Fee-For-Service Would Have Cost Less

In Bensonhurst, Brooklyn, at the new R&G Social Adult Day Care Center, known locally among elderly immigrants for luring clients with cash and grocery vouchers, most people there for lunch did not stay to eat. Instead, many walked briskly toward the subway carrying bags stuffed with takeout containers, and two elderly men rode away on bicycles with the free food.

Not a wheelchair or walker was in sight at these so-called social adult day care centers. Yet the cost of attendance was indirectly being paid by Medicaid, under Gov. Andrew M. Cuomo‘s sweeping redesign of $2 billion in spending on long-term care meant for the impaired elderly and those with disabilities.

Such centers have mushroomed, from storefronts and basements to a new development in the Bronx that recently figured in a corruption scandal. With little regulation and less oversight, they grew in two years from eight tiny programs for people with dementia to at least 192 businesses across the city.

Next time you hear someone say how we need to replace fee-for-service payment with bundled payments plus managed care, pull out this article from the NYT. Matt Yglesias comments.

Comments (11)

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  1. Anthony says:

    A good example of how easy it is for people to “corrupt the system,” deeming government’s role in health care all the more controversial.

  2. Tommy Beyer says:

    It’s so sad when you add human corruption into the play of other people’s health. Vicious world we live in.

  3. Sam says:

    And look where tax payer’s money ends up in NY. Great policy and oversight in NY, commending indeed.

  4. Harley says:

    Not so sure they’re corrupting the system. Much more like they’re taking advantage of a government system that probably shouldn’t exist in the first place.

  5. Jack says:

    I wish they would open one of these down the street from me! Cooking is such a hassle.

  6. Studebaker says:

    How about we give states like New York a fixed annual block grant, and make them pay for all the bells and whistles at the margin. Then maybe some of this fraud would go away.

  7. Steven says:

    Fee-for-service is clearly the way our healthcare system should be run… Why is Washington ignoring the solutions!

  8. Gabriel Odom says:

    I’d like to see each Medicare enrollee in the US afforded a monthly medical card (similar to food stamps) of about $800 per month. (At current, Medicare costs about $10,400 per person per year, or about $870 per month. There are currently about 58.1 million people on Medicare.)
    Similarly, the 51.9 million Medicaid enrollees would be given $240 per month. ( Medicaid costs about $3,175 per person per year, or about $265 per month.)
    These two actions together would save the Federal Government 65.7 billion in the first year alone. This money would sit in your account (the US can even loan it out to earn interest – in the same way that a bank uses your money while it sits there) and any money you do not spend will simply roll over to the next year. This puts the people in charge of their own money. They will be less likely to go to the emergency room for minor complaints as this will cost them more money. At the end of the fiscal year, you will qualify for a 5% refundable tax credit on whatever money you have left over – which will encourage people to spend this money frugally.
    Additionally, because people have a vested interest in saving money at the doctor’s office, market forces will force the healthcare industry to be more efficient and cheaper.

  9. Henry GrosJean says:

    The problem with your proposal Mr. Gabriel Odum, is that when discussing this topic, we must dismiss all rational thinking. Your proposal, good sir, is rational, and therefore, must be discarded.

  10. Devon Herrick says:

    Under a proposal like Gabriel Odom’s, private Medicare Advantage plans would likely compete for seniors’ business by offering a variety of plans to suite seniors’ diverse needs (presumably each senior’s payment would be risk rated).

    The NCPA has a Medicare proposal that’s similar to this. In the NCPA proposal, workers (and their employers) would deposit an annual sum equal to 4% of payroll. Upon reaching Medicare eligibility, the accumulated funds would be converted into an annuity.

    Like in Gabriel’s proposal, seniors would receive a yearly sum of money to pay for medical care below the deductible (an annuity payment in the NPCA proposal). Seniors could choose among different deductibles depending on their tolerance for risk. Seniors would benefit financially from being wise consumers; doctors would respond to these incentives by offering a wider range of innovative services.

    The incentives are far better when seniors control some fo their own funds than under traditional Medicare and Medicaid. In a few weeks we plan to release an updated policy report on this proposal that’s been evaluated by an actuarial firm.

  11. Gabriel Odom says:

    Thanks Devon. I know I didn’t mention this above, but Medicaid enrollees could spend this money on private health insurance.

    I truly believe this could be a “best of both worlds” scenario.