Paying for Value in Medicare
David Ignatius wants Barack Obama to forget about the uninsured and focus on changing the health care delivery system:
If liberals really want to show they are serious, they should begin with our existing single-payer behemoths, Medicare and Medicaid. Cortese argues that the White House should mandate that, within three years, these programs will shift from the current fee-for-service approach to a system that pays for value — that is, for delivering low-cost, high-quality care. If doctors performed unnecessary tests that ballooned costs, their compensation would be reduced. And doctors would be compensated by regional formulas, to encourage them to work cooperatively in local networks where they could all make more money by practicing better medicine. [...]
This “pay for value” approach would amount to a cultural revolution in American health care. It would take our bloated system and make it cheaper and better. The adjustments wouldn’t be easy, and the medical profession would balk unless respected doctors such as Cortese led the way.
I think there’s a lot of logic to this point of view. At the same time, the implication that the reason Barack Obama isn’t doing this is because “liberals” aren’t “serious” could really stand for some more scrutiny. Similarly, the idea that the medical profession might under any circumstances not balk at this is a bit nuts. No professional guild ever embraces the idea that they should be forced to completely change the way they do business. Anyone who proposed doing this would be savaged by medical professionals who would convince seniors that it amounted to a drastic reduction in their standard of care.
Indeed, Ignatius might have noticed that the health reform bills pending before congress already do take small-but-important steps in this direction and it’s already freaking seniors out. Nevertheless, allegedly unserious liberals are happy to vote for such bills. It’s moderate and conservative legislators who are balking.
44 Responses to “Paying for Value in Medicare”
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August 22nd, 2009 at 2:50 pm
“Nevertheless, allegedly unserious liberals are happy to vote for such bills.”
Not without a robust public option.
—–
Folks don’t seem to understand that if the final bill lacks a robust public option, it should be scuttled from the left on policy grounds, as well as on the obvious political grounds…
August 22nd, 2009 at 2:51 pm
Also, it would seem sensible to me that universal enrollment is actually a useful precursor to payment reform – high volume, low margin versus low(er) volume, high(er) margin, so to speak.
August 22nd, 2009 at 2:54 pm
You know what’s serious? Being cut off on your insurance when you know cancer is just around the bend. Maybe Mr. Iglesias should give away his assets and his health insurance, and maybe he’d get an idea of what serious is. He needs to live with the concept that he’ll just die because he can’t get treatment. That’s serious. He’s just a joke.
August 22nd, 2009 at 2:58 pm
“Maybe Mr. Iglesias”
Oops, that should be Ignatius.
August 22nd, 2009 at 2:59 pm
Also, paying for quality is a lot harder than it sounds. Really, lots harder. Witness the missteps with paying doctors for antibiotics in pneumonia or beta blockers in MIs. With the multitude of medical conditions out there, is it possible to develop (let alone reimburse based on) quality measures? What’s the determinant of quality for appendicitis? What’s the quality factor for a rectal foreign body? Diabetes is easy to define quality for, but acute illnesses and less common chronic illnesses seem to defy indexing to quality.
August 22nd, 2009 at 3:04 pm
As is pointed out at the link below, HR 3200 may well be unconstitutional. Congress simply does not have the power under Article I, section 8. But, that won’t stop “progressives” from being busybodies and forcing people to do their bidding. But the Roberts Court, might
http://www.washingtonpost.com/wp-dyn/content/article/2009/08/21/AR2009082103033.html
August 22nd, 2009 at 3:19 pm
@6: Unluckily for your argument, HR 3200 doesn’t actually contain an individual mandate.
August 22nd, 2009 at 3:26 pm
I read Ignatius’s piece, and it irritated me deeply while reminding me what a tremendously useful concept “concern trolling” has become.
Ignatius is, precisely, concern trolling. That’s to say, he pretends to share the agenda of a particular group (”liberals”), in order to suggest (sadly) that they’ve failed to understand Obstacle X. But the real effect of his gesture is to push a completely different agenda.
The current initiative may or may not bend the cost curve, but it will expand coverage, which will improve national health in a way that matters to the left.
Changing fee-for-service is a great idea. But it’s also, politically, a f—-g nightmare, and it can wait until we have a few marginally sane partners across the aisle.
August 22nd, 2009 at 3:29 pm
shadowfax Says:
August 22nd, 2009 at 2:59 pm
Also, paying for quality is a lot harder than it sounds. Really, lots harder. Witness the missteps with paying doctors for antibiotics in pneumonia or beta blockers in MIs. With the multitude of medical conditions out there, is it possible to develop (let alone reimburse based on) quality measures? What’s the determinant of quality for appendicitis? What’s the quality factor for a rectal foreign body? Diabetes is easy to define quality for, but acute illnesses and less common chronic illnesses seem to defy indexing to quality.
Gee, I don’t know. Maybe they could determine quality of care based on cure/survival rates compared to the average for the same population?
August 22nd, 2009 at 3:34 pm
As is pointed out at the link below, HR 3200 may well be unconstitutional.
Even the conservatives of the Roberts court wouldn’t be stupid enough to get into an issue as quintessentially political as national health insurance.
August 22nd, 2009 at 3:37 pm
What’s the determinant of quality for appendicitis? What’s the quality factor for a rectal foreign body? Diabetes is easy to define quality for, but acute illnesses and less common chronic illnesses seem to defy indexing to quality.
Shadowfax: the way we pay for the treatment of “rectal foreign bodies” isn’t going to matter either way when it comes to curve bending. Such ailments are, as you say, less, er, common.
August 22nd, 2009 at 3:45 pm
“Pay for value” is anything but revolutionary. It’s a rehash of managed care organizations and capitation, the hated pair from the 1990’s.
I expect accountable care organizations and global payments to be just as suboptimal.
http://stateofthedivision.blogspot.com/2009/07/capitation-and-managed-care-return-as.html
August 22nd, 2009 at 3:46 pm
David Ignatius: “by cutting the annual growth in per-capita spending from the current national average of 3.5 percent to 2.4 percent… Medicare could save $1.42 trillion and post a big surplus.”
Interesting. If I am reading Ignatius correctly, which I am, he is advocating, even though he doesn’t know it, Medicare For All.
I mean, if we can save $1.4 trillion and post a big surplus servicing a paltry 45 million Americans through Medicare, then we can save, what, $5 or $6 trillion with Medicare For All and post an unbelievably massive surplus.
Sounds like a good plan. Make tons of money while providing quality health care for all. Thanks Davey.
August 22nd, 2009 at 3:52 pm
Not that I care.
Sounds like it is shaping up to be, 1) No tax subsidy for employer based insurance 2) Bend the curve on medicare and medicaid 3) Anti-trust targeting of insurance monopolies 4) Remove interstate insurance restrictions. 5) Lower age requirements somewhat for Medicare.
What will really happen is there will be no agreement among Democrats and they will punt the ball come midterm elections.
Franky, this is about rationing.
August 22nd, 2009 at 3:57 pm
MikeK:
That article was very sad, because the authors don’t understand how an individual mandate works. It doesn’t actually say “everyone in America must buy health insurance,” it says, “everyone in America who does not buy health insurance will be taxed.” That’s perfectly within the powers of the Congress. Moreover, Baily v. Drexel is an outdated Lochner-era decision; United States v. Kahriger (1953), Lewis v. U.S (1955), and Marchetti v. U.S (1968) all upheld taxes on gamblers that were clearly designed to penalize conduct that doesn’t fit within the Commerce clause.
The authors of that piece in this sentence “Although the court’s interpretation of the commerce power’s breadth has changed since that time, it has not repudiated the fundamental principle that Congress cannot use a tax to regulate conduct that is otherwise indisputably beyond its regulatory power” are ducking the fact that the Court’s interpretation does allow for such a tax.
August 22nd, 2009 at 4:18 pm
The Pentagon can’t account for a couple of trillion dollars and we’re going to obsess on the “value” for health care? Dad drops half his paycheck for hookers and blow, so naturally the answer is for mom to make casseroles that taste like filet mignon.
August 22nd, 2009 at 4:33 pm
“Changing fee-for-service is a great idea. But it’s also, politically, a f—-g nightmare, and it can wait until we have a few marginally sane partners across the aisle.”
Or until we have Democrats that act like, you know, Democrats, instead of Wall Street whores.
August 22nd, 2009 at 4:51 pm
David Ignatius wants Barack Obama to forget about the uninsured and focus on changing the health care delivery system
People who think this is an admirable point of view should try going without health insurance for ten years or so, and then get back to us with their opinions.
August 22nd, 2009 at 4:51 pm
Steve
How can you possibly say that it isn’t mandatory if you don’t do something (buy insurance) that you will be taxed (punished financially)? What if, Congress decided everyone should have a car, but said, “individual transportation is useful for the nation’s commerce, so everyone not having a car will be taxed $1500 per year.” Is this what liberty has been come to?
August 22nd, 2009 at 5:15 pm
I guess Mike K got tired of trolling over at Benen’s blog.
Or maybe he’s been shamed away from there by the parody trolls that write in (sort of) his name.
August 22nd, 2009 at 5:20 pm
And Ignatius’ apparent belief that dropping the public option and instead proposing that Medicare/Medicaid shift to pay-for-value would “break through the political chaff” seems ridiculous. I would guess that this would be at least as contentious as the public option, if not more so — and in the meantime, people would continue to die because they do not have access to health care.
August 22nd, 2009 at 5:49 pm
Mike K:
Because you’re not being thrown in jail for not having health insurance, you’re being taxed. And your car example is a good point – we actually do mandate that people get car insurance if they want to drive. If we’re going to get up on our high horses about a health insurance mandate, why not abolish all insurance mandates? That’ll be fun.
August 22nd, 2009 at 5:56 pm
But, Steve, the car insurance covers damage we do to another, not damage to ourselves. Car insurance covers externalities, our idea of heath insurance is that a baby’s birth is car accident.
August 22nd, 2009 at 6:08 pm
Ah, Very Serious “Liberals”, always looking for a way to fuck over Social Security and Medicare and Medicaid.
August 22nd, 2009 at 6:15 pm
(And there I was thinking that McArdle Crushboy had taken his ball and gone home. No?)
August 22nd, 2009 at 6:16 pm
Mike:
Car insurance also covers damage we do to our cars, which are our property in the same sense that our bodies are too.
And health care involves a lot of externalities – illness, injury, etc.
August 22nd, 2009 at 6:18 pm
And your car example is a good point – we actually do mandate that people get car insurance if they want to drive.
The states (except NH) do this, not the federal government.
August 22nd, 2009 at 6:33 pm
Medicare and Medicaid are actually the revenue backbone of the entire for profit health care delivery system. In that sense changing the entire pay for service model could in theory revolutionize the cost structure of the industry, and it is an industry.
My guess however is you can’t get there from here. The hospital system in particular is highly reliant upon debt and thus debt service and bankruptcy not that far off for many if the stream of income is upset.
The financial underpinnings of the health care industry are every bit as vulnerable to disaster as any other part of our corporate world. The cash flows are totally based upon the current model with it’s $50 Tylenol and 20 page billing summaries.
The insurance vs delivery systems present a sort of chicken or egg dilemma in trying to determine the core of the problem. The problem being the worlds highest per capita cost, the impediments to full participation in the system and the waste and bad outcomes.
I don’t pretend to have an answer.
August 22nd, 2009 at 7:38 pm
As a freshman senior citizen I am not freaking out about changes to Medicare yet. The problem I have is if BO/Dems don’t change it then, if and when the republicans get back in control of congress/presidency then they will and I will then freak out. And they will do it in a lying cheating below the radar way similar to their “Medicare Drug Benefit” bill.
August 22nd, 2009 at 8:06 pm
I think you misrepresent Ignatius a bit. He doesn’t say Obama should forget about the uninsured and instead focus on reforming the health care delivery system, he says that providing universal coverage without also reforming the delivery system is a mistake. I don’t think he’s suggesting we choose between the two reforms–just suggesting (wisely) that we don’t implement one without also implementing the other.
Ensuring access to care is critically important, of course, but the biggest health care challenge we face is controlling the cost of the underlying medical services. While insurance-company administrative overhead and profit-taking adds significantly to the cost of health care, the vast majority of the cost comes from the health care services themselves. Ignatius (and Dr. Cortese whose ideas Ignatius’s article is based on) is right to say that expanding coverage without also addressing the underlying problem of high-cost, highly inefficient medical care will lead to financial problems down the road. What we need is universal access to efficient care, not universal access to inefficient care. Addressing the coverage problem only while ignoring the delivery problem will get us the latter. To get the former, we need to address both problems together.
August 23rd, 2009 at 12:08 am
Does the American Medical Association not count as a representative professional guild of healthcare providers? I thought the AMA had come out in support of changing the physician fee-for-service model. Their website says they want reform that “Repeals the Medicare physician payment system that harms seniors’ access to care.”
August 23rd, 2009 at 12:40 am
Who is this David Ignatius anyway? Forget the uninsured? The uninsured should be our first concern!
But Ted writes:
>I read Ignatius’s piece, and it irritated me deeply while reminding me what a tremendously useful concept “concern trolling” has become.
To my mind, “concern trolling” is a nasty, weaselly concept. Whenever I read the phrase “concern troll” I fear for serious discussion. What are we supposed to do–march in lockstep with our talking points?
I suppose this makes me a concern troll.
August 23rd, 2009 at 1:58 am
Glaivester -
Giant who cares. States rights have all the attraction to me of the rotten borough of the 19th century.
If governments can require people to buy insurance, then there is no reason why one level of government shouldn’t require people to buy particular kinds of insurance.
August 23rd, 2009 at 2:10 am
Slightly off topic?
Here is some incredible data provided by Anima at Daily Kos. Stuff I never considered, like what is the percentage of Americans uninsured who are under 65 and therefore not covered by Medicare. The statistics are stunning.
http://www.dailykos.com/storyonly/2009/8/22/770569/-Health-Care-Data-from-all-50-States
August 23rd, 2009 at 8:57 am
@31 (SC)
The AMA is kind of like the US Chamber of Commerce for doctors. It hates anything that might lower doctors’ incomes or place any restrictions on what doctors can do or charge for their services. It doesn’t like Medicare and other public options because the public plans limit what they’ll pay to doctors. It hates large insurance companies, because they too try to reduce reimbursements to doctors and also put restrictions on what doctors can do and limit coverage for certain services provided by doctors. And they hate lawyers because lawyers sue doctors who screw up. The AMA wants doctors to be able to do anything they want, charge anything they want for it, and be free of any legal or other accountability for their actions.
August 23rd, 2009 at 12:33 pm
we actually do mandate that people get car insurance if they want to drive.
Driving is a privilege and to access state-owned roads, states can set the requirements of being granted that access.
States don’t require life insurance or all manner of renters/homeowners insurance or travel insurance.
And, contrary to Pres. Obama’s assertions that doctors are just lusting for cutting off feet and ripping out tonsils for the sweet sweet cash, “fee for service” is not a dirty conspiracy. No more than retainers and billable hours for lawyers regardless of outcome.
Oh, funny that, in light of the billions of dollars of cost each year that can be attributed to defensive medicine, not one word of tort reform in all the “reform” bills.
August 23rd, 2009 at 1:47 pm
Maybe states should require those things – it’s a matter of containing liability if things go wrong. Whether it’s crashing your car or having your house burn down or getting sick, there are costs that are best spread across society.
Fee for service is not a dirty conspiracy, but it’s not a system of payment designed for efficiency. If your income depends on doing MRIs because you just bought a giant shiny MRI machine, you’re going to do as many MRIs as you can, even if there’s a simpler, cheaper test to figure out what’s going wrong. If by contrast, your income is based on capitation plus a results bonus, you have an incentive to deliver quality care to the patient, regardless of whether that means one kind of test or another. And it’s not a bad life – I have two relatives in the NHS, they live a very comfortable life.
And as for tort reform, I’m sorry but that’s a complete red herring. As Atul Gawande’s piece on McAllen, Texas, shows, if you go to the second-most expensive place in America in terms of h.c costs per capita, and guess what, all the doctors think torts are to blame, but Texas has a hard cap on malpractice that’s brought suits way down.
August 23rd, 2009 at 2:34 pm
I have to wonder if Obama ever read the Gawande piece he “likes so much.” His “reforms” have nothing to do with the methods Mayo (et al) used to achieve high quality outcomes:
http://stateofthedivision.blogspot.com/2009/06/did-obama-read-piece.html
August 23rd, 2009 at 8:29 pm
Of course he has, Alan. The problem is that the solutions Gawande proposes would arose the instant and all-out opposition of the AMA, a group that Obama has been very keen to keep within his coalition. The reason being that the AMA is a powerful opponent to universal coverage, and has been for seventy years.
What Gawande’s suggesting is what you do if you no longer want the AMA’s cooperation – i.e, after you’ve already got your universal enrollment.
August 23rd, 2009 at 8:29 pm
*arouse, not arose.
August 23rd, 2009 at 9:23 pm
Matt,
If you switch Medicare and Medicaid to a “pay for value” system in the absence of a similar change for other citizens the number of doctors who refuse to provide care under the programs will skyrocket. It’s already difficult for seniors to find specialists who will accept the strict limits that Medicare mandates. If the system starts paying a la NHS, they will be shut out.
That’s a sad and infuriating, but true situation.
August 24th, 2009 at 2:29 am
I think generalists might well support a pay-for-value system, since generalists are on the short end of the current payment scheme.
Doctors’ opinions are by no means monolithic on this, and there may be other sweeteners – such as tort reform – that could pick off more support for liberal reform.
I see no strong evidence that the Democrats – or their supporters in the blogosphere – are cognizant of these dynamics or interested in exploiting them.
August 24th, 2009 at 7:20 am
Really nice information, thanks for your blog.
August 28th, 2009 at 1:37 am
In American society today, health-care, such as Medicaid Medicare seem like important issues that will arouse a lot of controversy and cause many to question whether our government is providing us with what we need. However, we cannot blame the Senate for how our economy is turning out today. They have other issues to worry about. And medical attention often requires a large amount of money funded to those programs dedicated to helping the sick. But health-care cannot be a system where quality is worth the payments. Americans expect health-care to be both low-cost and high-quality care. However, this will never be the case. As Americans should easily be able to see that benefits are never both cheaper and better. Quality comes at it’s own price. Furthermore, even if this were to be the case, docotrs would easily lose a proportional amount in their salary since doing the same job as before is now going to be much cheaper for the patients. I believe professionals would disagree to this eventhough deep down they would really enjoy these benefits for themselves. Our government should not only focus on health-care. There may be other issues out there that demand attention. Health-care may be one of them, but not limited to the only one. It is selfish for anyone to say that Obama should only focus on the health-care delivery system and ignore those who are uninsured. Seniors are taking over the economy. Their population is increasing and many of them will agree that health-care is an important issue. Those who want cheaper, better-quality health-care are just thinking of what’s best for themselves and not everyone else nor the economy. Senior citizens tend to think what is best for themselves and always want to call first dibs on everything. They tend to forget about those around them. We should consider those in our future generations who won’t be needing health-care for a while. Just because health-care isn’t given as much attention senior citizens want it to be, it doesn’t mean that it’s okay to demand full attention from Obama for only this certain problem when many more citizens out there are also in risk and also demand quick attention. Health-care should not be the first and only political issue we should focus on.