Saturday, July 10, 2010

Time to Rethink How We Pay for Medical Care and Healthcare

Today we mostly have prepaid medical care insurance with some co-pays and deductibles – both with commercial insurance and with Medicare. In other words, our insurance covers essentially everything from basic and routine care to the catastrophic. And the insurance pays out based on units of care – a visit, a test, a procedure, a hospitalization, a prescription. This creates a system in which providers (physicians, hospitals, drug and device companies, others) get paid for a unit of activity – self interest dictates that all providers will offer more and more units of care, especially when providers feel that are underpaid for the individual units. And since insurance pays for care of illness but not at all or not much for disease prevention and health promotion, we can call this a disease industry rather than a healthcare industry. (I accept that, with rare exceptions, each provider attempts to offer the best care possible for each patient but I also am certain that the patient often does not need all of the units of care offered and often does not get the most appropriate units in a well coordinated manner.)

If the basic payment system changes to one that:

-Expects us (patients) to pay for routine, basic and preventive care, including medications, up to a maximum of, say, $1000/year, (offset by tax-advantages HSA accounts for all, including those on Medicare, and tax credits for the less well off)

-This creates a “professional services contract” between the patient and the provider (rather than today’s contract between the provider and the insurer)

-Insurance pays for everything beyond that.

Then three things would happen:

-We would pay attention to what drugs, tests and procedures are offered or suggested and query our provider in much more detail than we do now – because it is our money that is being spent in a direct manner with the provider.

-Providers would be mindful of the “contract” and be careful to recommend drugs, tests and procedures only if truly needed, appropriate and useful; they would think about our pocketbook.

-Insurance would cost much less.

Possibly a fourth thing would happen:

Because we are paying our provider, especially our primary care physician (PCP) directly, as we do our lawyer, accountant or other professional – and paying a price jointly agreed to be acceptable – our PCP would earn enough to:

-Reduce the total number of patients in his/her practice

All of which would result in:

-More time available per patient

-Time available for true preventive care

-Time available to give good coordination of care to those with complex chronic illnesses.

This would not be a panacea and there are other changes also needed to the payment system, but the effect of these few initiatives would be -- less expensive yet better quality care.

And if this does not come to pass, expect primary care physicians to take matters into their own hands by moving to retainer based practices, charging an annual administrative fee, or just not accepting insurance, especially Medicare, anymore.

Thursday, July 1, 2010

Today’s Health Insurance Has Perverse Incentives

Whether we have commercial insurance through our employer or Medicare, the incentives are poorly aligned to lower costs and improve quality. In fact, they actually encourage greater and greater expenditures. In most instances, our insurance covers everything from prevention to basic routine care to complex care of serious illness. Coverage may not be all that good for some things like preventive care and our primary care physician feels underpaid for routine visits but nevertheless we basically have “prepaid medical care” meaning that insurance is designed to go from A to Z. And we are not the client contracting with our physician. We get our insurance through a third party – employer or government – and although we may pay for part of it, we do not feel a contractual arrangement with our physician. Not does the physician. He or she has a “contract” with the insurer, not us.

Since we have “prepaid” care, we have no incentive nor does our physician to look for ways to reduce the costs. Yes, we may have a co-pay or a small deductible but that does not really get us thinking much about what is being proposed for our care.

Take drugs. Let’s say you need an acid suppressor for reflux esophagitis [acid reflux or GERD.] Your doctor could tell you to go to the grocery store and pickup Prilosec for about $30 for a months supply. Or, he or she could give you a prescription for Nexium. It would cost about $150 for a two week supply and is no better than Prilosec. But your insurance will pay for it except for your co-pay of, say, $15. So your doctor will probably suggest Nexium since it will cost you less. But the overall system is paying out a huge amount more than necessary. What a perverse incentive.

Much better if we all had insurance with a high deductible. [In practice this might mean a general insurance policy and a separate medication insurance policy as with Medicare; but each would have its own high deductible.] In that situation we pay less for the insurance and self insure for the deductible, just like car collision insurance. Now we are focused on cost effectiveness. We would purchase the Prilosec at $30 and save $120 off the cost of Nexium. Better still would be having the physician actually spend time with us to talk about preventing the reflux in the first place. Here again, if we were paying out of pocket for our routine primary care, we would expect our physicians to spend the time with us to review the following – don’t eat just before going to bed; avoid caffeine before bedtime; cut back on alcohol; avoid spicy foods; and put the head of the bed up on 4 inch blocks. These don’t cost anything and generally will solve the problem without the need for any medications. Now that is real cost effectiveness.

Praise for Dr Schimpff

The craft of science writing requires skills that are arguably the most underestimated and misunderstood in the media world. Dumbing down all too often gets mistaken for clarity. Showmanship frequently masks a poor presentation of scientific issues. Factoids are paraded in lieu of ideas. Answers are marketed at the expense of searching questions. By contrast, Steve Schimpff provides a fine combination of enlightenment and reading satisfaction. As a medical scientist he brings his readers encyclopedic knowledge of his subject. As a teacher and as a medical ambassador to other disciplines he's learned how to explain medical breakthroughs without unnecessary jargon. As an advisor to policymakers he's acquired the knack of cutting directly to the practical effects, showing how advances in medical science affect the big lifestyle and economic questions that concern us all. But Schimpff's greatest strength as a writer is that he's a physician through and through, caring above all for the person. His engaging conversational style, insights and fascinating treasury of cutting-edge information leave both lay readers and medical professionals turning his pages. In his hands the impact of new medical technologies and discoveries becomes an engrossing story about what lies ahead for us in the 21st century: as healthy people, as patients of all ages, as children, as parents, as taxpayers, as both consumers and providers of health services. There can be few greater stories than the adventure of what awaits our minds, bodies, budgets, lifespans and societies as new technologies change our world. Schimpff tells it with passion, vision, sweep, intelligence and an urgency that none of us can ignore.

-- N.J. Slabbert, science writer, co-author of Innovation, The Key to Prosperity: Technology & America's Role in the 21st Century Global Economy (with Aris Melissaratos, director of technology enterprise at the John Hopkins University).