount when considering how much more effective publicly administered pricing is than pricing through private insurers. But, again, the all important bottom line is that this savings was lost through the non-medical costs of the program.

This AcademyHealth award should serve as a proxy for the compromised integrity that the policy community has shown in their efforts to push the highly flawed Affordable Care Act.

These authors, along with the Health Affairs editors who approved the misleading title, and the committee members who selected this article for the award are no doubt good people, but they did not have the courage to stand up and say, “This conclusion is (expletive deleted)!”

We know what they should have said: “Although we have shown that the promise of the accountable care organization is not fulfilled, nevertheless we do know how to control spending while improving quality and that is through the enactment of a single payer national health program.” But, no, they didn’t have the courage.

Single-Payer Healthcare May Go Before Voters in 2016

A previous ballot measure to create a single-payer system failed in 2002, but activists say they'd try to head that off with a better education campaign

By Christen McCurdy
The Lund Report (Portland, Ore.), June 20, 2013

Supporters of a single-payer healthcare system may decide to put the issue before voters in 2016, depending on what members of the statewide coalition who were behind this year’s failed single-payer bill in the Oregon Legislature decide at next week’s annual meeting.

Peter Shapiro, who serves as organizational development co-chair for Health Care for All Oregon – which will bring members from all over the state to Eugene to discuss the successes and failures of this legislative session, as well as to plan for the future – intends to go over a “fairly detailed political agenda” including some brainstorming about how to proceed in the coming year and beyond.

The group is likely to lobby for another single-payer bill next session, like the one introduced by Rep. Michael Dembrow (D-Portland) this year. That bill failed to make it out of committee due to an impasse over the state budget, which activists said was not surprising.

Earlier this week, a bill that would require the Oregon Health Authority to contract with a third party to study the best way to finance healthcare in the state passed out of the Ways and Means Committee. Health Care for All Oregon wasn’t as active in lobbying for the bill, but activists hope it will help their cause.

“It’s a bipartisan bill, and not just a single payer thing,” because it would require investigation of other systems as well,” Shapiro said.

Still, organizers have been enthusiastic about the bill, because it has the potential to be budget-neutral – the Oregon Health Authority may be able to procure private foundation funding rather than tax dollars to conduct the research – and the bill has had broad support so far.

As for the continued push for single-payer, Shapiro said he has mixed feelings about the possibility of a ballot initiative campaign, though that’s likely to come up in next week’s discussion.

A previous ballot measure – Measure 23 – went before Oregon voters in 2002 and failed, an outcome Shapiro attributed to a “flood of insurance money coming from around the country” which funded an advertising campaign that caused the measure’s majority support to tank to 23 percent.

“We want to be sure, before we go to the voters, that people know what kind of arguments to expect,” Shapiro said.

Still, Shapiro has mixed feelings about the idea of a ballot initiative.

“The problem I have with the initiative campaign, aside from the fact that they’re expensive and time consuming, is that once it’s passed, it’s written in stone” and can’t be amended, he said.

Bill Whitaker, Health Care for All Oregon’s board treasurer, who’s organized a chapter of the organization in La Grande that has 60 people on its roster — 20 to 25 of whom regularly participate in meetings or other activities — said he hopes the study bill passes because he believes it will show – as similar studies have in other states – that a single-payer system is “more fiscally conservative” than other ways of paying for healthcare.

“What we’ve found is that when we ask people if they think that everyone should have access to affordable healthcare, we find most people – regardless of their political persuasion – think that makes sense,” Whitaker said of his efforts to organize a chapter in Union County, where the majority of voters with a party affiliation are registered as Republican. “I think what ultimately will happen is that Republicans are going to realize that the only fiscally responsible way we can provide universal coverage is to go to a universal payer system,” he added.

“Some of the Republican criticisms of the Affordable Care Act are correct. It’s expensive,” Shapiro said, and will still leave nearly 300,000 Oregonians uninsured once it’s fully implemented. Shapiro argued that neither the Affordable Care Act nor the state’s healthcare transformation efforts will adequately address the needs of certain workers, including undocumented immigrants, as well as some workers in the building trades.

“A lot of union health plans could be seriously undermined by the exchanges,” Shapiro said, such as the Taft-Hartley plans offered to union construction workers. “Apart from the practical matter of their ending up in the emergency room which costs more, it’s fundamentally immoral.”

http://www.thelundreport.org/resource/single_payer_healthcare_may_go_before_voters_in_2016

Canadians pay taxes for universal health care, and now they’re richer than us

By Philip Caper, M.D.
Bangor Daily News, June 20, 2013

I’ve been watching with some dismay the wrestling match going on between the governor and the Maine Legislature over the opportunity offered by the federal Affordable Care Act to expand our MaineCare program.

Proponents of expansion of MaineCare make their argument on both moral and economic grounds. Such expansion would provide health care coverage for almost 70,000 low-income Mainers who will otherwise receive no assistance from the ACA. More coverage would result in better management of our burgeoning level of chronic illness as our population ages. That will drive down the use of expensive crisis-oriented emergency services as well as the illness-inducing stress produced by out-of-control health care bills in low-income patients already afflicted by poor health.

Since 100 percent of the costs of the proposed expansion would be borne by the federal government for at least the first three years of the program (gradually reduced to 90 percent by 2020), MaineCare expansion under the ACA would also provide significant economic benefits to Maine in the form of federal dollars and the jobs they will create in every county in the state. According to a new study released last week by the Maine Center for Economic Policy and Maine Equal Justice Partners, if MaineCare were expanded under the terms of the ACA it would stimulate more than $350 million in economic activity, lead to the creation of 3,100 new jobs, and result in the generation of up to $18 million in state and local taxes.

Since the Legislature has now refused to override the governor’s veto of the expansion, those federal dollars (including those originating from Maine taxpayers) and their associated benefits will go to other states that accept the deal.

Some opponents of expansion claim that they don’t trust the feds to keep their word (even though it’s now written into law) and that we won’t be able to get rid of the extra costs should they renege on their commitment. Others are simply philosophically opposed to bigger government. It seems as though some are opposing MaineCare expansion simply out of spite.

This fight could be avoided, and is just a symptom of a more fundamental underlying disease — the way we pay for health care in the U.S. Our insurance-based system requires that we slice and dice our population into “risk categories.”

This phenomenon was made worse by PL 90, the “pro-competition” health insurance reform law passed by the Republican legislature in 2011. Now we’re seeing older, rural Mainers pitted against younger, urban ones. This type of discrimination is the very basis of the insurance business.

Many conservatives still characterize Medicaid as “welfare,” and many think of it as such. Presumably other types of health care coverage have been “earned” (think veterans and the military, highly paid executives, union members and congressional staff). We resent our tax dollars going to “freeloaders.” Until the slicing and dicing is ended, the finger pointing, blame shifting and their attendant political wars will continue.

In sharp contrast, our Canadian neighbors feel much differently. Asked if they resent their tax dollars being spent to provide health care to those who can’t afford it on their own, they say they can’t think of a better way to spend them. “Isn’t that what democracy is all about?” I’ve heard Canadian physicians say, “Our universal health care is the highest expression of Canadians caring for each other.”

Here in Maine, the response tends to be much different. Canadians seem to think health care is a human right. We don’t — yet.

If everybody was in the same health care system in the U.S., as is the norm in most wealthy nations, we would be having a much different and more civil conversation than what we are now witnessing in Augusta. No other wealthy country relies on the exorbitantly expensive and divisive practice of insurance underwriting to finance their health care system. They finance their publicly administered systems through broad-based taxes or a simplified system of tax-like, highly regulated premiums. Participation is mandatory and universal.

Taxation gets a bad rap in the U.S. and consequently is politically radioactive. Yet it is the most efficient, most enforceable and fairest way to finance a universal health care system.

In her excellent New Yorker essay called “Tax Time,” Jill LePore points out that taxes are what we pay for civilized society, for modernity and for prosperity. Taxes insure domestic tranquility, provide for the common defense, promote the general welfare, and take some of the edge off of extreme poverty. Taxes protect property and the environment, make business possible and pay for roads, schools, bridges, police, teachers, doctors, nursing homes and medicine.

Oliver Wendell Holmes once said, “Taxes are what we pay for a civilized society.” The wealthy pay more because they have benefited more.

Canada’s tax-financed health care system covers everybody, gets better results, costs about two-thirds of what ours does and is far more popular than ours with both their public and their politicians. There is no opposition to it in the Canadian Parliament.

What’s not to like about that?

Oh yes, and the average Canadian is now wealthier than the average American. Their far more efficient and effective tax-based health care system is part of the reason.

Physician Philip Caper of Brooklin is a founding board member of Maine AllCare, a nonpartisan, nonprofit group committed to making health care in Maine universal, accessible and affordable for all. He can be reached at pcpcaper21@gmail.com.

http://bangordailynews.com/2013/06/20/opinion/canadians-pay-taxes-for-universal-health-care-and-now-theyre-richer-than-us/print/

Redesigning Medicare cost sharing

Restructuring Medicare

Health Affairs, Health Policy Briefs, June 20, 2013

To reduce federal spending, advance entitlement reform, and simplify benefits, policy makers have proposed redesigning Medicare cost sharing.

What’s The Issue?

Some policy makers have recommended redesigning the program to protect beneficiaries from high out-of-pocket spending, better align incentives to reduce overuse of services, and potentially lower costs for the federal government. Opponents of such reform efforts fear that, in trying to reduce federal spending, reforms will shift costs onto beneficiaries and could make them less likely to seek needed care.

What’s The Debate?

Supporters of redesign believe that cost sharing under a redesigned Medicare program will be more predictable and simpler for beneficiaries to understand and better align incentives to reduce any overuse of services. Others fear that, if designed to reduce federal spending, restructuring the benefit design would likely shift costs onto many Medicare beneficiaries. Critics note that Medicare beneficiaries already spend three times as much of their income on health care as do people under age 65. Critics believe most beneficiaries cannot afford to pay more for their health care and are particularly concerned about proposals that include even higher deductibles or out-of-pocket caps.

Reforms of supplemental coverage, particularly efforts to limit first-dollar coverage, are also controversial. Opponents particularly question the wisdom of Medigap reforms that would likely reduce beneficiaries’ use of both necessary as well as unnecessary services.

The National Association of Insurance Commissioners (NAIC) recently recommended that the Department of Health and Human Services not add cost sharing to Medigap plans. NAIC noted that supplemental plans have little ability to change what care Medicare beneficiaries seek as well as how effective it is: The Medicare program determines what services are covered or not covered, and physicians guide individual beneficiaries on what particular care they need. NAIC expects that beneficiaries are unlikely to disagree with physicians about whether specific care is necessary, regardless of financial incentives.

What’s Next?

Medicare redesign remains a topic of interest on Capitol Hill. The House Ways and Means and Energy and Commerce Health Subcommittees held hearings on this subject on February 26 and April 11, respectively. Ways and Means Subcommittee Chair Kevin Brady (R-TX) indicated that he expected to hold more hearings on the future of Medicare and hoped to forge a bipartisan approach to reforming the program.

http://www.healthaffairs.org/healthpolicybriefs/brief.php?brief_id=95

Comment:

By Don McCanne, M.D.

The topic of “entitlement reform” doesn’t go away. Regarding Medicare, virtually all proposals under current consideration include mechanisms of shifting more costs onto the beneficiaries. As this policy brief states, “Medicare beneficiaries already spend three times as much of their income on health care as do people under age 65.” We cannot place this additional burden on those who need health care the most.

The National Association of Insurance Commissioners agrees that cost sharing should not be added to Medigap plans, for the reasons mentioned above. Why should only those with Medigap plans be protected? The Medigap benefits need to be folded into the traditional Medicare program so that all can benefit by having financial barriers to care removed.

Sadly, the political momentum is moving in the opposite direction – “saving” Medicare by making it less affordable and therefore less accessible for those who need it. Do we simply sit back and watch it happen? If so, “Improved Medicare for All” will continue to wither as a health care justice goal for the nation.

Universal health care and economic freedom go hand-in-hand

By David Callahan
Demos, June 19, 2013

One of the most pernicious myths of the past half century is that guaranteeing health care for all Americans would strike a mortal blow against this country’s system of free enterprise.

That claim has been made endlessly in the context of the Affordable Care Act, and Obamacare critics are now ramping up their predictions of doom as implementation of the law grows near.

But as Robert Frank explained this weekend in the New York Times, the lived experience of other countries like Sweden with national health care systems doesn’t bear out the fears.

In fact, you don’t need to take the word of a progressive economist like Frank on this point. The Heritage Foundation’s research indicates the same thing.

Consider Heritage’s “Index of Economic Freedom,” which measures how friendly countries are to business, investors, and property rights.

The countries that rank the highest on the list are: Hong Kong, Singapore, Australia, New Zealand, Switzerland, Canada, Chile, Mauritius, Denmark, and the United States.

Of those ten countries, nearly every one has a universal health care system or mandates that individuals pay into medical savings accounts. Australia and Canada both have single-payer systems. Denmark’s system is pretty much government controlled. Switzerland’s system is similar in many ways to Obamacare. Among the top twenty nations on the list are Ireland, the U.K., Germany, Sweden, and Finland — other countries that also have universal health care systems.

There are some good reasons why such systems might go hand-in-hand with economic freedom. For one thing, as Robert Frank noted, these systems help keep down healthcare costs: “The United States spends more than $8,000 a person per year on health care, well more than twice what Sweden spends. Yet health outcomes are far better in Sweden along virtually every dimension.”

Lower health care costs mean that business and individuals can channel more money into productive uses that foster a vibrant and globally competitive market economy.

Universal health care systems also make it easier for people to be entrepreneurs or self-employed. While we think of the United States as a place where people are uniquely likely to strike out on their own, this is largely a myth. The U.S. actually has a much lower self-employment rate than most developed countries. Australians, Brits, Germans, Swedes, and so on all are more likely to work for themselves than Americans.

It’s hard to say how much universal health care insurance determines self-employment rates, but common sense suggests you’re more likely to go out on your own if you’re not worried about losing your health insurance.

Now, does all this mean that Obamacare will produce more economic freedom in America? Not necessarily. Ironically, government-run health care systems are better for free enterprise than those — like the ACA — which impose mandates on employers.

I say ironically because, of course, such a truly “socialized” system was off the table during the health care debate thanks opposition by supposed defenders of economic freedom.

David Callahan is a co-founder of Demos, a public policy group based in New York City, and now edits the Demos blog PolicyShop. David is the author of eight books and his many articles have been published in such places as The New York Times, The Washington Post, The Nation, and The American Prospect.

http://www.demos.org/blog/universal-healthcare-and-economic-freedom-go-hand-hand?key=21901560

In-network providers are often not available

Out-of-Network Physicians: How Prevalent Are Involuntary Use and Cost Transparency?

By Kelly A. Kyanko M.D., M.H.S., Leslie A. Curry Ph.D., M.P.H., Susan H. Busch Ph.D.
HSR, June 2013

Objective

To determine the proportion of privately insured adults using an out-of-network physician, the prevalence of involuntary out-of-network use, and whether patients experienced problems with cost transparency using out-of-network physicians.

Data Sources

Nationally representative internet panel survey conducted in February 2011.

Study Design

Screener questions identified a sample of 7,812 individuals in private health insurance plans with provider networks who utilized health services within the prior 12 months. Participants reported details of their inpatient and outpatient contacts with out-of-network physicians. An inpatient out-of-network contact was defined as involuntary if: (1) it was due to a medical emergency; (2) the physician’s out-of-network status was unknown at the time of the contact; or (3) an attempt was made to find an in-network physician in the hospital but none was available. Outpatient contacts were only defined as involuntary if the physician’s out-of-network status was unknown at the time of the contact.

Principal Findings

Eight percent of respondents used an out-of-network physician. Approximately 40 percent of individuals using out-of-network physicians experienced involuntary out-of-network care. Among out-of-network physician contacts, 58 percent of inpatient contacts and 15 percent of outpatient contacts were involuntary. The majority of inpatient involuntary contacts were due to medical emergencies (68 percent). In an additional 31 percent, the physician’s out-of-network status was unknown at the time of the contact. Half (52 percent) of individuals using out-of-network services experienced at least one contact with an out-of-network physician where cost was not transparent at the time of care.

Conclusions

The frequency of involuntary out-of-network care is not inconsequential. Policy interventions can increase receipt of cost information prior to using out-of-network physician services, but they may be less helpful when patients have constrained physician choice due to emergent problems or limited in-hospital physician networks.

http://onlinelibrary.wiley.com/doi/10.1111/1475-6773.12007/abstract

Comment:

By Don McCanne, M.D.

An important role of private health insurers is to control prices through provider contracting. The current trend is to narrow their networks of providers even more. This allows them to further squeeze payments to the providers, in exchange for reducing the numbers of their competitors. If that will slow the increase in insurance premiums, then shouldn’t patients be supportive? No, and here’s why.

When patients obtain their care outside of provider networks, they are inflicted with severe financial penalties, sometimes receiving no coverage at all, plus losing the controlled rates that the insurers have negotiated. This study shows that using out-of-network providers is frequently unavoidable. The problem is particularly severe with in-hospital care, adding to the already burdensome expenditures for high-deductibles and coinsurance.

This is a direct result of placing private insurers in the role of financial intermediaries for our health care. They profit by selling us an inordinate amount of administrative services that we don’t want and shouldn’t need, while penalizing us for obtaining care that we need when we are unable to access providers within their narrow networks.

The model is all wrong. We need to dump the intrusive and wasteful private insurers who are forcing on us services that we don’t want but have to pay for – like taking away our choice under threat of financial penalty. We need to replace them with our own public program that is designed to ensure that we get the care we need, without penalizing us for doing so.

Nation should learn from mine workers

By Ian Swenson
St. Louis Beacon, June 19, 2013

The United Mine Workers of America were back in St. Louis Monday, rallying against Peabody Energy. The UMWA claims that Peabody created a spinoff company, Patriot Coal, that was designed to fail and saddled it with expenses including workers’ health insurance and pensions. When Patriot did in fact file for bankruptcy five years after its creation, 22,000 workers and retirees whose benefits had been reattributed to Patriot Coal lost those earned and negotiated benefits and joined the nearly 50 million Americans without health insurance.

But what do uninsured Americans have to do with you?

Health care is everyone’s problem. Caring for the desperately ill who cannot pay means that everyone who can must pay more. Once you reach age 65, society pays for much of your health care through Medicare. When people such as the Peabody workers are denied coverage and thus the care each of us needs, medical costs go up. No yearly checkups to monitor blood pressure, or diet, or activity level. No colonoscopy to check for colon cancer. No women’s health visits. You get the picture.

Not that private insurance has any interest in your health either. They understand that most Americans will move between multiple insurers before they reach Medicare age. Their interest is not to keep you healthy, it’s to keep you out of a doctor’s office, so that they don’t have to spend money on your case. Why would they invest in you, when you will eventually be someone else’s problem?

But wasn’t Obamacare supposed to fix everything? Well, some things are better, but by handing control of the insurance exchanges over to the states, legislatures such as the one in Missouri can needlessly complicate the process of registering for state insurance, preventing people from signing up. Or with minimums on coverage, employers can lower the standard on their plans from an industry average 80 percent of costs to the minimum 60 percent.

The ACA was a step forward, but in many ways it complicates health care as much as it alleviates problems. It is not the solution.

Long term, we must move to a universal comprehensive system for all Americans, an “Improved Medicare for All” system. One insurer, the government, funded by our progressive taxes, overseen by elected officials rather than profit-driven insurance companies, covering every citizen every day, or what some refer to as “single payer.”

The proof of efficacy exists. Medicare runs at 2-3 percent overhead costs. That’s unheard of in most businesses. Even if you like non-profit insurers, it’s hard to ignore CEOs making salaries of more than a million dollars.

In 2010, the average per-capita cost of health care in the European Union was $2,888. Every European nation handles health cost a bit differently, but each has universal comprehensive care administered by the national government. That same year, the USA spent $8,289 a person, and we didn’t cover everybody.

Those same nations also got better results than we did. When ranked against 16 other developed countries in nine major categories of a nation’s health, the USA was at the bottom or near the bottom in each category. American men: last in life expectancy. American women: next to last. We have the worst infant mortality rate, the highest rate of teen pregnancy and teen STDs, and these health disadvantages exist across all socio-economic groups from birth to 75.

But back to Peabody Energy. The reason companies drop workers’ health care is because the cost of that care is so large and rapidly increasing. Between 2009 and 2011, the cost of health care grew at a rate of 3.9 percent annually, and that was considered slow for the industry. Companies are expecting premiums to increase by about double that next year.

If businesses are having trouble paying for health benefits now, the forecast is absolutely terrifying for their profit margin. But, if the USA were to move to a single-payer health system, the cost of health care would not only be taken off of their hands, but could actually be solved rather than passed around.

A change has to be made and the right choice is clear, logical and proven. America must move to single-payer health care or be prepared to continue suffering the physical and economic consequences.

Ian Swenson is a member of the St. Louis chapter of Physicians for a National Health Program and a senior undergraduate student in biology at Washington University.

http://www.stlbeacon.org/?_escaped_fragment_=/content/31475/voices_swenson_coal_061813

ACOs and liability for institutional malfeasance

The Looming Threat of Liability for Accountable Care Organizations and What to Do About It

By H. Benjamin Harvey, MD, JD; I. Glenn Cohen, JD
JAMA, June 17, 2013

Hundreds of health systems across the country have already adopted the ACO model (accountable care organization) and in so doing have taken on a new role of cost containment. What may be less clear to them is that they are taking on new liability risks.

Unlike MCOs (managed care organizations), ACOs will generally not have the benefit of ERISA, which does not cover them; nor are they slated to get comparable federal liability protections. As a result, ACO cost-containment efforts may be scrutinized by the court when poor patient outcomes result in malpractice litigation. For example, if a poor outcome occurs in a patient with congestive heart failure (CHF), a plaintiff could challenge an ACO’s more stringent CHF hospital admissions criteria, asserting a prioritization of cost savings over patient care. In the absence of a federal law that could offer protection, this medical liability claim would be judged by state-based standards, which do not consider federal cost containment goals when determining whether a medical decision was appropriate. Based on MCO liability case law, state courts may hold ACOs liable in this situation.

Under “agency theory” in tort law, a plaintiff in a malpractice suit is permitted to hold a health system liable for the negligent actions of its employee, ie, the treating clinician. A patient may also sue a health system directly, claiming that policies or actions of the health system are negligent. Thus, whether ACOs or not, health systems are exposed to institutional liability related to medical malpractice. How big of a divergence is ACO liability from the existing forms of institutional liability common to health systems? The key difference is the introduction of a new dimension of medical malpractice liability that goes hand in hand with the cost containment charge: the claim that the ACO’s actions or policies prioritized cost savings over patient safety, contributing to the plaintiff’s harm.

Allegations of institutional malfeasance related to cost-saving efforts could increase liability costs and create a chilling effect on ACOs. Moreover, these suits need not progress to trial to threaten ACOs. The assertion of institutional malfeasance alone adds strength to a lawsuit and introduces the potential for punitive damages. This could increase jury awards and settlement amounts. In addition, the broader nature of the claims will enable more robust discovery beyond the care received by the patient. Discovery could now reach into the corporate boardroom as a plaintiff attempts to show that institutional policies regarding resource utilization or physician compensation stifled appropriate treatment. For the ACO, this increased complexity means greater defense costs and increased pressure to settle. Beyond cost increases from more garden-variety medical malpractice cases, ACOs also could be exposed to new theories of liability. It is possible to envision a class action suit seeking injunctive relief or damages against institutional policies felt to be potentially harmful to patients, such as physician incentives payments.

http://jama.jamanetwork.com/article.aspx?articleID=1697985

Comment:

By Don McCanne, M.D.

The primary purpose of accountable care organizations is to reduce health care spending. By participating in these schemes – accepting financial rewards for reducing care – physicians are exposing themselves not only to malpractice claims for negligence through failure to provide adequate health care services, but they are also exposing themselves to punitive damages for participating in institutional malfeasance related to cost-saving efforts. Surely during the trials the plaintiffs’ attorneys will let slip out the “G” word – GREED!

Greed: The secret word a la Groucho Marx (15 seconds): http://www.youtube.com/watch?v=ECQ-HuArv3s

Single payer saves money by reducing waste and improving resource allocation. It does not do it by paying physicians incentives for reducing health care. Most physicians surely would want to avoid even the least semblance of greed.

Trans-Pacific Partnership undermines health system

Medical corporations seek tools to protect their profits despite harmful effects on public health

By Margaret Flowers, M.D.
Al-Jazeera, June 17, 2013

The Trans-Pacific Partnership (TPP) is a deal that is being secretly negotiated by the White House, with the help of more than 600 corporate advisers and Pacific Rim nations, including Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. While the TPP is being called a trade agreement, the U.S. already has trade agreements covering 90 percent of the GDP of the countries involved in the talks. Instead, the TPP is a major power grab by large corporations.

The text of the TPP includes 29 chapters, only five of which are about trade. The remaining chapters are focused on changes that multinational corporations have not been able to pass in Congress such as restrictions on internet privacy, increased patent protections, greater access to litigation and further financial deregulation.

So far, all that is known about the contents of the TPP is from documents that have been leaked and reports from NGOs and industry meetings. Unlike other trade deals, the White House refuses to make the text available to the public. In fact, the negotiators refuse to publish the text until four years after it is signed into law. Why are they being so secretive? Former U.S. Trade Representative Ron Kirk said he opposed making the text public because doing so would raise such opposition that it could make the deal impossible to sign.

From the information available, one thing is clear about the impacts of the TPP on health care: the intention of the TPP is to enhance and protect the profits of medical and pharmaceutical corporations without considering the harmful effects their policies will have on human health.

We know that the TPP will extend pharmaceutical and medical device patents and provide other tools to keep the prices of these necessities high. This will make medications and treatments unaffordable for millions of people and raise the costs of national health programs. At its worst, the TPP will provide a pathway to infect the world’s health systems with the deadly parasite of for-profit health corporations that plague the U.S.

Patents keep prices high

Through the TPP, pharmaceutical and medical device corporations are seeking extensive patent protections using a process known as “Evergreening.” The TPP gives 20 years of patent protection for pharmaceuticals and medical devices; however, patents can be renewed for another 20 years each time there is a change in an indication or delivery. For instance, if a drug is indicated for headaches, but then the pharmaceutical company finds that it is also helpful for stomach cramps or makes it a capsule instead of a tablet, a new patent may be issued. In reality, patents can be extended indefinitely under the TPP.

Doctors Without Borders criticized this practice, stating that patent protections in previous trade agreements raised the price of life-saving medications and made them unavailable to people in poorer countries. Patents prevent the production of low cost generic forms of medications. Yet it was the availability of generic medicines to treat HIV and other infectious diseases that allowed advances to be made in decreasing their impact in developing countries.

Because of the negative impact on public health from patent protections in previous trade agreements, such as the Korea Free Trade Agreement, former President Bush rolled some of these practices back. Unfortunately, the TPP will move them forward again.

In fact, the TPP goes farther than previous agreements by also requiring that surgical techniques, medical tests and treatments be patented. This will restrict the availability of these treatments, especially in health systems that have limited resources.

Doctors Without Borders also expressed concern that patent protections encourage innovation based on profit instead of the needs of people, particularly those in poor nations. Corporations do not see it as in their financial interest to address health conditions more prevalent in poor nations which do not have the financial resources to buy their products. But it is often in these situations treatments can have the greatest impact on quality of life.

Attacking public health systems

An area of great concern is language within the TPP concerning State-Owned Enterprises (SOEs). These are institutions that are fully or partially owned by governments. SOEs are very common in countries such as Vietnam, Malaysia and Singapore.

Corporate lobbyists are concerned that SOEs have “unfair advantages” over private industry. These advantages include government subsidies, preferred tax status, low finance rates and access to capital. According to a leaked chapter, corporate lobbyists believe that there is a conflict of interest because SOEs have political considerations such as functioning to provide basic goods and services for their population and believe that instead SOEs should operate strictly as commercial entities seeking profit.

The TPP requires SOEs to disclose any special advantages they receive and the government to give the same advantages to corporations. It also provides methods for corporations to sue governments if they believe that they are not being treated fairly. The text outlines punishments such as increased tariffs on exports from the country found in violation and suspension of any “tariff concessions” made to the country in violation on imports.

Text from a section of the TPP called “Annex on Transparency and Procedural Fairness for Healthcare Technologies” was leaked in June 2011. It reveals this conflict between medical industries that have strictly commercial interests and public health systems that are concerned about the health of the population. Medical industries are pushing on all fronts to keep their prices high while public health systems must negotiate to keep prices affordable and maximize what they can cover within their budgets.

To the medical industries, such price negotiation is one of the “unfair advantages” of public health systems. When a public health system negotiates a lower price, it is said to be exerting its market power. On the flip side, when a government extends patent protections to medical industries to keep prices high, this is not considered to be an unfair advantage granted by the government.

Medical industries are pushing for other concessions within the TPP to “level the playing field,” also known as forcing public entities to operate as market-based entities, such as factoring the cost of not just research, development and production of drugs and medical devices, but also the cost of marketing them into what is considered to be a fair market price. And they only view prices negotiated without any government influence as fair. These provisions are significant because the TPP allows pharmaceutical corporations and others to challenge the legitimacy of any reimbursement decisions made by public health systems through the courts.

Patent and price protections for multinational pharmaceutical and medical device corporations based in the U.S. will benefit their bottom line and their investor’s pockets, but may bounce back and undermine public health systems in the U.S. The leaked text indicates that the above provisions only apply to health authorities under the jurisdiction of the federal government. However, the loopholes are large enough that all of the U.S. public health systems, which include Medicare, Medicaid, Tricare and the Veterans Health Administration, can arguably be considered to be federal.

These systems already struggle within the market-based U.S. health system that is most expensive in the world. The U.S. health system wastes one-third of health dollars on a bloated bureaucracy due
to thousands of different health insurance plans, each with different rules. And people in the U.S. pay the most for prescriptions and health services because there is no rational system for setting prices. High prices in the private health sector drive up prices in the public health sector too. For example, at present Medicare is prohibited from negotiating a bulk price for pharmaceuticals.

Over the past four years, there has been an increase in self-rationing in the U.S., patients avoiding or delaying necessary medical care and medications, due to health costs. At the same time, CEOs of health industries are the highest-paid in the nation. For the good of public health, we must reverse this trend towards greater privatization and lower the cost of care. But the TPP will protect the medical industries and give them greater power to use their wealth and the rigged trade tribunal court system to protect their profits.

This will undermine health systems in the U.S. and abroad. High prices could bankrupt public health systems like those in Japan and Australia (ranked among the top in the world). Under the TPP, it is also possible that Japan’s regulation of health insurance which includes controlling coverage, prices and profits would qualify it as an SOE that has unfair advantages. This could open the door for private multinational health insurance corporations to enter TPP signatory countries and demand access and that regulations are loosened.

As medical corporations gain greater wealth and power, we can expect to see further abuses to the detriment of human health. The TPP takes global health in the wrong direction. The losers in this negotiation will be the patients if the profits of corporations are permitted to come before the health of people.

Margaret Flowers, M.D., served as congressional fellow for Physicians for a National Health Program and is on the board of Healthcare-Now. She is co-director of It’s Our Economy and co-host of Clearing the FOG Radio Show. Follow her on Twitter: @MFlowers8

http://www.aljazeera.com/indepth/opinion/2013/06/201361711230432720.html

Replace volume with quality?

Should Physician Pay Be Tied to Performance? No: The System Is Too Easy to Game—and Too Hard to Set Up

By Steffie Woolhandler
The Wall Street Journal, June 16, 2013

Paying doctors for better care—not just more of it—seems like a no-brainer. Yet rigorous studies of pay-for-performance bonuses have found no health benefits and some unintended harms.

An exhaustive analysis of pay-for-performance research by the Cochrane Collaborative, an international group that reviews medical evidence, unearthed “no evidence that financial incentives can improve patient outcomes.”

Consider these cases. In Britain’s massive pay-for-performance program, family doctors earned almost perfect scores (and big bonuses) for hypertension treatment, but population surveys found no decrease in blood pressure or its main complication, strokes. Meanwhile, aspects of quality that didn’t bring bonuses deteriorated.

The largest U.S. pay-for-performance experiment—Medicare’s Premier Demonstration—also flopped. The 200 hospitals that offered bonuses scored slightly worse on patient death rates than other hospitals.

Proponents argue that programs like these were flawed in one way or another, and that the next trial—or the one after—will certainly do better. They also claim successes with other programs. But none of these claims rest on rigorous science, and all those that have subsequently been subjected to rigorous tests have failed.

No Easy Measurement

Why do these programs consistently fall short? Measurement is distorted once you pay doctors based on the data they themselves create. High scores may reflect real excellence, but can just as easily reflect cherry-picking or gaming the measurement system.

One Boston-area hospital we observed improved its quality score 40% just by getting doctors to change the words they wrote in patients’ charts. Medicare gives hospitals more credit for saving patients with “acute respiratory decompensation” than those with “COPD exacerbations,” although these terms are synonyms. That kind of practice is neither illegal nor unusual.

Beyond that, it’s devilishly difficult to quantify doctors’ performance in the first place. Hospital death rates seem, at first glance, an ideal measure of medical quality. Yet, four widely used algorithms yield completely different mortality rankings; a hospital rated outstanding in one often looks downright dangerous in another.

Even if—as some proponents argue—we find performance measures that work for one group of doctors, it’s unlikely that they’ll work for all providers in all patient populations. Moreover, many providers interact in providing care, and influence each other and patients’ outcomes in complex ways. It’s hard to imagine that incentives could optimize this as a system.

Ignoring Psychology

There’s also psychology at work. Rewarding performance ignores the complexity of human drive, particularly the role of intrinsic motivation—the desire to perform an activity for its own inherent rewards. Offering your dinner-party host a $10 reward for cooking a wonderful meal isn’t likely to motivate future invitations.

Studies have found that financial incentives often crowd out intrinsic motivation. For instance, college students will spontaneously play with interesting puzzles, but once they’re paid to solve them, they lose interest in playing for nothing. When day-care centers in Israel imposed fines on parents for picking up children late, tardiness increased. Promptness transformed from a moral duty to a market transaction.

Pay for performance undermines the mindset required for good doctoring—the drive to do good work even when no one is looking. Moreover, it forces doctors to shift their attention from patients to computer screens—documenting trivial details useless for patient care but essential for compliance.

None can doubt medicine’s grave quality problems. As a remedy, pay for performance suggests manipulating greed. This can certainly change medicine, but not necessarily in the ways that we would plan, much less hope for.

(Dr. Woolhandler is a physician and professor at the City University of New York School of Public Health. David U. Himmelstein, also a physician and professor at the School of Public Health, and Dan Ariely, the James B. Duke professor of behavioral economics at Duke University’s Fuqua School of Business, contributed to this article.)

http://online.wsj.com/article/SB10001424127887323528404578454432476458370.html

Comment:

By Don McCanne, M.D.

We keep hearing over and over that we are going to have to quit paying physicians based on the volume of their services and pay on the quality of those services instead. There are two problems with this.

The first problem is that there is a certain volume of health care that needs to be delivered. If the physician is told that quality counts but volume doesn’t, then wouldn’t that physician be motivated to cut back on work done? Does anyone seriously suggest that sloth is fine – payment would be the same regardless of the volume of work? Of course not. Whether fee-for-service or salaried, the physician is going to have to produce.

The second problem is that the abstract concept that physician pay should be tied to quality does not translate into a practical model of measuring and rewarding quality. Physicians already attempt to provide the best quality they can under the given clinical circumstances. Typical measures selected are only a infinitesimal sampling of the entire work product of the physician. Today’s article explains the deficiencies of trying to come to any conclusion about quality based on this process.

The counter opinion to the article above was written by François de Brantes, executive director of the Health Care Incentives Improvement Institute, and is available at the same link above. Some of his comments are instructive: “show poor outcomes in some pay-for-performance trials,” “design flaws,” “doctors were rewarded for results that were actually poor,” “it has worked, if not always as well as it should,” and, “problems can be fixed by not letting providers set benchmarks.” If physicians, with their conflicts of interest, don’t define quality, then who does? The MBAs? Is that really better?

We definitely must address medicine’s many quality problems, ideally through beneficent public policies, but manipulating greed through pay for performance schemes is not the way to get there.