Make doctors agents of health cost controls
THE STATE'S new healthcare law was the best law that could be passed, and has proven a blessing to more than 350,000 newly insured people, though a similar number remains uninsured.
Often, however, the law that can pass can't work as enacted. This law's individual mandate requires big public subsidies to make insurance affordable. It sharply boosts Medicaid payments to hospitals. It has no controls on healthcare costs. It redistributes modest sums previously used to help vulnerable people instead of squeezing out waste to finance care for all.
The law's proponents underestimated costs and overestimated revenue. Redeeming the law's promises has therefore obliged the state to spend more to subsidize insurance. This obligation imposes unsustainable financial and political stresses amid a growing budget deficit. Many health reform advocates therefore now declare cost controls crucial to the law's survival.
But what is crucial here has been unattainable throughout the United States. Since the 1970s, virtually all cost controls - using market competition or government regulation - have failed. And powerful caregivers still seek more money for business as usual.
Current cost control proposals - like publicizing hospital prices, adopting electronic medical records, or promoting prevention - will do little to cut costs. That's why they are politically feasible: they don't upset insurers or hospitals, doctors, other caregivers, and drug makers. The state isn't even canceling unwarranted Medicaid rate hikes that help the richest hospitals most.
Not yet able to lower underlying costs of healthcare, the state will seek new revenue. Methods include recent hikes in premiums and co-payments for families, higher cigarette taxes, proposed new payments by insurers, providers, and employers, and more federal Medicaid dollars. These steps may preserve the law's gains and buy time for fundamental cost containment, but not much time. Rising health costs may crash through the windshield of a stalled economy.
Today, US health costs per person are double those in other wealthy nations that cover everyone and live longer.
In Massachusetts, health spending this year will reach $10,500 per person, one-third above the US average. Today's spending is easily enough to finance medical security for all. But to make this promise real requires addressing the three main reasons for past controls' failure.
First, half of all spending is wasted and most cost controls have ignored central causes of waste. Clinical waste stems largely from caregivers' financial incentives to over-treat, defensive medicine, and lack of evidence on what care works. Waste also includes excess prices, theft, and paperwork, which is imposed partly by complexity but mainly by deep mistrust between payers and doctors or hospitals.
Second, hospitals, doctors, other caregivers, and drug makers have become increasingly specialized and uncoordinated, and their political power defeats efforts to cut their revenue.
Third, doctors' decisions essentially control almost 90 percent of health care spending. That's why shifting costs to patients can't work. Yet cost controls have ignored, marginalized, or sought to manipulate doctors instead of working with them.
Given doctors' power and their unique ability to squeeze out waste, the challenge is to put our healthcare dollars in their hands under conditions that verifiably let us trust them to spend it well. That entails dramatic but carefully coordinated bottom-up reforms in how care is given and financed. Microregulated pay-for-performance or a few more dollars for care management won't work.
Only by persuading doctors to be fiduciaries, not entrepreneurs, can we craft healthcare that is self-regulating, covers everyone, extirpates waste, and spends only what's affordable. This requires a financial, legal, and clinical peace treaty between payers and doctors. Different ways to do this should be tested quickly.
One approach: We urge development of small clusters of primary care doctors and other professionals that live within budgets, accepting capitation payments calibrated to patients' health. Raising primary care doctors' incomes by half would sharply increase their supply and their time to listen to patients and coordinate care.
Payment-related paperwork will be slashed. Doctors could not gain financially by giving unnecessary care - or by withholding needed care. Savings will be recycled to expand coverage and benefits and fulfill the promise of the state's reform law.
Alan Sager and Deborah Socolar direct the Health Reform Program at the Boston University School of Public Health.
