I will suggest that most of us believe the way to control health care costs, and at the same time maintain or improve quality, is to both use the managed care tools we have developed over the years, and perhaps more importantly, change the payment incentives so that both cost control and quality are upper most in the minds of providers and payers.

The Congressional Budget Office (CBO) has just released an important review of Medicare’s results in testing those ideas. The news is not good.

From the CBO’s blog post:

In the past two decades, Medicare’s administrators have conducted demonstrations to test two broad approaches to enhancing the quality of health care and improving the efficiency of health care delivery in Medicare’s fee-for-service program. Disease management and care coordination demonstrations have sought to improve the quality of care of beneficiaries with chronic illnesses and those whose health care is expected to be particularly costly. Value-based payment demonstrations have given health care providers financial incentives to improve the quality and efficiency of care rather than payments based strictly on the volume and intensity of services delivered.

In an issue brief released today, CBO reviewed the outcomes of 10 major demonstrations—6 in the first category and 4 in the second—that have been evaluated by independent researchers. CBO finds that most programs tested in those demonstrations have not reduced federal spending on Medicare.

Looking at 34 disease management programs and care coordination programs, the research found “little or no effect on hospital admissions.” The CBO went on, “In nearly every program, spending was either unchanged or increased relative to the spending that would have occurred in the absence of the program, when the fees paid to the participating organizations were considered.”

Looking at the Medicare demonstration projects for value based purchasing, “Only one of the four demonstrations of value-based payment has yielded significant savings for the Medicare program. In that demonstration, Medicare made bundled payments to hospitals and physicians to cover all services connected with heart bypass surgeries, and Medicare spending for those services declined by about 10 percent. The other demonstrations appear to have resulted in little or no savings for Medicare.”

The good news here is that when put on a budget, when the payment system was changed to create a downside if results weren’t improved, one of the studies did identify “significant savings.” But only about 10%.

Thirty years into managed care, the stark reality is that we aren’t yet smart enough to get things under control.

Medicare is now about to test the Accountable Care Organization (ACO) concept. In an earlier post, Why ACOs Won’t Work, I argued that this approach couldn’t work unless we change the game–we change how providers are paid so that there is a significant downside if results aren’t achieved. I said, “Here’s a flash for the policy wonks pushing ACOs: They only work if the provider gets paid less for the same patient population.” At least one of the studies the CBO is citing would appear to support that notion–but only one.

When Medicare first announced their ACO demonstration project, the providers all howled–they were being put at too much risk for too little return. The feds then lowered the bar by improving the odds there could only be winners and not losers––eliminating participant risk in the first of two ACO tracks. The second track continues to carry risk but offers larger potential rewards.

Medicare policymakers may have had no choice but to placate the providers in order to entice them into the new system in order to get it off the ground. That said, Medicare’s strategy of overpaying HMOs to entice them into the Medicare Advantage business hasn’t exactly worked out toward the goal of lowering costs.

This CBO study makes it very clear that ACOs with little risk, just layering these tools over the top of the fee-for-service system, is a pointless exercise. When we just provide incentives to do the right thing, we don’t do the right thing.

What we need to be testing and perfecting is the combination of the best tools we have and significant risk–changing the payment incentives for real.

Unless ACOs, or any other managed care scheme for that matter, start out paying less, and the tools we have are then used to achieve a profitable result, there is no evidence there will be savings.

Robert Laszweski has been a fixture in Washington health policy circles for the better part of three decades. He currently serves as the president of Health Policy and Strategy Associates of Alexandria, Virginia. Before forming HPSA in 1992, Robert served as the COO, Group Markets, for the Liberty Mutual Insurance Company. You can read more of his thoughtful analysis of healthcare industry trends at The Health Policy and Marketplace Blog, where this post first appeared.

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49 Responses for “(Almost) Nothing Works”

  1. Jonathan H says:

    “I said, “Here’s a flash for the policy wonks pushing ACOs: They only work if the provider gets paid less for the same patient population.” At least one of the studies the CBO is citing would appear to support that notion–but only one.”

    Are you giving yourself enough credit here? Your first statement still seems transparently true to me, regardless of the results of the Medicare pilots. The problem was that they didn’t end up paying less for the same patient population after admin was accounted for. I wouldn’t naturally interpret your statement as excluding admin cost.

    As for ACOs being pointless if, as invented now, they won’t reduce costs, that is not necessarily true. They could be cost neutral and improve quality of care, which seems in fact to be a likely scenario.

  2. Jonathan H says:

    “invented” should be “incented.” Danged auto-correct.

  3. MD as HELL says:

    ACO’s conceived by government in its own image, will fail to control costs for the same reason government itself has failed to control costs in anything at all, ever.

    The only way to control costs is for Congress to grow a set and tell its direct beneficiaries they are on their own. Congress has no way of paying off its lavish reckless “entitlements”.

    Young people have had enough and will vote old people out of the checkbook.

    • Jonathan H says:

      MDH, you mean like how the VA doesn’t control costs? Or the Netherlands? Or the UK? Or hundreds of other cases?

      We don’t control costs here because of culture and politics, not because of any essential limitation of government.

      • MD as HELL says:

        Sorry, Jonathan.

        i should have said “our government”.

        And if the VA cuts costs, it is because we in the private sector see the VA patients when they are sick and canot transfer them to the VA until they are accepted, which is when they are not sick.

        “Hundreds of other cases?” Write a book.

        • Jonathan H says:

          So our private sector is doing a bang-up job? I don’t see the alternative.

          As for writing a book, many have been written already. Some good ones, even. Another is not needed.

  4. Al Lewis says:

    I normally wouldn’t turn this into a vehicle for self-promotion, but if you’d like to buy an advance copy of my new book (in pdf form) Why Nobody Believes the Numbers, from my website dismgmt com , you’ll see it says exactly the same thing, not just about ACOs but about every other voluntary program — PCMH, DM, wellness, MTM — wtih math to back up these assertions. I would classify ACOs as “voluntary” in the sense that providers had to be enticed into this model.

    There are simply too many mouths to feed for arrangements that require enticing people into them with subsidies to every work.

    • BobbyG says:

      Your “why_nobody_believes.pdf” preview will not open.

      Not exactly encouraging for a $60 book.

      • Al Lewis says:

        file seems to be opening on both my devices just fine but I don’t like to have dissatisfied customers so how’s this for a makegood: email me at alewis@dismgmt.com and I’ll send it to you gratis, and you only pay for it if you read it and tell me you like it?

        What the heck — ANYONE on this site can do the same. It’s yours to keep and you only pay if you like it. (In both cases you’ll also get the hardcopy when published.)

        • BobbyG says:

          I just wanted to read your preview for now. Tried everything to open it. (I have the full Adobe Suite. iMac user). Thanks for the reply.

          • Al Lewis says:

            Yikes! How many people read this site, on a Saturday no less? I’ve already gotten four requests for the free copies. I gotta end this offer or no one will be left to actually buy tjhis book when it comes out.

            So the offer will end at 2:30 PM Eastern. After that, if you have any trouble downloading the free intro just ask me and I’ll send the free intro.

      • Matthew Holt says:

        Good to see that THCB readers are pushing Al to the poorhouse…

  5. I will suggest that most of us do not believe that managed care tools and changing payment incentives, either separately or combined can reduce costs and improve quality of care simultaneously. By “us” I do not mean expert consultants, policy makers, academia, etc.

    I will also suggest, speaking for myself only, that constantly ignoring evidence and proceeding headlong into a faith based solution because it looks good on paper is not going to prove any more effective this time around.

    The current push for provider consolidation is destroying primary care, destroying both patient and doctors autonomy, and handing over the oversight for medical care to revenue driven organizations, which the government hopes to be able to regulate into providing a superior product at a lower price.
    This mass produced superior product is of course intended for mass production, not for the fortunate few, and it will look exactly like the superior products sold at Walmart, at which point all is left to do is convince people that plastic forks are superior to silverware.

    On second thought, maybe the “most of us” referred to above are correct.

  6. BobbyG says:

    Nice post, Robert.

    I’d sure like to see Joe Flower and JD Kleinke add their thoughts.

    From the last GOP “debate,” btw -

    MR. ROMNEY: “… So — so we’ll make it work in the way that’s designed to have health care act like a market, a consumer market, as opposed to have it run like Amtrak and the Post Office. That’s what’s at risk — (applause) — at stake here.

    Problem solved. It’s no different than buying shoes or sheets or HDTVs or yachts or undervalued companies.

    Next?

  7. Dr. Mike says:

    Nothing works because those in charge keep trying the same thing but expecting different results. “This time will be the time…”

    Let’s see how this works in other industries:

    Government slaps a tax or penalty on some product or service, or conversely they provide a financial incentive or tax rebate, and the industry passes the extra cost or savings on to consumers, and the consumers change their behavior.

    But in healthcare:
    Government or insurance slaps a penalty or restriction or incentive on providers, but providers are prohibited by law or contract from passing the savings or costs on to the consumer, and consumer behavior stays the same. But the providers, whether they are receiving less or more per each service, now have the incentive to either provide more of that sevice in the same timeframe to preserve income (thus dropping quality) or to provide more of that service in lieu of less profitable (less costly) services. Either way, the end result of the attempts to manipulate the provider of the service instead of the consumer of the service results in the same or higher costs.

    If the powers that be would simply stop for minute and ask themselves – is there a way to incent the consumer to consume the services they need, while decreasing the consumption of services that don’t add value, all the while minimizing the impact on their family finances? If they would think on this instead of trying to think up more ways to control providers, they might actually have a breakthrough.

  8. Dr. Mike says:

    I’ll add that if you insist on working only on the provider side, your time would be better spent looking at the hospitals rather than physicians, as hospitals are where most of healthcare spending occurs. The recent MedPAC recommendation to place medicare payments to hospital outpatient clinics on par with private practice clinics is a good start. (a very disruptive change that will have widespread repercussions).

  9. Dr. Mike, I am not sure what you mean by consumers.
    Half of all Americans use almost no health care, while 5% or so use half of all resources. Is this a typical distribution in “other industries” where slapping and incenting consumers is working well?
    The overwhelming majority of consumers have no ability to affect any significant change. Those very sick individuals who are using most of our health care dollars will not respond to slapping for many obvious reasons. They have been shown to respond to more primary care from physicians. Why aren’t we concentrating on evidence based policy changes? Beats me, but it may have something to do with hospital corporations not wanting to lose all that revenue, and with payers of all stripes desiring to control their environments. It could also be that bureaucracy, like entropy, is governed by the second law of thermodynamics.

    • Dr. Mike says:

      “half of of all Americans use almost no health care” Maybe in any given year, but that certainly is not true when the time frame is expanded a bit.

      Inpatient care is obviously the most expensive, and consumes the majority of health care dollars, and yet the most intense debate is about outpatient care – prevention, insurance for all, SGR, medical homes, etc. Even the debate about ACOs often centers around the outpatient side of the equation. Patients, before they become part of that 5% that uses half of all resources, are for the most very capable of responding to both positive and negative consequences, but so far, IMHO, both government and private insurers have gone about it in the wrong way. Every working American is capable of making good choices when provided with the tools to do so. Providing insurance and/or health care to millions of Americans who have previously gone without is going to change the cost equation in ways that make it ever more important to get the incentives right for everyone. But you won’t get any more primary care out of me, and others like me, unless the incentives start to change from what they are now.

  10. steve says:

    We know how others control health care costs. Every other OECD country has done a much better job than we have. We are unwilling to try adapting programs from other countries. We are even unwilling, for the most part, to adopt some of the basic principles that have been shown to reduce costs.

    Steve

  11. Barry Carol says:

    In fiscal 2011 ended 09/30/2011, Medicare spending net of offsetting receipts (beneficiary premiums mainly) increased about 4% from the prior year which was less than what was expected at the start of the year. For the first three months of fiscal 2012, ended 12/31/2011, Medicare spending was actually down 11.9% from the prior year. After adjusting for the timing of payments due to calendar shifts, it was up 1.1% but actually down slightly on a per capita basis. Data is from the CBO’s Monthly Budget Review.

    So, even if the demonstration projects discussed in the post were not successful in reducing costs except for bundled payments for heart bypass surgery, it looks like there are some promising developments with respect to overall program spending. The practitioners out there can probably speak to this a lot better than I can. However, I keep hearing that hospitals are more interested in learning how to operate more efficiently at lower costs to get ahead of some of the payment changes coming down the pike. Perhaps more people are choosing hospice care sooner at the end of life and maybe more are executing living wills or advance directives that call for no heroic measures. The increasing percentage of the Medicare population enrolled in Medicare Advantage plans which all limit provider choice may be receiving less inappropriate care from more cost-effective providers.

    I know that the managed care insurers are very interested in bringing more and better care coordination to the expensive dual eligible population which consists of fewer than 10 million people eligible for both Medicare and Medicaid. As a group, this population costs about $300 billion per year to serve or roughly one-third of the combined cost of the two programs even though a sizeable percentage of them are not seriously ill. Interestingly, though, people from the lowest segment of the income distribution who also have deeply held religious beliefs are more likely than the rest of the population to insist on receiving the most aggressive and costly treatments at the end of life. Exactly why this is I have no idea nor do I know if this is also the case in other countries or not.

    • ….or maybe this recession is more like a depression, particularly for Medicare/Medicaid folks.

    • Al Lewis says:

      Health spending is down across the board, not just Medicare. It isn’t the “promising developments” that caused this reduction, any more than failure of those “promising developments” led to higher costs in earlier years. Fact is, all this fun social-engineering policy stuff stuff other than making consumers or providers pick up much more of the cost has only a marginal impact one way or the other.

      Anything that relies on exhorting voluntary behavior change falls into the category of “almost nothing works.”

  12. Barry Carol says:

    Dr. Mike –

    I agree about hospitals being a huge healthcare system cost driver. In a recently published Brookings Institution primer about the premium support concept, it was stated that approximately 25% of Medicare spending is for care during the last year of life, much of which is hospital based care. This is why I keep pounding away about end of life care, both the need for more widespread use of living wills and advance directives and for doctors to take into account the need to be good stewards of society’s finite resources when they make their treatment decisions and recommendations. I also agree about the need to get the incentives right throughout the system for both providers and patients.

    Separately, the private insurers note that hospital inpatient care is where they are seeing the most upward pressure on unit costs. Utilization of services has been fairly flat but the hospitals with a dominant local or regional market share are driving unit prices up considerably faster than general inflation. Hospitals, for their part, attribute at least part of that effort to inadequate payments from Medicare and, especially, Medicaid.

    Margalit –

    Approximately 90% of people with standard Medicare have Medigap plans as well which insulates them from copays and deductibles for services, tests and procedures covered by Medicare. The Part D plans do have copays, however. Medicaid patients don’t pay copays. I can easily see Dr. Mike’s Medicare and Medicaid patients not being affected at all by the recession. Moreover, I haven’t seen any stories about such patients dying before they normally would have because of the inability to afford care due to the recession.

    • Dr. Mike says:

      I will admit to a wee bit of hyperbole in my statement implying that none have been affected – and, if I were still accepting new medicaid into my practice, I would have noticed the effect of the recession in causing some previously privately insured to now be on medicaid. But for the most part (? >70%) my medicare and medicaid patients do not work, and seem oblivious to the recession. It really chaps my hide to be made to sound like I am attacking this group of patients just because I don’t buy into the falicy that they are poor and ignorant. By international standards the majority most certainly are not impoverished, and I have had enough interesting conversations with these patients to know they aren’t stupid. They “get it” a lot more than they are given credit for. They “get it” well enough that I believe they would respond very nicely to incentives for them to think about end of life care. I believe you could structure a small simple incentive program that patients would respond to by having an end of life document completed. Why would you design an incentive (or disincentive) for me? It defies logic and ignors human nature to target anyone other than the patient when attempting to modify the desire for futile end of life care. You can ask any doctor about the “a-ha” moments they see happen in their patients – years of haranguing them about their diabetes, etc never make a dent, but then something happens to them, TO THEM – THE PATIENT, and they suddenly have a desire to make the same changes you have been asking them to make for years. Disimination of information without the desire on the part of the intended audience to learn the information is pointless. The idea of benevolent stewards guiding the ignorant masses into the right path is itself ignorant. Ignorance is not the issue – it is desire, and desire can be created.

      • steve says:

        “By international standards the majority most certainly are not impoverished, ”

        By international standards, you and I are way overpaid. If you want to use international standards, at least be consistent. As to the end of life issue, the Wisconsin experience suggests that people respond quite well to even minimal discussion of the issues. I would like to see physicians get paid for having these talks. It will not happen if the current iteration of the GOP is in office.

        Steve

        • Dr. Mike says:

          I must have hit a nerve for you to accuse me of an inconsistency that is no where to be found in what I have written.
          Compared to doing nothing, most any intervention is likely to show a response. I would be very interested in seeing if compared to paying me for doing something (I am overpaid afterall) you instead spent the same amount of money on an incentive program for the patient. I would wager the patient’s incentive program would have dramatically better results. This of course will not happen if the current iteration of the, er, um, never mind, doesn’t matter who’s in office.

          • steve says:

            “I must have hit a nerve for you to accuse me of an inconsistency that is no where to be found in what I have written.” If by international standards the majority are not impoverished, then by international standards, if those are the ones you choose to use, we are overpaid. It’s pretty straightforward.

            “you instead spent the same amount of money on an incentive program for the patient.”

            Maybe, and I would not oppose a large scale pilot to see if it could work. However, we know that most spending is by a small percentage of patients. What incentives are you planning for the newly diagnosed cancer patient? They are going to go way over any reasonable deductibles/co-pays. Most of our patients simply are not that able or willing to move to new facilities or new docs. There may be room for incentives to whittle down some costs at the margin, but I think it unlikely to work for the majority of our health care spending. (Also, we know that when we increase deductibles, patients will often drop the most cost-effective care.)

            Steve

          • Dr. Mike says:

            Again, you said I was inconsistent. But, I never said I wasn’t overpaid. Just because you can use logic to deduce from one of my statements that another statement could be true, the fact is I never said one way or another, therefore there is no inconsistency to point out. You can make a point, but to call me inconsistent is a distraction. Thanks for playing though.

  13. hu williston says:

    Hooray for Jonathon H and all others who point out those vested interests who have learned to do well under the present lack of oversight will continue to lobby against any “big government” looking over their shoulder to see how they are doing well enough to pay millions to their executives and shareholders. Who in the government gets $100,000,000 to run what surely are some of the most important institutions of our society, Oops I forgot about the lobbyists, maybe they are making the millions.
    Where are the advocates for transparency? Publish the cost per patient per year or total payments for those providers seeing hundreds of patients a day for all those who are being paid by you and me, that is government programs. Put this on the internet by Zip and type of provider or specialist and let the investigative reporters help us sort out how wisely we are spending our health care dollars. We cannot correct or address this problem until we know where the money is going and if that is how we want it spent. Certainly many of us see hundreds of thousands spent on care and procedures of questionable value promoted by the “medical industrial complex” , hospitals, imaging centers, free mobility devices, pharmaceuticals promoted on TV. All of this is supported by our dollars for health care, insurance Medicare, Medicaid and most is uniquely American if not in quality certainly in quantity.

  14. MG says:

    “In America, the implicit belief system promoted by marketing is that you can eat anything you want in whatever quantity you want, and if anything goes wrong with your body or mind, there is a pill or procedure to fix it”

    Pretty much sums it up. I am always baffled that in healthcare there an overwhelming amount of energy and focus on the delivery system with everything else generally much attention, research, and funding. Like becoming obsessive-compulsive about just a single room in the house while the rest of it literally fails apart around you.

  15. MG says:

    It shouldn’t surprise people either that the vested interests in heatlhcare largely resist changing the status quo much either:

    I hate focusing on just income vs. wealth because it presents a pretty clear distortion of what actually matters but it is pretty clear people especially physicians are making out really well with the status quo:

    http://www.nytimes.com/packages/html/newsgraphics/2012/0115-one-percent-occupations/index.html?ref=business

    Also reflected in the undergrad majors that are making the big bucks:

    http://economix.blogs.nytimes.com/2012/01/18/what-the-top-1-of-earners-majored-in/?smid=tw-nytimeseconomix&seid=auto#hBiaIow,1

    The largest percentage of 1% (by income) by their undergrad college major are ‘Health and Medical Preparatory Programs’ at 11.9%. Biochemical Sciences, Zoology, and Biology are #3, #4, and #5.

    While the healthcare lobby doesn’t have the firepower in terms of reps, clout, and contributed dollars that finance does, it is no slouch either:

    http://www.opensecrets.org/industries/index.php

    They come in at #5 in funding from 2011-12.

    People who are wealthy, affluent, and have a relatively safe and secure lifestyle will act vehemently and strongly against any outside forces that attempt to change this especially political ones.

  16. Barry Carol says:

    Back in 2003, Princeton professor, Dr. Uwe Reinhardt, published a paper in Health Affairs titled “It’s the Prices, Stupid.” I suspect that if Germans had to pay U.S. prices for their utilization of health services, tests, procedures and drugs, their spending as a percentage of GDP would be comparable to the U.S. and maybe even higher. In today’s New York Times, Phillip M. Boffey published an article titled “The Money Traps in U.S. Healthcare.” In it, he compares the prices for a number of different procedures across five countries – U.S., U.K., Canada, France and Germany. Data is from the International Federation of Health Plans. Here are the procedures, along with average prices in the U.S. vs. Germany and the U.S. price as a percentage of the German price: M.R.I. scan, $1,009 vs. $632 (160%); Normal childbirth, $8,435 vs. $2,147 (393%); Appendectomy, $13,123 vs. $3,285 (399%); Average hospital stay, $14,427 vs. $4,718 (306%); Hip replacement, $34,454 vs. $15,329 (225%); and CABG, $59,770 vs. $27,237 (219%).

    My understanding is that the government does not set healthcare prices in Germany. Instead, the sickness funds (insurers) negotiate them as a group which is also the approach used in Switzerland. To do that in the U.S., insurers would need an anti-trust exemption. The current exemption only allows data sharing related to claims to make it easier for smaller insurers to establish their rates and compete more effectively than they otherwise could. Even if Congress passed a law giving the insurers the exemption they would need to use this approach, the larger carriers would probably resist because under the current system, they can negotiate a better deal (bigger discounts from list price) than their smaller competitors.

    I’ve said before that I would love to see a comparative analysis across countries showing the number of hospital employees per licensed bed and total compensation per licensed bed. I’m told that German doctors who work in hospitals earn surprising little except for department heads. At the same time, the average manufacturing wage in Germany is significantly higher than in the U.S. and when you go there as a tourist, everything else is more expensive than it is in the U.S. Go figure.

    That all said, there is plenty that we in the U.S. can do to improve costs from moving away from the fee for service payment model to risk adjusted capitation for primary care and bundled payments for surgical procedures to disclosure of actual contract reimbursement rates (price transparency) to sensible tort reform to reduce defensive medicine, greater use of electronic records to reduce duplicate testing and adverse drug interactions, and more administrative standardization and simplification to reduce billing costs. Tiered insurance networks to encourage patients to access care from the most cost-effective high quality providers and more widespread use of living wills and advance directives to reduce expensive and often unwanted end of life care would also be helpful as would more aggressive efforts to combat fraud. So, while it’s clearly important to get the incentives right, prices per service, test, procedure and drug are even more important. Price transparency tools would be useful in trying to at least build some countervailing power against market dominant hospitals including those in rural areas.

    • SJ Motew, MD says:

      German drug and device prices are controlled by their backbone social insurance program. Prices are capped, and new drugs highly regulated and/or discontinued after one year if not showing significant benefit over current drugs. Malpractice tort is very limited as damages are paid from social insurance with regulation of physicians handled separately. Germany is FFS but the prices are set for all comers and providers based on a formula simpler but not that much different from the US (ie amount of work, complexity and a government ‘correction’) This single fee schedule is a main driver in cost containment.

    • I don’t really understand your reasoning here, Barry. You start by correctly pointing out that we spend a lot more per service unit than any other OECD country, and proceed by suggesting that we change reimbursement methods to reduce utilization. Utilization is not the problem. Fee for Service is not the problem.

      American don’t use that much more health care than other countries, and in some cases they use a lot less. End of life care may mildly affect Medicare costs, but it does not affect private payers which keep hiking up premiums year after year.
      Capitation and bundling are not just numbers pulled out of a hat. They are calculated based on reasonable utilization of services as currently priced. This will not reduce costs any more than DRGs did.
      Swiss docs use less health IT than we do here.
      Providing antitrust exemption to for-profit payers is guaranteed to bankrupt even more small practices, and will have no effect on large monopolistic health systems, which are the main offenders. Where I live, no one, will buy insurance that excludes BJC. Not one employer or person. Ever.

      I agree with Dr. Motew and Bob below. We need a national fee schedule and a budget, and a heck of a lot more quality primary care. Real primary care, not the case manager type of racket.
      These are the mechanisms by which costs are contained in other countries.

  17. bob hertz says:

    I missed the section of the Ten Commandments which stated that intensive care had to reimbursed at $3000 or more per day.

    What if we cut the standard ICU fee to $1500 a day instead?

    What many other countries do is not necessarily mysterious.

    They have global budgets with no allowance for volume.

    The hospitals get their $80 billion – or whatever – and virtually no more. They can give patients four EKG’s a day and three blood gasses an hour, and their total is still $80 billion.

    The $80 billiion probably comes in four or twelve large predictable checks.
    So there is no need to harass ‘non-paying patients.’

    This is not perfect health care. Capital needs are often ignored, so that some hospitals get to be 60 years old. (very few American hospitals are over 20 years old)

    This system also creates layoffs when budgets are cut, and/or when employees bargain for higher wages.
    This system also creates waiting lists,

    It is, however, affordable.

    We cannot just flip a switch and do this in America. The HCFA in Washington cannot make out the budget for the Cleveland Clinic.

    But here is what we could do:

    1. Make Medicare the national fee schedule.

    2. Hospitals will almost certainly increase admissions.

    3. Set a budget target.

    4. When the budget target is reached, probably in November if we are using a calendar year, all reimbursements are cut by 90%.

    5. Ban all balance billing of patients.

    6. Expect a revolt in Congress. Any president who does this will get only one term.

    That is how you cut health care costs- by meaning it. Demonstration projects are far too polite. As the first poster said above, you cut costs by paying less for the same group of patients.

    Bob Hertz, The Health Care Crusade

  18. Vikram C says:

    I doubt if there is any good study to show European care is better than US. Higher life expectancy doesn’t reflect of procedure driven care.

    However the costs are clearly higher and my assertion is that as long as consumer equate price to quality, high price tag is what we will get. No cheap treatment will survive the cultural and scientific scrutiny.

  19. Barry Carol says:

    Dr. Motew and Margalit –

    In 2008, Health Affairs published an extensive interview with Germany’s Health Minister, Ulla Schmidt, conducted by Uwe Reinhardt and Tsung-Mei Cheng, both of Princeton University.

    There have been a number of significant reforms to the German system over the last ten years or so. Importantly, regarding pricing of health services, Ms. Schmidt states that regional associations of sickness funds negotiate prices with regional groups of physicians and all sickness funds pay the same price for the same services. The associations of sickness funds negotiate with each hospital individually and all pay a given hospital the same price for the same service, test or procedure. For newly developed procedures, a regulatory body must approve them first and cost-effectiveness is a key criteria required to win approval. For drugs, Germany uses a system called reference pricing, first developed in the Netherlands. This means that the insurer will pay for a low cost effective drug in a given therapeutic class but if the patient wants a more expensive drug in the same class, he/she must pay the entire difference out of pocket.

    In the U.S., there is wasteful utilization due to everything from defensive medicine to unreasonable patient expectations. There is also a lot of care delivered in very expensive hospitals and hospital owned outpatient centers that could be done just as well at less expensive facilities. There is also a lot of fraud, especially in areas like home healthcare and durable medical equipment. End of life care is a big issue as well.

    The price differences are a huge deal especially with respect to hospitals. This is why I think price transparency is important, not only for patients but for referring docs as well. If employers feel they need to include the local big name hospital in their network, they could still subject it to tiering. The patient can still go there but will have to pay higher coinsurance. For routine services, tests and procedures, both patient and doctor may decide that it would be better to get care from an alternative more cost-effective provider. That’s what I mean about trying to create countervailing power against the most expensive hospitals. I don’t think applying the Medicare fee scale to all care will work. The prices are dictated. Medicare overpays for some procedures and significantly underpays for others. In Germany, the prices are negotiated. That’s a critical difference.

    I say again, though, that I have never seen any good cost comparisons of what it actually costs to operate an AMC or a community hospital in the U.S. vs. Germany, the rest of Western Europe, Canada, Australia, etc. I suspect that U.S. hospitals employ more people per licensed bed and the doctors who are hospital employees earn significantly more than their foreign counterparts, especially the specialists. Since the average length of stay in the U.S. is the shortest in the world, I’m told, our average acuity is probably higher which further complicates the analysis. If anyone out there can shed some light on the relative costs per service, test and procedure to actually provide care, please share it.

  20. DeterminedMD says:

    Maybe if we started by being honest about end of life decisions and choices, we might see expenses drop a bit.

    Oh yeah, like being honest about the same lame and dishonest people most of you vote back into public office every 2-6 years. Change is just a word to so many who write here. Just like Hope. Just like the loser voted into the White House 3 & 1/2 Years ago. And just like the winner of the election in November 2012. You all want real change and hope for health care choices?

    Walk into the nearest room with a mirror and look at the reflection. Ask that person if you are really doing the best you can do. And listen to the reply.

    How do people who advocate for the status quo live with yourselves anyway!!?

    • BobbyG says:

      Are you Dr. Kevorkian’s brother? Your Johnny-one-note schtick has gotten way beyond old.

      • DeterminedMD says:

        Gee, taking a break and reading the same lame ad nauseum rhetoric from you and other people is so empowering. With the level of vision and opportunity spewed here, it is such a wonder health care has catapulted to such new heights. You all are finally reaching ground level now!

  21. Just a few thought from Tampa, FL.

    Encourage price transparency and comparison will get us a bit closer to where we want to be.

    Most patients in the FFS Medicare program play by the same rules.. Maybe using big data to tier these folks into different programs with incentives, affiliations, etc. would help. A 65 year old is much different than a 75 year old, 85, etc.. Why are we treating them all the same?

    Throw out the PAR Medicare fee schedule and allow SOME price competition pointed at the Medicare population. Leave in the limiting charge to cap the top-end.

    Move much faster in changing the Medicare DME / O2 program – too many holes here.

    Peter
    selfpaymri

  22. MD as HELL says:

    Please listen carefully as our menu has changed:

    For dialysys near death click “no way”

    For lift chairs and scooters click, “not a snowball’s chance”

    For feeding tubes in the nursing home click, “what have you been smoking.”

    For all other insane expectations from a broke and broken loser government program, please leave your name and number, and one of your former Congressmen will get back with you in their political lifetimes.

    NOT!

  23. Tom Albrecht says:

    If we really want to reduce health care costs we need a paradigm shift from a sickness based system to a wellness based one by focusing on nutritional and lifestyle changes, and in so doing we will all be much healthier!

  24. Tyler Decapot says:

    Operational and financial decisions are made every day. Still, how are they made? What is it that leads to specific decisions being made and particular paths being chose over other available options? The answer is quite simple; information and data, of quality, is required, so that whoever is making the decisions can be most informed and make the most efficient decision for everyone involved.

    Even with a particular mind set turned towards the healthcare industry and hospitalization, few people will argue that making haphazard choices, without appropriate attention being paid to the quality data and details, can simply lead to poor outcomes. Sometimes, it would even be better not to have made any choices at all.
    So, as discussed, to make a valid and informed decision, people require information. “The process of finding and using information has costs for individuals in terms of effort, time and material resources. These costs are different for different people and impact on their use of information in different ways. Thus, the accessibility of information is important in ensuring those people who need to make choices can do so in an informed way,” (Baxter, 2008).

    To sum up, Baxter is essentially saying that there is a cost benefit analysis everyone goes through, consciously or unconsciously, to reach a particular choice. Basically, it makes it so that the cost of that quality information, is truly of value the way one would figure. Regardless, if everyone were just to start going about making spontaneous, uninformed decisions, say about medications, or surgeries, a lot of incidents, including deaths, would ensue. As such, quality information is the key to quality healthcare.

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