Reforming Health Care: Changing incentives and expectations

In a political year appeasing public opinion becomes increasingly important. Politicians are risk averse and their motivation to innovate is inversely proportional to the time to voting. They will undoubtedly take note of this Kaiser Foundation data:

However, changing health care is an inevitable task. Our non-system is unsustainable and far too expensive.  Why is government involved? Because the private sector’s primary interest is making money not care.  For example private insurers  don’t have an overwhelming desire to provide coverage for those needing it most, the sick and elderly.

This from Alain Enthoven:

Since Medicare is a major reason for the large and rapidly growing national debt, growth in Medicare spending must be brought into line with growth in the gross domestic product (GDP). The most effective strategy for reducing health care expenditures is fundamental reform of the incentives provided to both patients and health care professionals. Medicare’s open-ended fee-for-service payment system is a major contributor to the high level and rapid growth of spending. In 2009, the Massachusetts Special Commission on the Health Care Payment System said that fee for service “rewards overuse of services, does not encourage consideration of resource use, and thus cannot build in limitations on cost growth.” The commission concluded that “risk-adjusted prospective global payment models that provide appropriate incentives for efficiency . . . should serve as the direction for payment reform.”1

There are good reasons to expect such incentives reform to bring a substantial cost reduction in Medicare. Prominent experts have estimated that at least 30% of U.S. health care spending represents waste or pays for poor-quality care that doesn’t benefit patients.5 In the RAND Health Insurance Experiment, the Group Health Cooperative, a prepaid group practice with global payment, provided high-quality care at a cost 28% lower than that of the fee-for-service approach. In addition to reducing the direct cost of care, global prospective payment would eliminate large paperwork burdens. Physicians and hospital managers frequently say that they could reduce costs without harming patients and would do so if the fee-for-service system didn’t punish them with reduced revenue. In Madison, Wisconsin, where many cost-conscious state employees choose plans featuring global payment, prices are significantly lower, and premium growth significantly slower, than elsewhere in Wisconsin, where fee for service is more prevalent.

And some principles to achieve cost control and coverage:

• Guaranteed right to enroll in the plan of the consumer’s choice
• Same price to all consumers for same coverage
• Periodic open enrollment for covered beneficiaries, managed through an exchange • Consumers fully responsible for premium differences
• Risk-adjusted payments by government or employer (adjusted for age, sex, health conditions, and geographic area) that are high enough to keep the least costly plan affordable
• One or a few standard coverage contracts to make comparisons easy and simplify provider billing
• Reliable and unbiased accessible information on prices, quality, and consumer satisfaction • Insurance transactions through an exchange to facilitate consumer choice and achieve economies in marketing

• Implement best practices for prevention of infections • Strengthen primary care for prevention, early detection, and treatment
• Align incentives of providers with needs of members for affordable care
• Use active management of chronic diseases to reduce need for inpatient care
• Match resources used to the needs of population served
• Share comprehensive longitudinal medical records to improve physicians’ knowledge of patients’ history and eliminate duplication of tests
• Outcomes management: track patient outcomes and feed results back into decision making
• Implement effective evaluation, selection, and purchasing of drugs and devices
• Substitute less costly personnel where equally or more effective
• Continuously improve quality and redesign processes
• Rely on evidence-based guidelines to eliminate unwanted variation and accelerate application of the latest science
• Use information technology for caregiver support tools such as reminders, alerts, and secure messaging between doctors and patients


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