Wednesday, July 22, 2009

David Leonhardt tries to do Obama's job for him

The New York Times' David Leonhardt seems to have taken it upon himself to drive home to Americans that the nub of healthcare cost containment is removing doctors' and hospitals' incentives to prescribe unnecessary care. From today's front page article:

On Thursday, Mr. Obama will visit another example he likes to cite, the Cleveland Clinic. Its successes capture what real reform would look like. Like Mayo, the Cleveland Clinic pays its doctors a salary, rather than piecemeal, and delivers excellent results for relatively little money.

“I came here 30-some years ago,” Delos Cosgrove, a heart surgeon who is the clinic’s chief executive, told me. “And I have never received any additional pay for anything I did. It never made a difference if I did five heart operations or four — I got paid the same amount of money. So I had no incentive to do any extra tests or anything.”

This is the crux of the issue, economists say: the current fee-for-service system needs to be remade.
In shining the spotlight on pay structures, Leonhardt seems to be trying to do the work he thinks Obama should be doing. He frames Obama's core task as teaching Americans that we're all overpaying in hiddden ways for healthcare to the tune of $6,500 per year per family, if you compare U.S. healthcare costs to those of typical wealthy countries. He complains that Obama has so far failed to invest his political capital, either to educate Americans or to fight for cost containment provisions with teeth:
Mr. Obama says many of the right things. Yet the White House has not yet shown that it’s willing to fight the necessary fights. Remember: the $6,500 tax benefits someone. And that someone has a lobbyist. The lobbyist even has an argument about how he is acting in your interest.

These lobbyists, who include big names like Dick Armey and Richard Gephardt, have succeeded in persuading Congress to write bills with a rather clever feature. They include some of the ideas that would cut costs — but defang them.
Interestingly, Leonhardt then dismisses one element of proposed House leglislation that would address the incentives problem as thus "defanged":
One proposal would pay doctors based on the quality of care, rather than quantity, but it’s a pilot project. Doctors who already provide good care may well opt in; doctors providing wasteful but lucrative care surely will not.
Perhaps. But to change the incentive structure for doctors, hospitals and other caregivers is to move an enormous battleship. The radical, unanimous proposal of a blue-ribbon helathcare commission in Massachusetts to replace fee-for-service with global payment systems proposes a five-year phase-in, noting the complexities: ""global payment rates will include adjustments for clinical risk, socio-economic status, geography (if appropriate), core access and quality incentive measures, and other factors." Perhaps a pilot program is not a bad place to start on the Federal level, in concert with other cost containment measures like a Medicare oversight commission to set rates and determine reimbursable procedures.

See also:
Massachusetts Commission cuts the Gordian Knot on healthcare costs
Leonhardt seconds Gawande: put doctors on salary
Orzag hones in on doctors' incentives

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