Reduce, Destroy, Demoralize, or Why a Single-Party Payer is the Only Sensible Option

The following paper was published two weeks ago in the healthcare policy journal Health Affairs (abstract and author affiliations provided):

Should Health Care Come With A Warranty?

Many goods and services come with warranties; should health care? Analysis of one payment model shows promise and challenges.

by Francois de Brantes, Guy D’Andrea, and Meredith B. Rosenthal

ABSTRACT: How health care providers get paid has implications for the delivery of care and cost control; the topic is especially important during an economic downturn with persistent growth in health spending. Adding “warranties” to care is an innovation that transfers risk to providers, because payment includes allowances for defects. How do such warranties affect patient care and bottom lines? We examine a proposed payment model to illustrate the role of warranties in health care and their potential impact on providers’ behavior and profitability. We conclude that warranties could motivate providers to improve quality and could increase their profit margins. [Health Affairs 28, no. 4 (2009): w678–w687 (published online 16 June 2009; 10.1377/hlthaff.28.4.w678)]

Francois de Brantes (francois.debrantes@bridgestoexcellence.org) is chief executive officer (CEO) of Bridges to Excellence, a not-for-profit organization developed by employers, physicians, health care services researchers, and other industry experts to recognize and reward providers who demonstrate quality improvement, in Newtown, Connecticut. Guy D’Andrea is CEO of Discern Consulting, a health care policy consulting organization, in Baltimore, Maryland. Meredith Rosenthal is an associate professor of health economics and policy in the Department of Health Policy and Management, Harvard School of Public Health, in Boston, Massachusetts.

(Here is the link to the actual paper on the Health Affairs web site, though you may need a subscription to access)

This paper, as you can imagine, has garnered some attention. The New York Times columnist Pauline Chen, MD, interviewed the lead author of the paper for an article in the June 25 issue of the NYT, and Tara Parker-Pope opened it up for an online discussion on her blog.

This discussion has been quite contentious, as Tara gets read by a lot of physicians and other healthcare providers. Of the 40 or so posts, not surprisingly, not one welcomed the idea. There were many emotional and sometimes bilious comments mostly around how patients’ non-compliance might influence individual practitioners’ reimbursements under this system. Many of the comments reflected the sense of disempowerment so prevalent among physicians today.

But the devil is usually in the details. So, I read with great interest the actual paper by de Brantes and colleagues. After all, the authors themselves are no slouches, and between them have decades of academic and real-world experience in healthcare policy. The authors propose separating what they refer to as “probability risks”, or those risks inherent in the patient and his/her circumstances, from “technical risks”, or those risks related to what they call “care production”. While the former are to be carried by the insurer, the latter, they suggest, are to be borne by the provider. To be fair, they do not call for zero compensation for the preventable acquired conditions (PACs, or those conditions acquired as the result of inappropriate process of care, such as preventable hospitalizations for a chronic condition). In fact, they propose mining the vast repositories of data that are already in existence to arrive at the middle-of-the-road estimates for their associated costs of care, allowing for a 50% frequency of the current rate of PACs. As an example, if the national rate of PACs is 12%, this payment system will cover a 6% frequency of PACs. This way, the authors argue, the providers are still covered for some baseline occurrence of PACs, and at the same time are rewarded for driving them down as much as possible. The result of this is that those providers who have very low PAC rates can make a substantial profit even under this system. Elegant, no?

Unfortunately, as someone who deals with data day in and day out, I am only too aware that reality is much messier than theory. The authors’ intentions are certainly good, and the road to Hades is paved with good intentions. This is a great system for physicians who take care of patients who are not too sick and who have the financial and cognitive means and the will to follow their recommendations. On the other hand, what happens to a provider who takes care of an inner city working poor population, who in the best of economic times end up splitting their blood pressure pills and cannot afford to keep to a heart healthy life style, and thus put themselves at risk for preventable hospitalizations? And what is the effect of the current profound economic crisis on these already marginally “compliant” patients? And realize that, since all healthcare is local, these patients are not conveniently and evenly distributed across all providers in the US. So, the very phenomenon that everyone is trying to avoid, patient profiling (cherry-picking only the healthiest and most compliant patients), is one of the very real potential unintended consequences of this proposed payment reform.

This proposed system takes away from both physicians and patients in other ways too. It takes all choice away from the patient and assumes that we, lemming-like, will follow all recommendations of our physicians. I may have already convinced you that one person’s evidence of benefit is another person’s evidence of uselessness. Since the authors suggest basing judgment of procedural correctness on either best evidence where available or expert opinion (and don’t even get me started on “expert opinion”!), there will not likely be much room for individual judgment, either for a physician or a patient.

But I want to bring up another, much more insidious consequence of this (and other) pay-for-performance scheme. Psychologist Barry Schwartz maintains that reducing all motivation to external rewards demoralizes people in two ways: in the conventional sense of taking away hope and enthusiasm, and also by eliminating morals as the driver of our actions. Let’s face it, it is downright absurd to suggest that we spend 4 years in medical school and put ourselves through additional 3-10 years of grueling training on top of that (while making less money than a receptionist) in order to get rich. The pursuit of reimbursement is for most MDs the direct result of this demoralization.

And this brings me to my conclusion: the only sensible response to this crisis is to create a single-party payer system and to salary all healthcare providers. With a salary, provided that it adequately reflects one’s investment of time and energy, there is no incentive to provide unnecessary and costly care, and physicians can concentrate on providing good care instead of drowning in bureaucratic process. Some surveys suggest that nearly ¾ of all MDs are for single-party payer. What are the rest of us missing? Tell Congress to stop throwing your tax dollars away on stupid experiments that simply rearrange the deck chairs on the Titanic: the market model of healthcare has already failed us.