Thursday, August 20, 2009
On Hiatus
Dr. Carter is on a short break and will begin posting blogs again in September. Thank you to our loyal readers! Any comments or questions can be posted below.
Monday, August 10, 2009
Capitation- The Goose that Laid the Golden Egg in Health Care
In my last posting, I mentioned the virtues of capitation both in controlling costs and promoting quality improvement. I also cited group practices, such as mine, who strongly prefer the capitated model of payment over fee-for-service. Yet, the popularity of capitation as a payment method for physicians has declined since its peak in the 1990s. Why has this happened? I would like to use the experience of my community, Houston, Texas to show how capitation has been treated in the health care marketplace.
At its peak in the 1990s, Houston had 8-10 physician organizations accepting capitation. Now we are down to three, and many health plans indicate that they would prefer not having any capitation. As I mentioned previously, capitation involves paying a physician group a certain amount per patient per month to cover all professional services. This means that the physician group accepts what’s called the insurance risk for these services.
This financial risk comes from the unpredictability of patients’ health. Most patients are healthy and their cost of professional health care services is low. In fact it is less than the capitated payment rate for these individuals. Some patients are ill, or become ill, and their cost of professional services can be quite high and significantly more than their capitated payment rate.
Insurance companies are very familiar with these risk calculations, and they make their living from predicting how much it will cost to cover a certain population and then charging employers enough to cover that cost with enough extra for profit. Most medical groups do not have this expertise and that is where many of them ran into trouble. In fact, our medical group nearly went out of business in the late 1980s because we underestimated how much capitation payment we needed to take care of the population covered by this form of insurance. Needless to say, we learned quickly and have not made that mistake again.
Even when a medical group has a good handle on what capitation rate they need to be successful, it is very difficult to get health plans to pay the needed amount. Even after over 20 years of experience with capitation, both on our part and on the part of the health plans we contract with, the negotiation over the rate we receive is routinely very contentious with threats to terminate contracts not being unusual.
The fact is that most medical groups do not have the experience at managing risk and the toughness needed at the negotiating table to succeed at capitation. Also, health plans often underestimate the benefits of having capitated medical groups within their network. They see a lot of money going to a medical group, but they don’t always understand that the group now has an incentive to take very good care of their patients, which results in fewer hospital admissions, shorter hospital stays, more cost-effective testing and prescribing, etc., which results in a significantly lower total medical cost for the population being cared for. The health plan is essentially paying the medical group to manage the total cost of that population, but because much of the savings comes from reduced hospital or drug costs, the health plan doesn’t credit the medical group that is actually responsible for the savings.
The result is that health plans try to reduce the capitation payment past the point at which it no longer covers the medical group costs. If they succeed, then the medical group either stops taking capitation and goes back to fee-for-service, or else it just goes out of business. This is called Killing the Goose that Laid the Golden Egg, and it has happened repeatedly in our community. At the end, only a few groups have been able to be successful with capitation. This would not be a big deal, except that the virtues of capitation with regard to controlling costs while improving quality are in severely short supply in the U.S. health care system. Further erosion of the market share of capitation will only serve to continue the uncontrolled increase in health care costs.
Well, in view of all this, is capitation a lost cause? I don’t think so, and in my next posting, I will discuss how capitation is coming back in certain health plans, and how health care reform can assist in encouraging this superior payment method.
At its peak in the 1990s, Houston had 8-10 physician organizations accepting capitation. Now we are down to three, and many health plans indicate that they would prefer not having any capitation. As I mentioned previously, capitation involves paying a physician group a certain amount per patient per month to cover all professional services. This means that the physician group accepts what’s called the insurance risk for these services.
This financial risk comes from the unpredictability of patients’ health. Most patients are healthy and their cost of professional health care services is low. In fact it is less than the capitated payment rate for these individuals. Some patients are ill, or become ill, and their cost of professional services can be quite high and significantly more than their capitated payment rate.
Insurance companies are very familiar with these risk calculations, and they make their living from predicting how much it will cost to cover a certain population and then charging employers enough to cover that cost with enough extra for profit. Most medical groups do not have this expertise and that is where many of them ran into trouble. In fact, our medical group nearly went out of business in the late 1980s because we underestimated how much capitation payment we needed to take care of the population covered by this form of insurance. Needless to say, we learned quickly and have not made that mistake again.
Even when a medical group has a good handle on what capitation rate they need to be successful, it is very difficult to get health plans to pay the needed amount. Even after over 20 years of experience with capitation, both on our part and on the part of the health plans we contract with, the negotiation over the rate we receive is routinely very contentious with threats to terminate contracts not being unusual.
The fact is that most medical groups do not have the experience at managing risk and the toughness needed at the negotiating table to succeed at capitation. Also, health plans often underestimate the benefits of having capitated medical groups within their network. They see a lot of money going to a medical group, but they don’t always understand that the group now has an incentive to take very good care of their patients, which results in fewer hospital admissions, shorter hospital stays, more cost-effective testing and prescribing, etc., which results in a significantly lower total medical cost for the population being cared for. The health plan is essentially paying the medical group to manage the total cost of that population, but because much of the savings comes from reduced hospital or drug costs, the health plan doesn’t credit the medical group that is actually responsible for the savings.
The result is that health plans try to reduce the capitation payment past the point at which it no longer covers the medical group costs. If they succeed, then the medical group either stops taking capitation and goes back to fee-for-service, or else it just goes out of business. This is called Killing the Goose that Laid the Golden Egg, and it has happened repeatedly in our community. At the end, only a few groups have been able to be successful with capitation. This would not be a big deal, except that the virtues of capitation with regard to controlling costs while improving quality are in severely short supply in the U.S. health care system. Further erosion of the market share of capitation will only serve to continue the uncontrolled increase in health care costs.
Well, in view of all this, is capitation a lost cause? I don’t think so, and in my next posting, I will discuss how capitation is coming back in certain health plans, and how health care reform can assist in encouraging this superior payment method.
Monday, August 3, 2009
Capitation: Don’t Try Health Care Reform Without It!
In my last posting I discussed the adverse incentives of the current fee-for-service system of physician payment in the U.S. These incentives are widely felt to increase overutilization of medical services and significantly increase health care costs without actually improving health care. Well, what are the alternatives? Today, I will discuss capitation, which in my opinion is the best way to pay physicians.
If I had the power to make a single change in how health insurance is done in the U.S., I would make it mandatory that all health plans at least offer to pay physicians by capitation. I would also institute incentives for physicians, health plans, and employers to adopt capitation of Physician-Led Accountable Care Organizations as their primary payment modality.
Capitation is the practice of paying large, accountable physician groups a certain agreed-upon amount of money every month to take care of a given population of patients. The physician group provides all needed medical services for the patients. If there are services that the physician group can’t provide, it pays other health care providers for these services.
I’m sure it’s obvious to you that by paying physician groups this way, you immediately eliminate the single most powerful incentive to increase costs, which is the direct financial incentive to physicians to perform more medical services (whether needed or not) in the fee-for-service system.
Capitation has been around for a long time, and has been very successful in reducing total medical costs by anywhere from 15-30%. Kaiser-Permanente, which is the health care organization that took care of President Obama’s grandmother, has paid its physicians by capitation for over 50 years. My medical group, Kelsey-Seybold Clinic, as well as many others, have accepted capitation since the mid-1980s and much prefer the capitated payment model over the standard fee-for-service system.
Fears of some observers that, under capitation, physician groups will withhold needed care, have never materialized. In fact, capitated group practices, and the health plans that contract with them, have been in the forefront of the Quality Improvement movement within the health care industry. They have had to demonstrate that their patients are receiving all recommended health services, which has resulted in higher quality care, rather than any withholding of necessary services.
Unfortunately, capitation is not widespread, and in fact has been declining in market share over the past few years. We’ll discuss why this is in my next posting.
If I had the power to make a single change in how health insurance is done in the U.S., I would make it mandatory that all health plans at least offer to pay physicians by capitation. I would also institute incentives for physicians, health plans, and employers to adopt capitation of Physician-Led Accountable Care Organizations as their primary payment modality.
Capitation is the practice of paying large, accountable physician groups a certain agreed-upon amount of money every month to take care of a given population of patients. The physician group provides all needed medical services for the patients. If there are services that the physician group can’t provide, it pays other health care providers for these services.
I’m sure it’s obvious to you that by paying physician groups this way, you immediately eliminate the single most powerful incentive to increase costs, which is the direct financial incentive to physicians to perform more medical services (whether needed or not) in the fee-for-service system.
Capitation has been around for a long time, and has been very successful in reducing total medical costs by anywhere from 15-30%. Kaiser-Permanente, which is the health care organization that took care of President Obama’s grandmother, has paid its physicians by capitation for over 50 years. My medical group, Kelsey-Seybold Clinic, as well as many others, have accepted capitation since the mid-1980s and much prefer the capitated payment model over the standard fee-for-service system.
Fears of some observers that, under capitation, physician groups will withhold needed care, have never materialized. In fact, capitated group practices, and the health plans that contract with them, have been in the forefront of the Quality Improvement movement within the health care industry. They have had to demonstrate that their patients are receiving all recommended health services, which has resulted in higher quality care, rather than any withholding of necessary services.
Unfortunately, capitation is not widespread, and in fact has been declining in market share over the past few years. We’ll discuss why this is in my next posting.
Monday, July 27, 2009
Are We Getting What We Pay For? Yes!
“That any sane nation, having observed that you could provide for the supply of bread by giving bakers a pecuniary interest in baking for you, should go on to give a surgeon a pecuniary interest in cutting off your leg, is enough to made one despair of political humanity”
-George Bernard Shaw, Preface on Doctors, 1911
“Many health care experts believe that one main reason we spend far more on health than any other advanced nation, without better health outcomes, is the fee-for-service system in which hospitals and doctors are paid for procedures, not results.”
-Paul Krugman, New York Times, 2009
“You want to look at anything that will move us away from a fee-for-service model, the core perversion in the system.”
-David Brooks, New York Times, 2009
I have been using the first quote above, from playwright George Bernard Shaw, for years when I speak to new physicians at our medical group about health care economics and the adverse incentives inherent in the fee-for-service way that most doctors are paid in America. The other two quotes, one from the generally liberal Nobel Prize-winning economist Paul Krugman, and the other from the generally conservative New York Times columnist David Brooks, both appeared in my hometown newspaper, the Houston Chronicle, last Saturday.
These quotes are right on the money in regard to the powerful incentive for doctors to overutilize when they are paid strictly on a fee-for-service basis. While paying people for what they do is a time-honored compensation mechanism, the way it has played out in American medicine has been a major reason for the up to 30% of “care” that is provided for which there is no good evidence of effectiveness. Many astute observers have commented that getting rid of this unnecessary care is going to be a key to reducing U.S. health care costs.
The way that the fee-for-service system works for physicians is that doctors are only paid for seeing a patient face-to-face in the office or in the hospital, and the doctor is paid more for each additional service that he or she provides. One problem with this system is that you, the patient, often can’t really tell if the service the doctor provides is necessary. This is similar to taking your car to a mechanic and being told that you need an expensive repair. Unless you are also a mechanic, it will be difficult or impossible for you to know whether that repair is really necessary. The result is that patients can, and often do, get services that they don’t need and which increase health care costs significantly without actually improving anyone’s health.
Another problem is that a fair amount of health care can be done easier and cheaper without a face-to-face office visit. In my own practice, which is largely geriatrics, I routinely do a lot of care over the phone. I have my nurse discuss test results with patients and may even do simple diagnoses or medication changes by phone. Patients like it because they don’t have to take the time and incur the expense associated with an office visit. Many physicians, including my medical group, are also starting to use the internet and e-mail for these sorts of issues. Unfortunately, even though doing this reduces costs and improves service, doctors do not get paid for these activities in the fee-for-service environment.
What is particularly maddening about all this is that the doctors who try to do the right thing and not order unnecessary testing, office visits, and procedures wind up shooting themselves in the foot financially, as they forgo the income that their colleagues receive for doing all of these things. In fact the current Medicare methodology for adjusting physician fees, called the Sustainable Growth Rate model, reduces fees to compensate for this overutilization. Of course this mainly penalizes the doctors who don’t overutilize. The others just crank up utilization even more, to make up for the fee cuts.
Bottom line: We actually are getting what we pay for; it’s just that we’re paying for the wrong thing! It’s time to seriously look at getting physicians off of the strict fee-for-service payment system. It’s an antiquated way to pay for health care and patients and the nation can no longer afford it. In my next post I will discuss alternatives to the fee-for-service system.
-George Bernard Shaw, Preface on Doctors, 1911
“Many health care experts believe that one main reason we spend far more on health than any other advanced nation, without better health outcomes, is the fee-for-service system in which hospitals and doctors are paid for procedures, not results.”
-Paul Krugman, New York Times, 2009
“You want to look at anything that will move us away from a fee-for-service model, the core perversion in the system.”
-David Brooks, New York Times, 2009
I have been using the first quote above, from playwright George Bernard Shaw, for years when I speak to new physicians at our medical group about health care economics and the adverse incentives inherent in the fee-for-service way that most doctors are paid in America. The other two quotes, one from the generally liberal Nobel Prize-winning economist Paul Krugman, and the other from the generally conservative New York Times columnist David Brooks, both appeared in my hometown newspaper, the Houston Chronicle, last Saturday.
These quotes are right on the money in regard to the powerful incentive for doctors to overutilize when they are paid strictly on a fee-for-service basis. While paying people for what they do is a time-honored compensation mechanism, the way it has played out in American medicine has been a major reason for the up to 30% of “care” that is provided for which there is no good evidence of effectiveness. Many astute observers have commented that getting rid of this unnecessary care is going to be a key to reducing U.S. health care costs.
The way that the fee-for-service system works for physicians is that doctors are only paid for seeing a patient face-to-face in the office or in the hospital, and the doctor is paid more for each additional service that he or she provides. One problem with this system is that you, the patient, often can’t really tell if the service the doctor provides is necessary. This is similar to taking your car to a mechanic and being told that you need an expensive repair. Unless you are also a mechanic, it will be difficult or impossible for you to know whether that repair is really necessary. The result is that patients can, and often do, get services that they don’t need and which increase health care costs significantly without actually improving anyone’s health.
Another problem is that a fair amount of health care can be done easier and cheaper without a face-to-face office visit. In my own practice, which is largely geriatrics, I routinely do a lot of care over the phone. I have my nurse discuss test results with patients and may even do simple diagnoses or medication changes by phone. Patients like it because they don’t have to take the time and incur the expense associated with an office visit. Many physicians, including my medical group, are also starting to use the internet and e-mail for these sorts of issues. Unfortunately, even though doing this reduces costs and improves service, doctors do not get paid for these activities in the fee-for-service environment.
What is particularly maddening about all this is that the doctors who try to do the right thing and not order unnecessary testing, office visits, and procedures wind up shooting themselves in the foot financially, as they forgo the income that their colleagues receive for doing all of these things. In fact the current Medicare methodology for adjusting physician fees, called the Sustainable Growth Rate model, reduces fees to compensate for this overutilization. Of course this mainly penalizes the doctors who don’t overutilize. The others just crank up utilization even more, to make up for the fee cuts.
Bottom line: We actually are getting what we pay for; it’s just that we’re paying for the wrong thing! It’s time to seriously look at getting physicians off of the strict fee-for-service payment system. It’s an antiquated way to pay for health care and patients and the nation can no longer afford it. In my next post I will discuss alternatives to the fee-for-service system.
Friday, July 17, 2009
Taming Healthcare Costs: See what’s Working Now!
The latest headline coming out of Washington is that Douglas Elmendorf, director of the Congressional Budget Office, has pointed out that the healthcare reform bills currently circulating through Congress have been skewed more toward expanding coverage than controlling costs. The result is that overall healthcare spending will go up significantly, a prospect that has many legislators calling for a slowdown or halt in efforts to pass healthcare reform legislation this year.
Well, it can’t be considered shocking news that expanding coverage to over 40 million uninsured patients will increase costs. It’s not that these patients aren’t already generating costs, but the costs were less obvious. Costs of caring for uninsured patients take the form of bad debt for doctors and hospitals, whom then shift these costs onto health plans, other patients, or local or state government in the form of higher fees, or budget deficits for public hospitals.
Providing access to care for those who previously did not have it is bound to increase total medical costs, similar to when Medicare was introduced in 1965. This might not be so alarming if health costs for the currently insured in America were anywhere close to what is seen in other developed countries. About 16% of our Gross Domestic Product (GDP) goes into health care, which comes out to over $7,000 per capita. And this is with 46 million uninsured! The large, industrialized, countries that are commonly felt to be our socioeconomic peers, such as France, Germany, Great Britain, Canada, Australia, and Japan, range from 8% to 11% of their GDP devoted to healthcare and all of these countries have universal health coverage.
So do we need to completely change our style of health care to a European-style, government-managed system? Many observers have stated their opinion that practically any attempt on the part of Congress to reform healthcare will necessarily result in this.
I don’t think so.
The fact is that many physician-led, market-based healthcare systems in the United States, such as Kaiser-Permanente, the Mayo Clinic, Geisinger Health System, and the system I work for, Kelsey-Seybold Clinic in Houston, have achieved significantly lower total medical costs than their peers both locally and nationally.
The key to these systems’ high quality, low cost and high patient satisfaction is that they are Physician-Led Accountable Care Organizations. In most cases they receive a fixed amount of money per patient, either in the form of capitated payments from health plans, or in the more familiar form of insurance premiums, if they have their own health plan. In turn, they are accountable for providing all health care to their members. This accountability is not just financial. These systems, having prominent brand names in their communities, must also demonstrate high quality of care, as well as high patient satisfaction.
This completely turns around the incentives in the typical fee-for-service arrangement for doctors and hospitals to do as much as they can (and charge as much as they can) whether or not there is any evidence that what they are doing will actually help patients. So far, although many reputable organizations and commentators have pointed out the advantages of Accountable Systems of Care, Congress has been hesitant to be seen as favoring this style of health care organization.
I think incentivizing the development of Accountable Care Organizations will be essential to control health costs going forward in America and will be key in avoiding a more intrusive, government-managed system.
Well, it can’t be considered shocking news that expanding coverage to over 40 million uninsured patients will increase costs. It’s not that these patients aren’t already generating costs, but the costs were less obvious. Costs of caring for uninsured patients take the form of bad debt for doctors and hospitals, whom then shift these costs onto health plans, other patients, or local or state government in the form of higher fees, or budget deficits for public hospitals.
Providing access to care for those who previously did not have it is bound to increase total medical costs, similar to when Medicare was introduced in 1965. This might not be so alarming if health costs for the currently insured in America were anywhere close to what is seen in other developed countries. About 16% of our Gross Domestic Product (GDP) goes into health care, which comes out to over $7,000 per capita. And this is with 46 million uninsured! The large, industrialized, countries that are commonly felt to be our socioeconomic peers, such as France, Germany, Great Britain, Canada, Australia, and Japan, range from 8% to 11% of their GDP devoted to healthcare and all of these countries have universal health coverage.
So do we need to completely change our style of health care to a European-style, government-managed system? Many observers have stated their opinion that practically any attempt on the part of Congress to reform healthcare will necessarily result in this.
I don’t think so.
The fact is that many physician-led, market-based healthcare systems in the United States, such as Kaiser-Permanente, the Mayo Clinic, Geisinger Health System, and the system I work for, Kelsey-Seybold Clinic in Houston, have achieved significantly lower total medical costs than their peers both locally and nationally.
The key to these systems’ high quality, low cost and high patient satisfaction is that they are Physician-Led Accountable Care Organizations. In most cases they receive a fixed amount of money per patient, either in the form of capitated payments from health plans, or in the more familiar form of insurance premiums, if they have their own health plan. In turn, they are accountable for providing all health care to their members. This accountability is not just financial. These systems, having prominent brand names in their communities, must also demonstrate high quality of care, as well as high patient satisfaction.
This completely turns around the incentives in the typical fee-for-service arrangement for doctors and hospitals to do as much as they can (and charge as much as they can) whether or not there is any evidence that what they are doing will actually help patients. So far, although many reputable organizations and commentators have pointed out the advantages of Accountable Systems of Care, Congress has been hesitant to be seen as favoring this style of health care organization.
I think incentivizing the development of Accountable Care Organizations will be essential to control health costs going forward in America and will be key in avoiding a more intrusive, government-managed system.
Monday, July 13, 2009
Presidential Candidates and the Risk Pool: Sink or Swim? Part 2
The key feature of Senator John McCain’s proposal for healthcare reform consisted of changing the way that health benefits are taxed, then using the money from this to offer all Americans who are not covered by employer-sponsored health insurance a tax credit to be used for them to purchase health insurance on the individual market. The money would come from eliminating the income tax exclusion for employer-sponsored health insurance. This feature of the tax policy is a remnant of World War II-era price controls and has been an important factor in causing the predominance of employer-sponsored health benefits in the U.S.
Elimination of this exclusion would cause employees with employer-sponsored health insurance to pay more income tax. The tax revenue generated by this would be significant- estimated to be some $3.6 trillion over the next 10 years. Senator McCain is not the only one who has noted problems associated with this tax exclusion. The biggest gripe has been that it is unfair, particularly in two aspects. One is that it is only available to employees of companies that provide health benefits. Millions of working Americans do not have access to employer-sponsored health benefits and so are not eligible for this tax exclusion. The other issue is that it is worth more in savings to higher-income individuals due to their higher marginal tax rate. Senator McCain’s plan would eliminate these issues of unfairness.
With regards to the risk pool, Senator McCain’s proposal is significantly different from either of the main Democratic proposals. Both Senators’ Clinton and Obama proposed plans that tried to get as many people as possible into large risk pools. Senator McCain’s proposal would tend to have the opposite effect. His idea is to give the uninsured a tax credit so that they can purchase insurance on the individual market. As I mentioned in my June 29th entry, individual health insurance policies, as opposed to employer-based group policies, must charge sicker individuals much higher premiums than healthy people. What this means is that almost certainly, the tax credit available to sicker, uninsured persons would not be nearly enough to actually cover the cost of an individual policy. The result of this is that a large uninsured population would still exist.
I believe that the proposals offered by the Democratic and Republican candidates in last year’s presidential election really do highlight the philosophical differences between the parties. The Republicans generally emphasize individual freedom and responsibility and their health care proposals reflect this. Individuals are responsible for obtaining their own health insurance, and they are expected to pay any additional cost associated with poor health status.
To the extent that poor health status is the result of bad lifestyle choices such as smoking, lack of exercise, obesity, and motorcycle riding (Full disclosure: I do ride a motorcycle, but I swear I only ride on Sundays at 20 miles per hour while wearing full Ninja-Turtle type protective gear!) this approach makes some sense. However, having been a primary-care doctor for over 20 years, I am pretty skeptical that most bad lifestyle choices can be significantly affected by financial disincentives. In addition, unfortunately this approach also tends to leave those with poor health status that are generally not lifestyle-related, such as cancer, birth defects, and diseases due to genetic or unknown causes, out in the cold.
The Democrats have typically promoted a view of government having the responsibility to assist those in need, whether financially, health and nutrition-related, or otherwise. The well-to-do help the poor, healthy people pay for the sick, with the government as the broker. Their health care proposals also reflect this, with large insurance pools overseen by the government ensuring that enough healthy people are in the plans to pay for the sick members. Of course, this leaves them open to the charge that there is no incentive for unhealthy individuals to take charge of their lives and health care in order to get better. They also need to overcome the widespread feeling that the government is the last entity one would pick to broker anything!
For the time being, the Democrats have the ball, and they are attempting to run with it. I should have plenty to write about in the next few months.
Elimination of this exclusion would cause employees with employer-sponsored health insurance to pay more income tax. The tax revenue generated by this would be significant- estimated to be some $3.6 trillion over the next 10 years. Senator McCain is not the only one who has noted problems associated with this tax exclusion. The biggest gripe has been that it is unfair, particularly in two aspects. One is that it is only available to employees of companies that provide health benefits. Millions of working Americans do not have access to employer-sponsored health benefits and so are not eligible for this tax exclusion. The other issue is that it is worth more in savings to higher-income individuals due to their higher marginal tax rate. Senator McCain’s plan would eliminate these issues of unfairness.
With regards to the risk pool, Senator McCain’s proposal is significantly different from either of the main Democratic proposals. Both Senators’ Clinton and Obama proposed plans that tried to get as many people as possible into large risk pools. Senator McCain’s proposal would tend to have the opposite effect. His idea is to give the uninsured a tax credit so that they can purchase insurance on the individual market. As I mentioned in my June 29th entry, individual health insurance policies, as opposed to employer-based group policies, must charge sicker individuals much higher premiums than healthy people. What this means is that almost certainly, the tax credit available to sicker, uninsured persons would not be nearly enough to actually cover the cost of an individual policy. The result of this is that a large uninsured population would still exist.
I believe that the proposals offered by the Democratic and Republican candidates in last year’s presidential election really do highlight the philosophical differences between the parties. The Republicans generally emphasize individual freedom and responsibility and their health care proposals reflect this. Individuals are responsible for obtaining their own health insurance, and they are expected to pay any additional cost associated with poor health status.
To the extent that poor health status is the result of bad lifestyle choices such as smoking, lack of exercise, obesity, and motorcycle riding (Full disclosure: I do ride a motorcycle, but I swear I only ride on Sundays at 20 miles per hour while wearing full Ninja-Turtle type protective gear!) this approach makes some sense. However, having been a primary-care doctor for over 20 years, I am pretty skeptical that most bad lifestyle choices can be significantly affected by financial disincentives. In addition, unfortunately this approach also tends to leave those with poor health status that are generally not lifestyle-related, such as cancer, birth defects, and diseases due to genetic or unknown causes, out in the cold.
The Democrats have typically promoted a view of government having the responsibility to assist those in need, whether financially, health and nutrition-related, or otherwise. The well-to-do help the poor, healthy people pay for the sick, with the government as the broker. Their health care proposals also reflect this, with large insurance pools overseen by the government ensuring that enough healthy people are in the plans to pay for the sick members. Of course, this leaves them open to the charge that there is no incentive for unhealthy individuals to take charge of their lives and health care in order to get better. They also need to overcome the widespread feeling that the government is the last entity one would pick to broker anything!
For the time being, the Democrats have the ball, and they are attempting to run with it. I should have plenty to write about in the next few months.
Monday, July 6, 2009
Presidential Candidates and the Risk Pool: Sink or Swim? Part 1
We’ve been talking about risk-pooling in my last few postings. As I mentioned, risk-pooling is really central to the debate about health system reform. In the last presidential race, differences between the candidates in their approach to risk-pooling caused much of their disagreement about health care reform.
Of the two “finalists” in the Democratic race, Senator Clinton’s proposal did the most to get everyone in the pool. She basically said that if you don’t mandate that all Americans obtain health insurance, then you run the risk that those of the employed uninsured who consider themselves healthy will continue to refuse to pay for coverage and rely on a safety-net of emergency care should they ever need it. These “free-riders” are problematic as insurance pools need their money to pay for the sicker members of the pool.
President Obama, when he was Candidate Obama, did not insist on mandatory enrollment of all Americans into health plans. The centerpiece of his plan is a mandate for all employers above a certain size to either offer health insurance to their employees, or pay a payroll tax to the government, which would in turn take measures to ensure that health insurance is offered to all Americans. These measures consist of a national private health insurance exchange and a competing government-sponsored health plan. All three of these proposals are intended to encourage as many individuals as possible to participate in large health insurance risk pools without mandating that everyone have coverage.
In my next blog, we’ll talk about Senator McCain’s take on risk pooling.
Of the two “finalists” in the Democratic race, Senator Clinton’s proposal did the most to get everyone in the pool. She basically said that if you don’t mandate that all Americans obtain health insurance, then you run the risk that those of the employed uninsured who consider themselves healthy will continue to refuse to pay for coverage and rely on a safety-net of emergency care should they ever need it. These “free-riders” are problematic as insurance pools need their money to pay for the sicker members of the pool.
President Obama, when he was Candidate Obama, did not insist on mandatory enrollment of all Americans into health plans. The centerpiece of his plan is a mandate for all employers above a certain size to either offer health insurance to their employees, or pay a payroll tax to the government, which would in turn take measures to ensure that health insurance is offered to all Americans. These measures consist of a national private health insurance exchange and a competing government-sponsored health plan. All three of these proposals are intended to encourage as many individuals as possible to participate in large health insurance risk pools without mandating that everyone have coverage.
In my next blog, we’ll talk about Senator McCain’s take on risk pooling.
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