The Mystery of Health Care Policy
Who would you put in charge of the investigation? Hercule Poirot and Jane Marple? Or the person most likely to have committed the heinous crime? Believe it or not, in health care we are about to do the latter.
Writing in Health Affairs, Ken Thorpe and his colleagues offer a description of the current phase of the problem:
Medicare beneficiaries’ medical needs, and where beneficiaries undergo treatment, have changed dramatically over the past two decades. Twenty years ago, most spending growth was linked to intensive inpatient (hospital) services, chiefly for heart disease. Recently, much of the growth has been attributable to chronic conditions such as diabetes, arthritis, hypertension, and kidney disease. These conditions are chiefly treated not in hospitals but in outpatient settings and by patients at home with prescription drugs.
So how are we dealing with this challenge? Poorly.
More than half of beneficiaries are treated for five or more chronic conditions each year, and a typical Medicare beneficiary sees two primary care physicians and five specialists working in four different practices. System fragmentation means that chronically ill patients receive episodic care from multiple providers who rarely coordinate the care they deliver. Because of this structural deficiency, patients with chronic illnesses receive only 56 percent of clinically recommended medical care. That gap in care may explain a nontrivial portion of morbidity and excess mortality.
Now before moving on, let’s note that Prof. Thorpe is a long-time adviser to Democrats on health care issues. The reason that’s interesting is that the solution preferred by the entire left wing of the Democratic Party is to force everybody into Medicare (single-payer solution) and the only solution Democratic moderates have proposed is demonstration projects run by Medicare (ObamaCare)!
I hate to be the bearer of bad tidings, but isn’t this like putting Bernie Madoff in charge of the SEC? Although these reformers often call themselves “progressives,” they are really reactionaries. Their model for the future is the failed system of the past.
“I Believe in Yesterday”
Is there any part of the health care system where there has been improvement? It turns out there is:
Over the past decade, chronic disease management programs have proliferated in the private sector and are common in the Medicaid and Medicare Advantage programs. But they are notably absent in traditional fee-for-service (FFS) Medicare.
Note that the success stories in Medicaid and Medicare Advantage are all private contractors who have an economic interest in lowering cost and improving quality — since they compete for patients and the competition often involves price and quality.
The private sector successes comprise a much broader and richer experience than these, however. They often involve privatization, entrepreneurship, competition, economic incentives and even patient power. There are also interesting examples within Medicare itself — but almost always in spite of — rather than because of — Medicare’s bureaucratic payment system. I’ve written about some of these before, but here’s a brief overview. (Full disclosure: We have received modest contributions from some of these entities.)
Cash and Counseling. Pilot programs in more than half the states allow the Medicaid homebound disabled to manage their own budgets. They can hire and fire the people who provide them with services — which increasingly includes medical care in addition to custodial services. Patients can use the money they save to purchase other health services and products. Satisfaction rates hover in the 96% to 98% range. (Nowhere else in the world are people this satisfied with a health care program.)
Critics often ask: Are people smart enough or competent enough to manage their own health care budget? Answer: If these patients can do it, patients anywhere can do it — unless they’re in a coma or under anesthesia. This undertaking, by the way, is a Robert Wood Johnson Foundation project — although there is little information about it at their Web site. You would think they are embarrassed about the whole affair. (I think once they realized they had created a Health Savings Account for poor people, their enthusiasm waned.)
Telephone and E-mail Services/Walk-in Clinics. A whole slew of services have been developed by entrepreneurs to cater to patients largely outside the third-party payment system. Since their goal is to meet patient needs by lowering the money cost and the time cost of care, they are especially important to people who need care frequently. Teladoc of Dallas has more than one million customers who pay for telephone consultations with physicians. As explained in a previous Alert, electronic medical records and electronic prescribing are an essential part of the business model. The nurses who deliver primary care at MinuteClinics follow computerized protocols, keep medical records electronically and can prescribe electronically. The quality of care they deliver appears to be as good or better than traditional care settings.
If Medicare would pay the market price for any service provided by approved walk-in clinics, it would cut a huge chunk out of its Part B costs and it would cut administrative costs as well. Ditto for Teladoc. That Medicare does not take these simple, obvious cost-cutting, quality-improving steps is Exhibit A for why we don’t want everyone in Medicare.
American Physician House Calls (APHC). As explained here, the goal of this company is to treat special needs patients in their homes — thus keeping them out of the more expensive hospital setting. In fact, the company estimates it bills Medicare about $33,000 a year for patients who otherwise would have cost twice that amount. These entrepreneurs are cutting Medicare expenses in half by coordinating care, using EMRs, prescribing electronically and apparently doing everything else Thorpe and company think ought to be done — and all on a fee-for-service basis!
The wonder is that APHC does what it does at all. They surely could make more money with traditional care and traditional billing.
Cancer Treatment Centers of America (CTCA). Put aside the issue of whether we are spending too much on end-of-life care for cancer patients. (Although if this issue is of interest to you, see the case for the other side made by Gary Becker and his colleagues at the University of Chicago.) CTCA seems to be doing what Thorpe and colleagues would surely approve of. Care is coordinated, records are electronic, and many services are provided despite the fact that Medicare doesn’t pay for them. Under Medicare’s byzantine payment rules, these entrepreneurial centers succeed by competing for patients based on quality rather than on price.
Now let’s compare all this entrepreneurial, need-meeting activity to the two approaches favored by the left.
Medicare for All (Single-Payer). One reason why Medicare is so defective is that it is the creation of politicians. In 1965, the federal government had no idea what a health insurance plan should look like, so in creating Medicare it copied a standard Blue Cross plan in use at the time. Political interests quickly coalesced around this plan and fought off any changes (the original plan did not cover drugs or many preventive services, for example). In time, the federal government was paying to amputate the legs of diabetics, while refusing to pay for the drugs that would have made the amputation unnecessary in the first place.
The structure of Medicare, then, reflects political equilibrium, not sound medicine or rational insurance economics. The reason why seniors pay three premiums to three plans (Medicare Part B, Medigap and Medicare Part D drug coverage) and still do not have the drug coverage the rest of the population takes for granted is that politics of medicine prevents a more sensible outcome.
Making the structure of health insurance political guarantees that it will not be able to adapt to the changing conditions Thorpe and his colleagues are describing.
Accountable Health Organizations (ObamaCare). The Obama administration is proposing to control costs with Medicare pilot programs, designed to try out new ideas. They are all demand-side ideas, however. None of them would encourage entrepreneurs (on the supply side) to solve problems on their own. And the demand-side ideas do not include empowering patients!
Chief among the ideas coming forth is the Accountable Health Organization (AHO), described by industry insiders as “an HMO on steroids.” The idea is to give providers responsibility for all health care to a group of providers, along with a set amount of money to manage. If they don’t spend it all, the ACO gets to keep some of the savings. The ACO would be judged against quality indicators set in advance by Medicare.
But how do we know that giving an entity responsibility for all health care is an efficient way to deliver care? We don’t. None of the entrepreneurial efforts described above assumes responsibility for a patient’s total care. And how do we know that the quality indicators chosen by Medicare will be the best parameters? We don’t know that either. Almost certainly they will not be.
A Supply-Side Alternative to Single-Payer Medicare and ObamaCare Medicare. What I have called a supply-side approach would let providers/entrepreneurs propose the innovations, rather than Medicare bureaucrats. Providers would not only propose changes in the way they are compensated, they would also propose changes in how we measure and determine quality of care. In other words, the improvements in care and advances in our measurement of the quality of care would come from those who are in the best position to know what is needed and how to do it.
In general, providers would be free to propose any change in a payment scheme, provided that (a) the participation of patients is voluntary, (b) the costs to the government do not rise, (c) the quality of care for the patient does not fall and (d) they propose a measurement system that ascertains whether conditions (b) and (c) have been met.
Never thought about these issues this way. But, I think you are right, John. The leftwingers are reactionaries. Certainly there is nothing “progressive” in their thinking.
I have never understood why the left is so infatuated with Medicare. It’s a lousy insurance plan. If a private insurer tried to sell similar benefits to nonseniors, it would probably be illegal in most states. Where else in our society do you see anyone paying three premiums to three plans in oder to get coverage worse than what the rest of us have?
John
Talk about a non-sequitor!! Wow really, you missed the entire point of the article. Traditional single payer Medicare has no approach for dealing with the problems I raised. Therefore we need innovative approaches to preventing disease (which there are wonderful examples) and care coordination. Many of the solutions and approaches you highlight are ones I talk about. I have been an outspoken advocate for more aggressive, national approaches to these issues using best practices from the private sector, Medicaid or wherever they exist. So honesty don’t really understand the need for the ad hominems here.
Regarding “Medicare for All (Single-Payer),” the policies behind an improved Medicare program that would cover everyone are very sound. It is true that the politics are a problem, but the solution is not to reject the policies, it’s to change the politics.
The private sector is also experimenting with a concept called Medical Home, an effort to better coordinate care. Sounds like the best application would be in the Medicare setting. But, I suppose no incentive exists there as in the private sector where cooperation on such a program exists between the insurance company and willing/capable physician organizations.
Ken: I did not intend this as a criticism of you. Sorry you took it that way. The premise of this Alert is: assuming Ken Thorpe is correct, what can we conclude about the best avenue for heath reform? And the answer is: the best avenues are all outside of Medicare.
Maybe I should have made that clearer.
Too bad that “prevention” or “coordination” have nothing to do with politically popular tax subsides for health insurance drving “free” care (low-copay) demand inflation. Nor can clinicians control this public policy actuarial non-sense from the bedside.
Too bad that anyone would think Medicare Advatage is pivate enterprise with lots of prevention, when it is only a massive HMO subsidy program. With about a 114% overpayment, any insurance dorporation can offer showcase prevention and zilch premium rates. The huge subsidy cost compared to cost of ordinary Medicare does nothing but coverup the continued inefficiency of managed care that should have been obvious from experience in the old Medicare Part C program with its boondoggle cherry picking to insure the well and lemon dropping the sick back into regular Medicare.
Managed care is not the enemy; these systems whether corporate here or nationalized abroad just don’t work. With fixed budgets and perverse legalized control of the benfits insured, they are classic command and control organizations without the ability to allocate resources sanely. The Medical microeconomc sector where millions of transaction take place daily between millions of people is too complex to manage regardles of the good will of the managers and their innumerable computers and massive data sets.
The corporate/nationalied managers give lip service to “prevention” and “corrdination”, but know that their only real cost of care solutions are to blame the “culprit” (avaricious) providers for cost-price inflation, to transfer their gatekeepr role to clinicians (voila the ACO appears), and to raise premium rates here or put the sick in queues abroad. That’s the way to balance a fixed budget. “Prevention” and “coordination” is cost control sophistry. Bob
I’ve known Ken Thorpe for about 20 years now and I don’t care what they say about him — up to and including calling him a perpetrator of a heinous crime: he’s alright.
I do believe, though, that John offers some valuable comments here that cannot be brushed aside: for purely political reasons that go back to the founding of Medicare, that program has never been allowed to be a clinically or economically prudent purchaser of health care, as Ken, no doubt would agree.
At a recent Cato Institute meeting I was taken to task by some proponents of the single-payer for not using my forum to advocate for the single payer program (as if I naturally owed that to anyone). My response was exactly that in our political system such a program probably would not be allowed to be a good purchaser and coordinator of health care. Whereupon I read a blog smearing me for serving on the board of a Medicaid managed care company that does try to coordinate care — perhaps not as well as ideally we would like to, but we do try.
Over the years I have always leaned towards Paul Ellwood’s and Alain Enthoven’s vision of a combination of managed competition among insurers and managed care by insurers, ideally with delivery systems that are clinically integrated — like Geisinger or Mayo or Kaiser. Some of them might employ carve outs wehere that makes sense.
In any event, I think John should pull back the arrest warrant for Ken.
I’m always intrigued when people use the word “accountable.” In my experience, people using the word are trying to shift blame rather than handle the problem itself.
The logic usually goes something like this, “The fire in our building is a huge issue, and we have to hold someone accountable for it right now!” And then the person goes through a process of creating a rubric of checklists that are supposed to point to the guilty party. They don’t worry about the fact that the building is burning to the ground.
Two additional points to think about; 1) Internal Medicine sub-specialists, Cardiologists, Nephrologists could also be the primary care providers for their patients who do not have a primary care physician coordinating all their care. This would address the critical primary care physician shortage which is now a major problem. 2) We need a national central computerized medical record system with access to the patients total medical record and guidelines to improve overall medical care. Security could be assured by having large penalties for unauthorized access. Hospitals and physicians accessing the system would pay a small fee for each encounter. Thank You, Kenneth A.
Fisher, M.D., http://drkennethfisher.blogspot.com
John;
I am beginning to sound like an old record. Quality of care, utilizing technology only when medically necessary, and injecting a good dose of honesty and integrity in the delivery of care is what will save our system. Yes, there should be care that is acceptable for all of us, but if there are those who want extra bells and whistles, let them have it if they will pay for it out of pocket. If primary care is to survive, you will see a big increase in personalized or concierge medicine; if there are more cuts in Medicare reimbursement, you will see more physicians opting out. Then where will the patients go? Why can’t reasonable people address all aspects, not merely the ones that effect their monetary gain.
There is remarkably little hard evidence that care coordination of the sort preached by ObamaCare reformers does much more than make life more difficult for patients by rationing care and expanding managerial overhead. The ObamaCare reformers have an engineering view of health care processes. Patients need a market view.
Fix the payments system. After that, systems for “coordinating” care will likely develop that take both supply realities and patient preferences into account.
John is correct. The best avenues continue to be outside of Medicare and all other third parties. We have a fee for service systems problem where the providers don’t get paid unless they see the patient…
It’s best to have a direct financial relationship with patients.
Linda,
True care coordination (medical home) occurs when patients truly have a close relationship with a physician with a small practice. The patients determine quality, not some bureaucrat.
For example, I had a 85 yo patient with congestive heart failure in Diabetic KetoAcidosis on a cruise ship in the Indian Ocean 2 weeks ago. Assisting a ship’s doctor with an IV insulin drip and getting your patient safely home for $167/month is a pleasure. Trust me, the family was pleased.
Today I helped a 49 yo patient get his diabetic/cholesterol/HTN meds in jail…$133/month..
Trust me the patient and family (and their lawyer) were appreciative…
Concierge (all you can eat) is a true solution for our medical ails.
While I have no expertise in national health policy, I wish to comment as a provider and consumer.
While it may be overly simplistic, it seems that the solutions lie in having more of us with more skin in the game, return insurance to the concept of what one cannot afford to cover. In ’75, costs were less out of control when we were all paying about a third of our costs out of pocket.
At the clinic where I work, we only see Medicaid. The vast majority of families I see have cell phones, iPods, latte’s in hand and promise their kids a happy meal if they’re good. From my observations we aren’t subsidizing health care for the poor so much as we are subsidizing other non-essentials. I rarely see a family that couldn’t afford a $5-10 copay.
I am also a doctor on the dole. My wife has been on dialysis for almost 12 years, with medicare paying out over 3/4 million dollars and counting. In my vision of health care, I should be paying at least $20,000 annual deductible before the government paid a dime.
Of course if we were all paying more of our share, we would find much more cost saving innovation. I met a dialysis patient who applied and became his own medicare supplier. At the end of two years, after covering his supplies and billing Medicare for each dialysis treatment, he had 20,000 in his account.
It’s unconscionable that my daughter who works for minimum wage is paying into Medicare to support millionaires on this system. We can’t continue attempts correct perceived injustices by passing on massive debts to our children. And if we find it is acceptable to go into debt when it is a matter of life and death and righting wrongs, then we may as well as plan on joining Greece in total financial insolvency.
If you want quality care, you need to pay for it! I see a very selective subgroup of patients with advance lung disease. Many of these patients are on 15 medications or more. Medicare pays about $37.00 for a typical office visit. I am comfortable handling these patients on the basis of my training and experience. The family practice physicians and general internists have no interest or desire to care for such patients. Why go through a list of 15 medications at each visit, when you can see a younger patient on two medications and get paid the same amount.
I adopted an electronic medical record in 1995 and began electronic prescribing in 2009. I electronically review the patient’s records from the hospital and the imaging centers. All of this effort takes time, but improves care. My associates are like minded, but they are both younger and married to husbands that are professionals. If the reimbursement model for caring for the chronically ill does not improve, I will probably continue to work, but my associates will simply drop out.
Dr. Goodman points out some very interesting ideas, but the best method of reducing unnecessary care is to pay someone with advanced expertise more to provide the care needed. Nurse and physician extenders are fine for simple problems, but they are not capable of handling the complexity of 15 medications in a chronically ill person. Service follows reimbursement and once the reimbursement falls below the cost of delivery, the service stops.
I think that Dr. Goodman has to much faith in Medicare Advantage programs. Many of these simply increase the cost of delivery of care by shifting administrative burdens on to the physician. I have never had a CT of the chest or sinuses denied, but my staff and I spend needless time obtaining approval. The same issue exists for a multitude of medications. This is one aspect were traditional Medicare allows for delivery of care in a more efficient manner.
Great blog!
I really learned a lot. I have only known this issue after reading the whole posted article. Medicare should not be taking for granted; it’s an important issue in both legal and personal. Thank you for sharing it with us.
Great post! Thank you!