Change Will Not Come From DC

Paul Levy

Posted 2/22/12 on Not Running a Hospital

A New York Times editorial — “A Real ‘Doc Fix’” — provides a wonderful example of how a dogmatic adherence to a particular policy prescription causes one to develop constructs that are politically impractical.  This editorial is about how to tackle Medicare costs.  The proposed solution:

  1. Cut fees for specialists and then hold them flat;
  2. Have the Secretary of HHS identify overpriced and overused services and reduce the fees paid for them;
  3. “Protect primary care doctors” by holding their fees flat for a decade; and
  4. Establish a fee schedule that pays doctors more if they leave fee-for-service and form organizations that will coordinate care or take on the financial risk of managing a patient’s care for a year at a fixed fee.

There are germs of good ideas in here, but it doesn’t hold together.  Let’s look at reality.

Medicare has had the authority for years to adjust the relative fees paid to specialists and primary care doctors.  The Wall Street Journal has described the process.  A secretive body called the Relative Value Scale Update Committee, dominated by specialists, sets the rates.

With regard to overpriced services, Medicare also has had the authority to make changes.  Yet, even where the evidence supports lower prices, like irradiation by proton beam machines for “regular” cancers, it persists in paying more and enabling the medical arms race.

And a risk-based care regime requires elimination of the PPO feature of Medicare.  In other words, the care organization would have to require that patients lose their choice of clinicians and care venues.  As I have noted:

How can you be held accountable, as a provider group, if you cannot control the management of care of your patients?

These things proposed by The Times do not change because the interest groups that drive politics in Washington are quite content with the status quo.  It is politically hard to change the rules because “one person’s costs are another person’s income,” and Congress and Administrations are loath to take away from powerful interests.  Further, there is no way Congress will limit choices among the Medicare population, the cohort that alwaysvotes in elections.

Change in the health care system will not be driven by major policy shifts for the Medicare-eligible population.  Those are too highly politically charged.  Change will come from two sources:

The first is employers who put pressure on private insurers and providers to calibrate pricing based on quality and other attributes.  Tiered insurance products are one result of that pressure.  (Be careful, though, as high-priced incumbents will try to obtain state legislative passes to get around those rules.)

The second source of change will be those provider institutions that adopt an approach based on patient-driven care, elimination of preventable harm, transparency of clinical outcomes, and front-line driven process improvement.  This is the path to greater efficiency and a change in cost trends.

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