Op-Ed: Leave it to Darwin?

Roger collierI’ve been reading some of the testimony on delivery system reforms from the House Ways and Means  Committee meeting earlier this month, in particular the lengthy statements from MedPAC Chairman Glenn Hackbarth and Urban Institute Senior Fellow Dr. Robert Berenson.  Hackbarth and Berenson are each distinguished health care figures, and their remarks are worth careful study. Together, they paint an all too familiar gloomy picture of a system whose costs are out of control, in which quality is often poor, and where there is little correlation between expenditures and outcomes. Few would disagree with the causes that they identify: payment structures that reward volume, lack of coordination among providers, an overemphasis on specialty care, and a system that seems more often driven by supply than demand. The two sets of testimony include several very important recommendations, like more emphasis on public health, dissemination of comparative effectiveness information, and higher payments for primary care (although several years will elapse before this makes a real impact on physician career choices).

Other testimony proposals, however, especially those focused on
Medicare, carry the risk of distracting us from more important changes.
Chronic care coordination (including the medical home model) has not
yet convincingly been demonstrated to cut costs. Accountable care
organizations (this year’s buzz-phrase) require more willingness to
cooperate than many providers have so far shown. Bundled
hospitalization payments make good sense but require the same kind of
willingness to cooperate. Tying payments to quality introduces
questions of data interpretation and validity of guidelines.  

Aside from their uncertainty of success, these proposals share two problems. Each offers potentially inadequate incentives for changing entrenched provider behavior, and each represents yet another government attempt to make an inherently inefficient and ineffective system work just a little better. Rather than trying to breathe life into a system that might be better left to wither and die, perhaps we should focus on the potential of market Darwinism—in which the most cost-effective survive, and the less fit fall. In the context of Medicare, Darwinism means redesigning Medicare Advantage so that private plans compete with the FFS program on the basis of price alone—without subsidies. While Hackbarth’s testimony noted the need for financial neutrality between MA and FFS, he stopped short of the recommendation that would really ensure survival of the fittest: allowing beneficiaries to offset any MA savings against their Part B premiums, and requiring that they assume the full additional burden when MA premiums exceed FFS costs.  In the context of national health care reform, Darwinism means setting a standard benefit package that insurers must offer through an insurance exchange. Insurers should be allowed to offer separately priced supplemental coverage, but again—except for low-income individuals—there should be no counter-productive government subsidies that disguise differences in premium cost for the basic benefit. What might be the results? Assuming a functioning risk adjustment mechanism to discourage “cherry picking,” the least cost-effective insurers should rapidly disappear, the better HMOs should thrive, while the best managed other insurers should apply the kind of cost pressures and pricing innovations that Hackbarth and Berenson have presented (and should rapidly abandon them if they are ineffective).  This doesn’t mean that Medicare FFS demonstration projects aren’t worthwhile. It would be wonderful if the costs of traditional Medicare could be controlled. However, we should be focusing more on the kind of health care system that will work long-term, rather than expending too much of our energies on the application of band-aids and baling wire to something that is inherently faulty.  Roger Collier was formerly CEO of a national health care consulting firm. His experience includes the design and implementation of innovative health care programs for HMOs, health insurers, and state and federal agencies. He is editor of Health Care Reform Update.

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16 replies »

  1. Consumers have always been responsible for all, not just a portion, of their health care. Every month a certain sum of money is paid directly or indirectly by consumers to insurance companies. Whether it is a visible deduction from a paycheck or an invisible “benefit” offered by the employer which results in lower pay.

  2. Value must be determined by the patient, not the system. As for expensive tests; if it has become standard of care to get a CT before any appendectomy, then it will be done. If it is standard of care not to miss a subtle PE, then I will get a CT to find that rare event.
    As for expensive end of life care, the family wants Home Health, the family gets home health. The family wants a PEG tube, the family gets a PEG tube (for the patient). The family wants full code status on a vegetative patient…well, you shoud be getting the idea. Give us tort reform, and we can help people make better choices. If you don’t trust your doctor to make those choices, then get a different doctor.

  3. When I think of value-based choices, I think more of choosing between providers than choosing between particular treatments. If we want to hold providers accountable for their quality and fee schedule, we need to put the competitive forces to work. That includes a more health literate public, a more patient-friendly billing system (ICD-10 is a move in the wrong direction), and an effective way to measure and communicate quality.
    As it stands right now, the average patient has no idea how to evaluate their provider based on quality or cost. Based on that fact alone, it should be no surprise that our system is not providing good quality per dollar expended. All system stakeholders are to blame for that.

  4. MD, I have a question regarding utilization.
    The only utilization I can see that can be driven by those Medicare/Medicaid beneficiaries is office visits and maybe ED visits to a certain extent.
    Doesn’t it take a physician to order all the expensive diagnostics that drive costs up? If so, why do physicians order all those expensive and frequently unnecessary procedures and tests? It can’t be all due to lack of tort reform.
    Deron, what does value-based consumption really means?
    Say, treatment A costs $1000 per day and has 90% chance of success and treatment B costs $50 per day and has 80% chance of success. Is the “consumer” supposed to choose one based on what he can afford?
    Other than the obvious social inequity, are we setting in place a system of value-based assessment of human life?
    That is a frightening prospect to me, particularly when I start playing all sorts of scenarios in my head (should we save 60 year old grandma with breast cancer or attempt to save baby Jane who has CF?).

  5. Margalit – I agree that we’re already financially responsible for our care, but that responsibility has to be explicitly tied back to individual services as opposed to being put into a big pool that everyone craps in. Otherwise, we cannot effectively move to value-based consumption of services.

  6. Margalit,
    Only half the country gets a paycheck. Medicaid recipients have never paid for their coverage. Medicare is doled out to people allegedly disabled who never prepaid anything. The utilization patterns of these groups is out of control.
    Deron S.,
    In 1979 the insurance plans paid 80% of UCR (usual, cousomary, and reasonable). The consumer paid 20%.
    Now plans pay a percentage of Medicare allowable charges. Balance billing for all plan recipients would cut down on alot of unnecessary utilization.

  7. Consumers have always been responsible for all, not just a portion, of their health care. Every month a certain sum of money is paid directly or indirectly by consumers to insurance companies. Whether it is a visible deduction from a paycheck or an invisible “benefit” offered by the employer which results in lower pay.
    Consumers are also responsible for all Medicare and Medicaid expenditures. Every paycheck has an explicit deduction for Medicare which is paid out by the consumer decades in advance.
    There is also a tax line in every paycheck. That is money that the consumer pays out, some of which is for Medicaid.
    I don’t really understand the notion that we all are getting free care from insurers and government alike. Every penny spent on health care was collected, in advance, from “consumers” and that includes the waste and private profits.
    Unfortunately, the bodies that are supposed to manage all the collected healthcare funds on behalf of the consumer are either incompetent or greedy or both.

  8. “2. Consumers must be financially responsible for at least a portion of their care.”
    Why, because they know what medical tests have value and what don’t? Because it will improve the bottom line of insurance companies? Because it will teach them to get less sick? Because cancer will be reduced? Because that’s the portion the doc gets to keep?

  9. Roger – Your most important point is the fact that supply appears to have as much or more of an influence as demand. Reform must make it easier to use the value proposition to improve quality and decrease cost. (The only thing more powerful than supply and demand is the power of food industry marketing to make us fatter.)
    1. Quality and cost data must be easily accessible for consumers. Easier said than done, but it has to happen.
    2. Consumers must be financially responsible for at least a portion of their care.
    3. Healthcare must become a budget line item in everyone’s personal budget. For too long, insurance paid for everything and people still haven’t completely adjusted. To this day, we get people coming into our practice saying “Why do I owe anything? That’s why I have insurance.” I’d love to say, “Because it’s 2009, not 1979.”

  10. So basically we should have a “standard” plan, a.k.a. “poor plan for the poor” and the insurers will compete in the “supplemental” plans for the wealthy.
    Survival of the fittest for insurers will mean survival of the most profitable (more premiums & less care).
    As far as patients are concerned…. I guess the same “survival of the fittest” applies….
    Should probably work rather well.

  11. “What might be the results? Assuming a functioning risk adjustment mechanism to discourage “cherry picking,” the least cost-effective insurers should rapidly disappear”
    And then what type of competitive market are you left with? This happens in standard business all the time; market becomes mature, only way then to expand share is buy market through acquisition/amalgamation, then with reduced competition raise prices – does that really make sense for healthcare?

  12. End of life care in this country is totally out of control. From PEG tubes to dialysis, we keep the nearly dead alive to their great detriment as dignified people.
    As for the rest of costs, the only way to control demand is to keep the patient on the hook for part of the cost; every cost. If the patient had to pay for 10-20% of every cost, the demand for CT scans after minor head bonks would dwindle. Not even Medicaid patients should escape bearing some liability for the cost of their care.
    And, as always, there must be tort reform.

  13. “Darwinism means setting a standard benefit package that insurers must offer through an insurance exchange.”
    What’s evolutionary about a standard benefit package? We have had the alphabet of medicare supps for decades, it wasn’t until 2 years ago we got drug coverage. Standard anything is contradictory to Darwinism.
    What if I come out with a revolutionary plan design tomorrow that can cut cost in half, eliminate all waste, and improve quality of care, I have to wait 5-10 years until Congress agrees and modifies the “standard plan”? How will anyone know it works if I’m not legally allowed to offer it because it deviates from the approved plan?
    What Darwinism really means is getting government out of healthcare so the system can evolve and improve, it is the artifical restraint of regualtion that stuck us with 1970s healthcare in 2009.

  14. End of Life Care:
    More like 25-30% of costs, and yes it is wise for the providers to keep doing it, because they have mouths to feed (and rooms to fill).
    A vast majority of this care is associated with people in government programs (Medicare, Medicaid), so the government has the power to impact this segment of health care spending (or revenue, as the providers call it).

  15. Ideas for health care reform that do not include”end of life care” are complete poppycock! End of life care absorbs a disproportionate share of our health care dollars. Most estimates place this figure to be around two-thirds of our health care budget. End of life care includes our most expensive procedures and may well briefly extend an individuals life; but at what cost? While we are spending 2 out of every 3 dollars extending a person’s life for a few days, children and adolescents are squeezed out of basic health care placing an entire life at risk. The economics of health care demand that we make decisions regarding how our health care resources are invested. Is it wise investing 2 out of every 3 dollars on a person who is nearing the end of life as opposed to one who is just beginning?