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Surprise! Health care continues to be expensive

June 23, 2011

So, there’s been a lot of talk about how we can make health care better and less expensive. One idea is to stop paying doctors and hospitals per procedure and instead give them a  chunk of money for just keeping a patient healthy or treating a particular problem.

The idea is, when you pay doctors/hospitals for every appointment, x-ray, or lab test, it’s likely they’ll schedule more appointments, x-rays, and lab tests. It’s an odd incentive.

Few health care professionals consciously offer unnecessary care, but they’re so busy doing the things that they get paid to do, they have no time to spend on the unpaid work of keeping their patients well.

Thus the idea of a “global payment” method that moves away from what the health care world calls the “pay for service model.”

According to this article in the Boston Globe, Massachusetts decided to give the program a try. But a year after the experiment, a report by Attorney General Martha Coakley says there’s no evidence the program has saved money. In fact, in some instances it’s been more expensive.

Here’s the breakdown from Coakley’s press release

A shift to global payments is unlikely to control rising costs without also addressing historic health care provider price disparities and encouraging consumers to make prudent health care purchasing decisions…  providers who are globally paid in Massachusetts do not have consistently lower medical expenses.  In addition… medical spending is on average higher for the care of health plan members with higher incomes.

So why didn’t this experiment work?  According to Coakley, more powerful health care providers continued to leverage higher payments. So, instead of getting paid more per procedure, they were getting more per lump sum. She says the only way to bring these costs down is to get rid of those disparities between doctors who offer the same services but get radically different payments.

But The Globe cites critics of the report who says it’s too early to call the effort a failure. They say one year isn’t long enough to measure whether costs are really going down. Besides, doctors were enticed into the program with higher than average global payments. As those payments become more realistic, MA might see a reduction in costs.

This debate is particularly relevant for Rhode Island’s experiment with patient centered medical homes, where doctors are get paid a certain amount of money per patient per month in addition to the normal “fee for service” model.

This year, the team is trying to reduce costs.  If doctors meet certain goals (decrease emergency room visits, improve the health of folks with chronic disease) they get an increase in the amount that they get paid per patient per month. Perhaps this is a better approach?  What do you think?  Can this global payment idea still work?

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