Health Care Reform: Pay Per Patient or Pay Per Service?
Last week the Massachusetts’ Special Commission on the Health Care Payment System issued a report that should inform discussion of health care reform. In 2006 Massachusetts became the first and only state to attempt to provide universal health coverage for its citizens. Since that time, the state has been struggling to pay for it. Last year, in fact, reports the New York Times, the state took a number of actions to balance the program’s budget, including approving an assessment on insurers and hospitals, raising penalties for businesses that do not cover workers, increasing premiums and co-payments and raising the state’s tobacco tax; and this year the program faces another $250 million deficit.
So what is the Special Commission recommending? Replacement of the current fee-for-service system with a global payment system. Under the current system, a doctor receives a payment for each service that he or she provides, which incentivizes providing more treatment than is necessary. Under the proposed new system, networks of health care providers would receive a flat fee for each person in the network, regardless of whether that person only received an annual check-up or spent months in the hospital recovering from a serious illness. The notion is that the latter approach will encourage preventative care and discourage overtreatment.
There would be many challenges with making such a conversion. How do you ensure that all networks have comparable participants or that those networks with higher risk participants receive extra compensation? How do you ensure that networks don’t cut corners, especially with dying patients, in order to maximize profit? How do you determine what the initial per-participant compensation rate should be and the rate at which it should increase over time? What impact might such a system have on innovation in a state with some of the best academic medical centers in the country?
Even so, I think the Special Commission is on to something. The proposal may not be perfect, but it should receive serious consideration.