Category: Health Alerts

Why the Pilot Programs Failed

Just about everybody in the health policy blogosphere has noted with disappointment the failure of Medicare’s demonstration projects to reduce the costs of care. Recall that these are critical to President Obama’s challenge “To find out what works and then go do it.”

If nothing works, the fallback weapon in Obama Care is to reduce fees paid to doctors and hospitals. Yet the Medicare actuaries tell us that squeezing the providers in this way will put one in seven hospitals out of business in the next eight years, as Medicare fees fall below Medicaid’s. Under this scenario, senior citizens may be forced to line up behind welfare mothers, seeking care at community health centers and in the emergency rooms of safety net hospitals.

I believe this is the only blog that has confidently predicted that health care costs will never be controlled by running pilot programs and trying to “copy what works.” (Note, however: the Congressional Budget Office has shared our viewpoint from the beginning; see their previous conclusions here and here.) I’ll explain why I predicted failure all along below. First let’s review the latest results.

I Still Haven’t Found What I’m Looking For

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How Doctors Are Trapped, Part II

Of all the people in the health care system, none is more central than the physician. Fundamental reform that lowers costs, raises quality and improves access to care is almost inconceivable without physicians leading and directing the changes. Yet of all the actors in modern health care, none are more trapped than our nation’s doctors. Let’s consider just a few of the ways your doctor is constrained, unlike any other professional you deal with.

No Telephone. Sometime in the early part of the last century, all the other professionals in our society — lawyers, accountants, architects, engineers, etc. — discovered the telephone. It’s a handy device. Ideal for communicating with clients. Yet even today I find that I can rarely talk to a doctor by phone. Why is that?

The short answer is: Medicare doesn’t pay for telephone consultations. Medicare has a list of about 7,500 tasks it pays physicians to perform. And talking by phone isn’t on the list — at least in a way that makes it practical. Private insurance tends to pay the way Medicare pays. So do most employers.

At a time when doctors feel like they are being squeezed on their fees from every direction by third-party payers, most become very focused on which activities are billable and which are not. And most are going to try to minimize their non-billable time.

And now my life has changed in oh so many ways,
My independence seems to vanish in the haze.

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How Doctors are Trapped

Every lawyer, every accountant, every architect, every engineer — indeed, every professional in every other field — is able to do something doctors cannot do. They can repackage and reprice their services. If demand changes or if they discover a way of meeting their clients’ needs more efficiently, they are free to offer a different bundle of services for a different price. Doctors, by contrast, are trapped.

To see how trapped, let’s look at another profession: the practice of law. Suppose you are accused of a crime and suppose your lawyer is paid the way doctors are paid. That is, suppose some third-party payer bureaucracy pays your lawyer a different fee for each separate task she performs in your defense. Just to make up some numbers that reflect the full degree of arbitrariness we find in medicine, let’s suppose your lawyer is paid $50 per hour for jury selection and $500 per hour for making your final case to the jury.

What would happen? At the end of your trial, your lawyer’s summation would be stirring, compelling, logical and persuasive. In fact, it might well get you off scot free if only it were delivered to the right jury. But you don’t have the right jury. Because of the fee schedule, your lawyer skimped on jury selection way back at the beginning of your trial.

This is why you don’t want to pay a lawyer, or any other professional, by task. You want your lawyer to be able to reallocate her time — in this case, from the summation speech to the voir dire proceeding. If each hour of her time is compensated at the same rate, she will feel free to allocate the last hour spent on your case to its highest valued use rather than to the activity that is paid the highest fee.

Clowns to left of me, jokers to the right
Here I am, stuck in the middle with you

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Money, Medicine and Ethics

The American College of Physicians has published their updated manual on ethics for physicians and the following passage is causing quite a stir:

Physicians have a responsibility to practice effective and efficient health care and to use health care resources responsibly. Parsimonious care that utilizes the most efficient means to effectively diagnose a condition and treat a patient respects the need to use resources wisely and to help ensure that resources are equitably available.

On the right, American Enterprise Institute scholar Scott Gottlieb writes “Parsimonious, to me, implies an element of stinginess, and stinginess implies an element of subterfuge.” (Quote of the Day in American Health Line.)

On the left, Aaron Carroll writes:

I would fight tooth and nail to get anything — and I mean anything — to save [his own child]. I’d do it even if it cost a fortune and might not work. That’s why I don’t think you should leave these kinds of decisions up to the individual. Every single person feels the way I do about every single person they love, and no one will ever be able to say no. That’s human.

Similarly, I don’t think that it’s necessarily fair to make it a physician’s responsibility. I also want my child’s doctor to fight tooth and nail to get anything that might save my child. Many times, physicians have long-standing relationships with patients. Asking them to divorce themselves from the very human feelings that compel them to do anything that might help their patients is not something that I think will necessarily improve the practice of medicine. They also should be human.

So whose job is it? Well, mine for instance. That’s what I do as a health services researcher. That’s what policy makers should also do….

That’s a roundabout way of saying that only the government can ration care the right way. Here is Don Taylor’s (Incidental Economist) take on the subject.

My view: people in health care have become so completely immersed in the idea of third-party payment that they have completely lost sight of the whole idea of agency.

This game of life I play
Living and dying with the choices I made

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Christmas Present: All Problems Solved

In his final post of the year for The New York Times, Uwe Reinhardt left us with this gloomy thought:

After wrestling for decades and in futility with the triple problems facing health care in the United States – unsustainable spending growth, lack of timely access to health care for millions of uninsured Americans and highly varied quality of care – any new proposal to address these problems is likely to be a recycled old idea.

Bah. Humbug.

He then goes on to give us a brief history of the “old idea” of “managed competition,” as it evolved from Paul Ellwood to Alain Enthoven  ….  to   …..   well  …. to  ….  just about  everybody who’s anybody.  As depression overcame me, I vacillated between reaching for a tissue or another cup of eggnog  …. until it dawned on me that all of the people who are recycling this (basically failed) idea are people who don’t believe in prices.

To a man (are there any women in here?), they believe that no one should ever have to face a real price – certainly not for health care and not for health insurance either. My one contribution to this discussion is the observation that if everyone faces perverse incentives, you are going to get very perverse outcomes. My only regret: my conclusion has not been recycled enough to stop the policy wonks from continuing to think they can give people incentives to do perverse things and then successfully stop them from doing those things.

Okay, halt. I’m going to put these people out of their misery.

Folks, we already know enough to design an insurance plan that will cut health care spending in half and improve quality and access to care at the same time. Explanation below the fold.

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