Sunday, July 19, 2009

Massachusetts Commission cuts the Gordian Knot on healthcare costs

I wanted to post notice of a key development on the healthcare cost containment front reported in the WSJ on Friday, but didn't get around to it (settling for a tweet) -- and now I see that Ezra Klein has beaten me to it. Here's the WSJ:
A Massachusetts panel proposed that the state scrap traditional payments to doctors and hospitals for each office visit or procedure, and instead adopt a system where they receive a monthly or annual fee per patient.

The proposal is an effort to control the state's health-care costs, which are among the highest in the nation.

Under the new system, doctors and hospitals would be organized into groups responsible for all of a patient's health-care needs. The groups would receive a "global payment" per patient, which could be adjusted with performance incentives based on the quality of care provided.

The proposed system -- a radical departure from the way patients and insurers now pay -- would require legislative action and waivers from Medicaid and Medicare rules.

The panel, created by state law, voted unanimously to adopt the recommendations. The commission included key state legislators, the state's leading doctor and hospital associations and insurers.

As Klein says:

That's a huge reform. Much bigger than anything we're considering nationally. It's a direct attempt to change the behavior of politically powerful providers to preserve the coverage that the reforms gave to individuals. It will be difficult. The doctors' lobby is already giving angry quotes to the press.

Atul Gawande, in his landmark article focusing the healthcare debate on the problem of health care providers' incentives (mainly payment per treatment), stressed the complexities of realigning those incentives:

Instead, McAllen and other cities like it have to be weaned away from their untenably fragmented, quantity-driven systems of health care, step by step. And that will mean rewarding doctors and hospitals if they band together to form Grand Junction-like accountable-care organizations, in which doctors collaborate to increase prevention and the quality of care, while discouraging overtreatment, undertreatment, and sheer profiteering. Under one approach, insurers—whether public or private—would allow clinicians who formed such organizations and met quality goals to keep half the savings they generate. Government could also shift regulatory burdens, and even malpractice liability, from the doctors to the organization. Other, sterner, approaches would penalize those who don’t form these organizations.

This will by necessity be an experiment. We will need to do in-depth research on what makes the best systems successful—the peer-review committees? recruiting more primary-care doctors and nurses? putting doctors on salary?—and disseminate what we learn. Congress has provided vital funding for research that compares the effectiveness of different treatments, and this should help reduce uncertainty about which treatments are best. But we also need to fund research that compares the effectiveness of different systems of care—to reduce our uncertainty about which systems work best for communities. These are empirical, not ideological, questions. And we would do well to form a national institute for health-care delivery, bringing together clinicians, hospitals, insurers, employers, and citizens to assess, regularly, the quality and the cost of our care, review the strategies that produce good results, and make clear recommendations for local systems.

Dramatic improvements and savings will take at least a decade.

Massachusetts' Special Commission on the Healthcare Payment System (full report here) is proposing to cut the Gordian knot - to end payment per treatment in one fell swoop. In fact, though, there is nothing simple about the proposal, other than recommending unequivocally that the core transition to "global payment" be mandated. The Commission proposes a phase-in period of five years., and makes it clear that developing the global payment system will be a complex undertaking -- "global payment rates will include adjustments for clinical risk, socio-economic status, geography (if appropriate), core access and quality incentive measures, and other factors." The Commission recommends all the reforms outlined by Gawande and then some - development of "accountable care organizations," development of uniform standards of outcome assessment, implementing pay for performance incentives, building consumer incentives for preventive care.

The lobbying machinery is cranking up to crush the panel's initiative. Can Massachusetts legislators, under cover of a unanimous blue-ribbon commission, withstand the pressure? Can Massachusetts, which led the way in extending near-universal coverage, now lead the way in containing costs? Or will this fundamental reform fade away. to be replaced by nibblings around the edges of health care cost control?

BTW, will Peter Orzag weigh in on this potential game-changer?

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