Fee-For-Service Again
USA Today asked me to write a counterpoint to their editorial calling for the abolition of Fee-For-Service payment in health care. Their editorial is here, and my counter is here.
Unfortunately, USA Today did not show me the article I was responding to. Now that I have read it, I want to make a few other observations.
First, the paper thinks that putting physicians on salary would curb the problem of overtreatment. Yes, it might do that, and replace one problem with another — under treatment. Physicians might become clock-watchers, punching in at 9:00 and out at 5:00, regardless of patient need. While on the clock, they might slow-walk their services. After all, why hurry when you get the same pay regardless of how much work you do? Even factories have long figured this one out, preferring to pay piecework instead of flat wages.
But USA Today sees a more insidious problem in health care. It believes some physicians are “greedy, incompetent, and crooked.” No doubt that is true. I expect some newspaper editors are also “greedy, incompetent, and crooked.” Does placing doctors on salary solve that problem? No, it would actually worsen it for at least a couple of reasons. First, the physician would no longer be responsible for securing and paying for his own malpractice insurance. He would be covered by an enterprise-wide policy that minimizes his own culpability. Second, greedy, incompetent and crooked employees are very good at hiding in a big bureaucracy. They can always find someone else to blame for their own misdeeds and be shielded by workplace rules. Have you noticed how hard it has been to fire Lois Lerner from the IRS?
The paper says, “Ideally, doctors do no more than a patient needs.” Well, yes. But it is often hard to tell in advance what is “more than a patient needs,” and if doing “no more than needed” is the imperative, we might often end up doing less than the patient needs, with tragic consequences. If we place a ceiling on what the doctor does, if we punish him for doing more, he may err on the side of caution and often do less.
The paper also wants us to “encourage second opinions.” Good grief. Getting second opinions has been touted as a panacea for at least the last 30 years. Most of the research I have seen says that the second opinion almost always confirms the first opinion, but adds to costs because the second opinion is not cheap. That does not mean second opinions shouldn’t be done. Individual patients will be comforted if the first is confirmed or may change her mind if it is counter to the first. But there is no guarantee that the second opinion will be more valid than the first, and if the two conflict it may be necessary to get a third.
Finally, the paper says something I can agree with –
…[O]ne of the most effective ways to cut down on unnecessary operations is for doctors to share the decision-making with their patients by pointing out alternatives…
Yes, indeed. But it helps if the patient is holding the checkbook during that conversation. That is the only equalizer the patient has when negotiating with the doctor. The doctor can explain the advantages and disadvantages of each alternative, and what the costs will be! And the patient can then make a fully-informed decision. But that implies something USA Today has been railing against — a system in which fees reflect the services provided. Otherwise, in a salaried system, the doctor will be advocating for the easiest, cheapest alternative and the patient will be suspicious of the recommendation and push for the most complicated and costly choice.
There is simply no substitute for a fee-for-service system in which the patient pays.
A great fact from your piece:
“But consumer-driven health care, in which consumers are responsible for the first few thousand dollars, has been reducing the rate of inflation of the entire health care system for the past 10 years”
“It wasn’t the payments but the leadership of the system that made the difference.”
Leadership can change the entire tone of service. But finding leaders is difficult.
“Physicians might become clock-watchers, punching in at 9:00 and out at 5:00, regardless of patient need. While on the clock, they might slow-walk their services. After all, why hurry when you get the same pay regardless of how much work you do? Even factories have long figured this one out, preferring to pay piecework instead of flat wages.”
There is some relevance to this argument but it discredits the whole premise behind the purpose of being a medical doctor, which is to help people above self. Some doctors follow this, others don’t.
Critics argue that insurers employing doctors have an incentive to withhold care — including beneficial care. This may be the exception but undoubtedly occurs on some occasions. The other side of that coin is hospitals that employ physicians. Nearly half of physician practices are now owned by hospitals.
A few hospitals have been accused of encouraging doctors they employ to provide excessive care. For instance, some hospitals have been charged with having a quota, where, say, 20% Medicare enrollees who present to the Emergency Room should be admitted to the hospital. Employed doctors who don’t meet this quota have been threatened with termination. One newscast even quoted doctors who claimed their (former) hospital employer had software that warned them when they attempted to send home a patient that the computer system deemed healthy enough to return home.
Ending FFS would not necessarily end abuses where doctors pad the bill by ordering an extra lab test or MRI. Ending FFS might encourage doctors to look for CPT codes to obtain a bundled payment for a condition that not really serious.
The paper says, “Ideally, doctors do no more than a patient needs.” Well, yes. But it is often hard to tell in advance what is “more than a patient needs,” and if doing “no more than needed” is the imperative, we might often end up doing less than the patient needs, with tragic consequences. If we place a ceiling on what the doctor does, if we punish him for doing more, he may err on the side of caution and often do less.
Doctors should go above and beyond. However, unnecessary examinations are a problem, especially when the doctor does so at the expense of doing more research on the patient’s case and resorts to test-taking as the best indicator.
Exactly. People don’t take into account the economic recognition lags in medicine.
How much medical care does a person need? How much do they want? — the answer to both those questions depends on who is paying for it.
Great point on “doing no more than needed”. Wouldn’t we want to error on the side of a little too much care and a little more money than less?
Exactly. Incentives is what the entire economy is built on. If Doctors (like any other profession) have no incentive to do a good job, they won’t, the vast majority of the time.
“[O]ne of the most effective ways to cut down on unnecessary operations is for doctors to share the decision-making with their patients by pointing out alternatives”
The bottom line.
The socialist mantra is to pay for attendance, not performance
Yes “no substitute for a fee-for-service system in which the patient pays,” but in our system, third party payers of job-based insurance, Medicaid, and Medicare pay most so they are in control. With a single payer system, the government taxes and pays and is control of the choices. With a free-market-system, individuals would own catastrophic insurance policies and pay for most of their care out-of-pocket, just like Mr. Scandlen advocates. It is the income tax tax breaks that causes job-based medical care. Replacing the income tax wit the FairTax would go a long way towards moving us to a free-market system.
It’s amazing how the statists continue their attack on fee-for-service medicine, while ignoring the massive evidence that third party payment and price controls are what drives up costs. Here is my take on this from a while back: http://www.aapsonline.org/index.php/article/from_fee-for-service_to_no-fee-no-service_medicine/
If you place physicians on salary, who will operate on “high risk” patients? Who will operate on one eyed patients? Why would a salaried physician bother given the risk reward ratio and liability?
As a financial planner I find this especially amusing. The mantra in financial planning is to not pay a commission but to pay a fee, since that is supposedly the only way to get unbiased advice. I think that it is really a case of “whatever it is, I’m against it” attitudes on the part of the media.