A Policy Prescription for 2011

Our blueprint for structuring a multi-payer universal health care system in the United States begins with crafting solutions to age-old problems: defining basic benefits, fixing medical malpractice, and redesigning physician payment.

Throughout the past two years, Policy Prescriptions has reviewed several pieces of health policy literature that suggest that the best health care systems in the world are those that provide coverage to all a nation’s citizens without regard to individual financial circumstances. Unlike health insurance in the United States, universality is the priority among all other industrialized democracies.

Health care systems with multiple payers offer flexibility in service delivery that is unavailable in single payer systems. In a nation as geographically large and diverse as the United States, a multi-payer universal system is a reasonable choice and feasible reality.

The health reform law passed last year puts the United States on a path towards such a system. Even though progress has been made, the plentitude of different health insurers leaves the risk pool remains highly fragmented.

As health reform continues the implementation phase, three major challenges remain: (1) How will the be defined? (2) Will major changes occur in the ? (3) How will (specifically those for physicians) be altered?

To answer the first question, section 1302 of the health reform law instructs the Secretary of Health and Human Services package required of new health plans. This task is likely to be fraught with intense political scrutiny.

Every possible interest group concerned for their particular illness-laden constituency will seek to have a set of drugs, diagnostics, or therapies covered by the essential benefits package. While comprehensive, an approach bowing to such interests will raise the cost of insurance for everyone.

Like all other things, healthcare is a limited resource. Essential health benefits must include those medical expenses which are unpredictable, catastrophic, and financially destructive for individuals and families. Evidence-based preventive care should be included to promote the health of all Americans. Coverage of marginally beneficial services should be excluded.

The second major issue, that of is touched on by three sections of the health reform law (6801, 10607, 10608). Using the recent estimate of for the annual costs of the tort system (payments to injured patients, the cost of defensive medicine, and profits for insurance companies), the $50 million allocated over the next 5 years to research alternatives to the current tort system appear a mere drop in the bucket.

Notwithstanding the lack of political consensus on malpractice reforms, the available evidence suggests that modest gains in physician supply exist in states where malpractice caps are in effect.

Setting a nationwide cap, likely at a very high threshold ($1 million for non-economic damages), could help stabilize physician emigration from states with unfavorable malpractice conditions.

However, such a strategy to insulate physicians must be combined with a strategy to actually compensate injured patients, whether or not their injury is the result of neglect.

The third major issue, that of physician payment, accounts for nearly one-fifth ($92 billion) of all Medicare costs . The health reform law explores (sections 3001, 3002, 3007, 3021, 3922, 3023, and 3024). Currently, hospitals receive compensation from Medicare on a prospective basis, with a patient’s diagnosis (not the intensity of service) determining the amount of payment.

In contrast, physicians are compensated retrospectively based on a  fee-for-service system heavily skewed to reward intensity and quantity of service.

New payment systems should free physicians from the need to rapidly shuttle patients through their offices or to perform procedures of limited value. Instead, physicians should be compensated for the time spent with patients and the quality of the care they provide.

The Medicare fee schedule must immediately be reconstructed to place a firm investment in primary care and prevention. For instance, the interpretation of 2 EKGs, which takes all of a minute, is considered more valuable than spending up to 10 minutes counseling a patient about the dangers of smoking. However, the focus really should be on the outcomes; that is, compensating physicians when their patients actually quit smoking.

The Medicare fee schedule and the arbitrary adjustments offered by the sustainable growth rate (SGR) must eventually be replaced with a prospective payment system. This physician payment system should compensate office based physicians on a  risk-adjusted, capitated basis. Hospital-based physicians should be compensated based on the complexity of the patients they treat.

The American health care system must find a way for Medicare to purchase services proven by evidence, compensate providers based on the quality of care and the complexity of the patients treated, and improve access while preventing over-treatment by mitigating the psychological effects of medical malpractice.

by

Cedric Dark, MD, MPH