Time to Rethink How We Pay for Medical Care and Healthcare

[Stephen C Schimpff]

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.

[Stephen C Schimpff]

Thanks to you both for thoughtful comments. I understand the issue of "self-pay" means higher pay than what is negotiated by the insurers. Two approaches come to mind. The first is that the insurer is still in the loop, just not paying until the deductible is met. In this situatin the patient pays the same amount the insurer would pay. A second is "retainer-based" practices where the individual pays the PCP a flat amount per year, say $1500 -2000, and in return is promised immediate access, whatever time is needed, 24/7 cell phone access, email access, ER and hospital attending, etc. Here the PCP is investing in keeping us healthy so do outcomes come first.

[Ronald S. Newbower]

All the goals you list are laudable and badly needed. I hate to be a bit of a pessimist about the mechanism, however.
One major stumbling block is that the individual patient, when in a self-pay mode, gets charged a very artificially high amount for doctor's visits and for drugs. We, as self-pay patients, don't get the benefit of the prices the insurance companies have negotiated and which the pharmacy benefit management companies and the clinical providers accept. Thus, at these "retail prices", that hypothetical $1,000 amount would get eaten up with little more than a UTI and a course of antibiotics, with perhaps one other modest acute primary-care incident, per year, let alone a visit to a specialist or a significant test. There would be no money for preventive care or visits to forge that bond with a primary care physician operating in the "medical home" mode.
Thus discretion over the first $1,000 in expenses is not enough to move the major forces into alignment.
You can see the same forces at work with dentistry, in a simpler way -- where patients usually are self-pay, currently. The decisions that patients make are not necessarily in alignment with the actions desirable for preventive care. And the prices they pay for preventive actions are far higher than they are a company providing dental insurance.
The holy grail of payment systems would be ones that pay for outcomes, not for individual visits or procedures, and one that pays for prevention. Yet patients are not generally knowledgeable enough to spend their discretionary money in such a way. To truly work toward rewarding outcomes rather than visits or procedures or tests, major payors would need to implement a replacement of the current fee-for-service model. Things will have to get much worse before political forces will support such a change. Look at how much terror has been generated by the relatively benign action of President Obama in appointing Don Berwick to head CMS -- a man who shares your goals and wants to reward outcomes-based care. The industry forces are strong to defend the current system despite its misalignment. And it's not just primary care physicians who are at issue here.
Sorry to be a bit of a downer, here!

[Lester Martinez-Lopez]

I think when we design a system where the consumer of the service doesn't pay or even care for the cost of the service, then market forces will be out of alignment. Like you, I think we need to bring closer the patient and the physician on these issues. Your proposal will get us closer.