This article by Dr. Robert Steinbrook is largely an explainer. But Dr. Steinbrook does highlight several important points:
The Congressional Budget Office found the evidence for cost savings from such approaches to be “mixed,” concluding that “several rounds of successive and significant changes and refinements in Medicare’s rules would probably be necessary to yield substantial budgetary savings.”
For one view of potential savings, read Elliott Fisher and Mark McClellan’s assessment based on delivering care through Accountable Care Organizations (ACOs) (password required, sorry). These are the networks of providers the state’s special commission on health care payments recommends Massachusetts adopt.)
Dr. Steinbrook points out that Massachusetts may see less savings because the state will likely continue to let patients seek care wherever they want. Restricting care, or forcing patients to pay more for care outside their network of providers, would be a very tough sell. But without such limits, Massachusetts may “undermine the cost-control, quality-improvement, and care-coordination purposes of global payments” says Steinbrook.
Finally, Dr. Steinbrook has a good read on the level of chatter that the commission’s recommendations are generating in Massachusetts.
It is likely that an increasing number of health care organizations will voluntarily adopt global payment systems, and the Massachusetts report may well spur such efforts. It is too soon to say, however, whether a mandatory transition to global payments is ready for prime time.
I’m hearing about a number of hospitals that are launching internal working groups to discuss how they move would towards an ACO and global payment model. There seems to be less activity among physician groups.
Martha Bebinger
How will ACO’s and global payment drive accelerated quality improvement if they limit patient/consumer choice?
So let me see if I understand this.
The new global payment system essentially is a per-patient cap on insurance coverage for a designated period, for example a month or a year.
This new global care budget will be funneled by Medicare through “accountable care organizations” (ACOs).
The NEJM report states that ACOs would be “composed of hospitals, physicians and/or other clinician and non-clinician providers working as a team” and would “accept responsibility for all or most of the care that enrollees need.” They could be incorporated entities or merely contractual networks.
The NEJM continues, “Although a new independent state board would … formulate the methods for determining payment amounts, the board would not have the authority to set the payments. The ‘market . . . consistent with the methodology established by the oversight entity’ would determine the amounts.”
Okay, as the MA panel recommending this drastic change has framed it in harshly economic terms, while de-emphasizing its consequences on the health care we receive, let us look the proposal through that distorted lens.
Suppose that a patient remains healthy for the entire contracted coverage period. The global care budget capitated for that person would have funds left over. Would that bonus left over from the premium prepaid by the patient be returned to the patient for working to remain healthy? Yes, immediately after the snowball fight in Hades. More likely it will be split between the caregiver(s) and private insurers along some pre-determined ratio.
So the patient takes the economic hit. That’s the way it goes when you don’t have any bargaining leverage in a secret negotiation going on in a smoke-filled room behind closed doors.
More disturbing is the other scenario, which becomes much more likely as we all age into Medicare coverage. A person in a capitated global budget system becomes ill, and the capitatated budget does not provide sufficient funds to cover his or her care. That sick person will not be treated adequately, but will become a victim of capitation and recission:
“In congressional testimony on June 16, insurance industry executives from WellPoint, UnitedHealth Group, and Assurant refused to end a controversial practice known as “rescission.” Under rescission, insurers retroactively cancel—often on the basis of dubious claims that policyholders haven’t disclosed their complete health histories—the coverage of those who develop expensive medical conditions. That has left many people with costly medical bills for treatments that had been previously authorized by their insurance. As Lisa Girion reported in the Los Angeles Time, the three insurers that were included in the June 16 hearing ‘canceled the coverage of more than 20,000 people, allowing the companies to avoid paying more than $300 million in medical claims over a five-year period.’ In doing so they sought to avoid paying for the treatment of ‘policyholders with breast cancer, lymphoma and more than 1,000 other conditions.’
“There is no stronger indictment of American private insurers or better example of the profit motive’s corrosive influence on medicine than rescission. That insurers, even with political pressure for reform, would not forswear this practice in public hearings is stunning.”
Thus, global budgets in a multiple-payer private health insurance environment only will lead to an intensification of competition among private insurers via utilization review, claims denial and, frankly, enrollee- and patient dumping.
Capitation and recission prove that the MA panel’s global budget proposal will work, if the only goal is to reduce costs by providing less care to people.
The only way out of this horrible dilemma is through the introduction of an adequately funded, not-for-profit, SINGLE PAYER, Medicare for All health insurance system.
Hi Mr. Pankey – the theory (not mine) is that patients who stay within a network will receive more coordinated, thus better care. The arguement is that docs within a system who confer deliver higher quality care because they send patients for repeat tests, prescribe medications that work together, treat the whole patient, not just one symptom, etc. What do you think?
Martha Bebinger
Hi RP – thanks for detailed assessment. One small point – global payments aren’t based on individual patients. They are an aggregated total based on the group of Harvard Pilgrim (or Tufts or Blue Cross) members whose doctors belong to a network. I don’t think this effects your analysis – just a mention. Thanks for writing.
Martha Bebinger
Commonhealth,
I think that increased coordination in care is vital for care improvement. But I also think that competition based on quality is an important driver. Ultimately this is an empirical question, so we should try global payment and see how it works. I’m happy that there is increasing agreement that fee for service causes perverse incentives.
I just think it’s very important keep the patient consumer at the center of the discussion.
Evan Pankey
twitter @epiStoic