Ending the Medical Arms Race
This is the third installment in a series on correcting the mistakes in the Democrats' health reform bill. Click here to read the rest of the series.
Obamacare cannot succeed: the American healthcare system is too large to be controlled from Washington. A managed care model where insurers and providers are integrated into a united health delivery system would better preserve patient choice and insure quality care while also controlling costs. Insurers could provide the budget and the provider network would allocate the money to provide the best care. But government, insurers and medical practitioners would all have different responsibilities and roles in this new model.
But what would be the role of government in such a plan? Government would have a regulatory and oversight role. It would guarantee that clinical outcomes are acceptable, that key processes are in place and validated, that regulation is enforced and that the healthcare systems are held accountable. What government would not do is directly manage care. Government could also determine the range of insurance premiums to be paid for various plan components and also perform a re-insurance function that would help underwrite the cost of care for the poor or uninsured.
What is the role of insurance companies in such a system? They change in a dramatic fashion. This is the hard part, because we would need to convert these current insurance entities into part of an integrated healthcare delivery system. If a city were to have three such integrated delivery systems, each would have an insurance company that would be the collection/disbursement arm of the system. In cities or regions with one dominant insurer, it could be divided into smaller divisions that support each delivery system. Medicare would pay the insurance company based on the number of Medicare beneficiaries in the care of the system, not unlike the original Medicare risk contracts created in the 1990’s. Businesses would offer their employees enrollment in any of the available systems.
What is the role of physicians in this plan? They would need to be contractually linked to a given system and use that system to provide all care for their patients. They would need to be committed to one hospital or set of hospitals and manage their patients in that setting. Physicians will not like this idea but more and more they have come to see the inevitability of joining with hospitals and other large entities to survive as our current plans focus on a painful ratcheting back of payments in order to achieve reduced costs.
What is the impetus for the integrated delivery systems to be cost effective? Competition.
Up to now, competition between provider or insurer groups has probably raised healthcare costs. This is because the moral hazard in our current system has only rewarded providers who have the latest technology, the most glamorous advertising, and the most famous practitioners. While technology and famous practitioners are great, when they are not accompanied by an economic imperative to control expenditures, they become a positive feedback loop with more expenditures leading to ever more expenditures in what has been called the “medical arms race”. A fixed payment for each life for which the health system is responsible creates two opportunities to generate net income, control costs and increase the number of lives in the system. Competition would then be for attracting individual patients to contract with a given system.
More to come...