Should Seniors be Rewarded for Choosing Lower-Cost Services?
Can Medicare save money by giving patients cash to make cost-saving decisions? This is the subject of an article from Reason.
The basic idea, dubbed cash-for-care, is as simple as a year-end performance bonus. When faced with two treatments of roughly equal efficacy but dramatically different cost, Medicare would pay patients a cash fee if they chose the less expensive option. The idea is a form of shared savings. But where most shared savings plans share exclusively with health care providers, Cash for Care shares it with patients.
Yet this should not be confused with consumer driven health care, where providers compete for cash-paying patients.
And that’s the biggest potential problem for a program like Cash for Care: It still relies on experts and administrators to make decisions about which treatments to encourage, and which ones to discourage, and how much to pay for each.
A better way would be for the doctors and hospitals themselves to figure out more efficient ways to provide care by getting a share of the savings. Providers should be able to negotiate with CMS to share in the savings if they can find efficiencies that are currently not being utilized.
I’m all for patients being involved in the choice process but the physicians must retain an active voice in the best treatment options. I have opted for a local anesthetic for a procedure that involves a general anesthesia for most patients. I was given a choice and it cut the price by a couple of thousand dollars but that’s not the best option for some.
This is one of those ideas that sounds good in theory but would be hard to implement in practice. Administrators would have to put a value on treatments in order for patients to compare them on price. We already have administrators (MedPAC) trying to put a value on 7500 Medicare billing codes. Past experience indicates it is very difficult to get the prices right absent a market. As a result, some procedures are performed too often (because they are lucrative) while other procedures are performed too little (because they are not lucrative).
Yesterday at Cato, Helmchen presented his ideas on this “cash for care” plan. Michael Cannon of Cato made a good point that while this proposal recognizes the moral hazards of Medicare, it fails to acknowledge that politics don’t reward efficiencies.
Agreed Candace– as Cannon said, “patients are not rational economists.”
Hmm, I always hate to disagree with either Devon Herrick or Michael Cannon. However, I think this “cash for care” is a good idea. It is highly unlikely that cost-savings will occur unless the savings are earned by the patient.
Relying on providers to share savings with the government (with patients blissfully ignorant)will never bring about change, because the incentives in the other direction are far too great. This is not like Safeway collaborating with General Mills or Procter & Gamble on savings that will accrue to grocery shoppers.
We are already seing that Accountable Care Organizations (ACOs), as legislated by PPACA, are failing. When playing with taxpayers’ money, why on earth would providers collaborate to achieve savings when their (lack of) collaboration to achieve more spending has been successful for decades?
Caveat: Providers must be free to bundle and re-bundle their services under “cash for care” as well as advertise and otherwise communicate their services to patients.
Indeed, I expect that this would be even more politically do-able than “consumer-driven care” because of how people react when they believe (incorrectly) that they’re getting something back from the government.
(Even I must admit that I cheer up when I get my tax refund from the IRS, even though my brain knows perfectly well that it is simply a confirmation that I paid too much tax in the first place!)