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Tagged: health reform

3

Waldo’s Optimal Fragmentation

Thank you Frank, Glenn, and Concurring Opinions for inviting me to participate in the online Fragmentation book review symposium.  As serendipity would have it, your timing could not have been better, for two reasons.

First, just last week in my Health Care Finance class here at the University of Georgia, we began the chapter on “The Structure of the Health Care Enterprise,” which opens, as those familiar with the Furrow, Greaney, et al. Health Law casebook know, with a classic fragmentation scenario:  Our 35-year-old patient, Waldo, a recurring character throughout the casebook, must navigate the late 1970s health care system and all of its poorly coordinated care, minimal attention to quality, self-interested referrals, fee-for-service payment, and balance-billing flaws.  Students are urged to observe the deficiencies and incentives driving the U.S. health care “system” — or lack thereof — and prepare, in future chapters, to compare Waldo’s treatment under, first, 1980s managed care and, later, contemporary consumer-driven health care.  Preparing for this Symposium primed me for discussing the Waldo example with my students.

Second, over the weekend I presented at the Midwestern Law and Economics Association conference, where I had the good fortune to see my friend and mentor, David Hyman.  Thanks again to the upcoming Symposium, I had just read David’s chapter on my flight to Denver and could engage his thoughts on the Fragmentation book.  As I commented to David, what I find so refreshing and valuable about this book is that it does not start from the well-worn and, to me, uninteresting, suggestion made whenever one is asked to talk about what’s wrong with the United States health care system:  “Well, really, don’t we just need universal health care, a single-payor system?  If Canada can do it, why can’t we?”  (I mean no disparagement to Vickie Williams’s excellent post earlier today on this point, for those who are less jaded than I.)  Instead, the book accepts the system we have — an admittedly disjointed amalgam of government programs and regulations, along with competitive markets and incentives — and asks how it might be improved.

David’s chapter focuses on payment systems as a source of fragmentation and provides some nice examples even within particular health care programs or payors.  For example, Medicare A (hospitalization) providers have no incentive to consider Part B (outpatient and physician services) providers’ costs because the Parts operates as “payment silos,” under distinct reimbursement methodologies, with no need to coordinate care or service delivery.  With dually eligible beneficiaries, the fragmentation is even worse:  Medicare faces higher costs if poor quality care in Medicaid-covered long-term care settings precipitates an acute hospitalization, while Medicaid faces higher long-term care costs if Medicare prescription drug coverage fails to treat beneficiaries’ chronic conditions.  The chapter suggests some payment reform strategies, such as medical homes, pay-for-performance, and bundled payments, which have been debated and adopted to varying degrees by government and private payors, including in the recent Patient Protection and Affordable Care Act.

The end of the chapter was the most provocative.  In David’s characteristically contrarian, and, to me, always entertaining way, he concludes by begging the question:   Before we get all worked up about fragmentation and how to fix it, we should step back and consider that, at least in some cases, we seem to (and, he would suggest, at least sometimes, should) prefer fragmented health care delivery.  He points to the popularity of Wal-Mart retail clinics, medical tourism, and specialty hospitals.  And I would add the decline of managed care, rise of concierge medicine, and popularity of $4 prescription drugs.  Of course, as David acknowledges, those trends reveal other, deeper flaws in our health care delivery “system.”  But before jumping on the de-fragmentation bandwagon, Waldos should consider carefully what they may have to give up.

5

Integrated Delivery Systems as a Panacea

In “Curing Fragmentation with Integrated Delivery Systems,” Alain Enthoven, the father of “managed competition,” extols his creation as a cure for what ails America’s fragmented health system.  Indeed, many of Enthoven’s proposals for reducing fragmentation in our health care system, such as regional health insurance exchanges, were incorporated into the Patient Protection and Affordable Care Act (“PPACA”), the health care reform bill signed into law on March 23, 2010.

Although a proliferation of integrated delivery systems competing with each other for business may be a step in the right direction, it will do little or nothing to cut down on the enourmous amount of health care resources spent on compliance with ever-expanding numbers of billing rules.  Even Professor Enthoven acknowledges that a single-payer system could solve many of the same problems as his integrated delivery system proposal, but he believes that Americans do not have the political will to accept such a system.  Professor Enthoven also fails to consider that even less-radical changes to our health care system, such as adopting a system of encrypted medical records that a patient carries with her, like the French “carte vitale,” would greatly cut down on or eliminate poor medical outcomes that are attributable to fragmentation in the system.

A well-managed single-payer system could  satisfy the American appetite for market competition, and achieve more than the integrated delivery systems proposed by Professor Enthoven.  Competition could still take place at the insurer level, much like in Germany, or it could take place amongst providers, such as in Japan (whose system author T.R. Reid cleverly describes as “Bismarck on Rice” in his recent book The Healing of America (Penguin Press 2009)).

Professor Enthoven’s example of the “epitome of integrated delivery system[s]” is Kaiser Permanente (for which Enthoven is also a consultant, according to his Stanford University on-line biography).  His vision is for the American people to have a choice of many Kaiser Permanente-like organizations.  This presumes that people want choices when it comes to picking a health plan, a presumption shared by PPACA.  I believe that is incorrect.  What people want is choice of providers.  Nobody loves their payers; they love their doctors.  They want to make sure they don’t receive numerous bills for every little service they receive, but they don’t really care about who pays those bills.  Only the ultimate integrated delivery system, a single-payer one with a compensation system based on outcomes, not services, will achieve this.

It is true that many of the single-payer systems in use around the world are underfunded and under inflationary pressure.  A single-payer system in the United States would be no exception.  Despite our current economic woes, we remain the richest country in the world.  As Dr. Marcia Angell, former editor-in-chief of the New England Journal of Medicine stated in the 2000 PBS documentary “Healthcare Crisis:  Who’s at Risk?,” the amount of our GDP that we spend on health care is not really important.  What is important is that we get good outcomes and the customer satisfaction that we are paying for.  Managed competition and “integrated delivery systems” although a step in the right direction, will not solve our problems in the long run.