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The second of two parts...

Causes of the Problem

Massachusetts’ c. 58 law included no meaningful cost controls. Instead, responding to political pressure, it actually increased spending in several ways. It boosts hospitals’ Medicaid payments over three years by some $500 million, half for costly, generally profitable teaching hospitals.

Doctors—including primary care doctors, who are in short supply—are receiving little

In c. 58, the Massachusetts legislature passed the best law it could pass and get signed by Gov. Romney. But it is not financially sustainable.

There are several reasons for the weak political support for cost control in Massachusetts. These include
• Powerful parties feared loss of revenue they claim to need to save our lives.
• The decades of failure of cost control here and nationally—owing to reliance on traditional market and government action, which are largely irrelevant in health care.
• The lack of a link between cutting cost and some valuable benefit—the lack of a positive motive to contain cost.
• The belief that cost control is a hopeless, dull, and mechanical topic.
• Business groups obsessed over the law’s $295 annual assessment on non-insuring employers while ignoring the uncontrolled rise in overall health care costs.

So the law’s main attention to cost came in limiting benefits to hold down premiums, leaving sick people to face high costs. Its new commission on health quality and costs hopes to win cost reductions as a by-product of quality improvements—tackling at most a small part of the cost problem.

But if past cost control failures are understood and new approaches attempted, our state’s $66.3 billion in health care spending could cover everyone very well.

Today, about half that sum is wasted—on unnecessary care (stemming largely from financial incentives and defensive medicine), payment-related paperwork, excess prices, and theft.

It’s helpful to begin by recognizing two key things. First, trying to cut costs by forcing people to shop for cheaper care when sick is cruel—and ineffective.

Second, doctors’ decisions control about 87 percent of personal health spending—hospital care, prescription drugs, most long-term care, their own incomes, and more. A main reason why past cost controls failed is that doctors have been treated as objects, manipulated, or simply ignored.

A Different Solution

The challenge is to put this 87 percent of spending into doctors’ hands under arrangements that let us trust them to spend it wisely, and that liberate and motivate and oblige doctors to use this money to care for all of us well.

Doing this requires negotiating a peace treaty with doctors. And that requires dramatic action to capture doctors’ attention and persuade them to abandon business as usual. We propose these main provisions.

Ending doctors’ fear of malpractice suits, separate new mechanisms would weed out dangerous doctors and compensate injured patients.

Doctors also get an end to payment-related paperwork, slashing their office expenses, and freeing their time to see patients. Eliminating this paperwork requires ending today’s mistrust—assumptions that doctors will cheat on billing, order unnecessary tests, perform unnecessary surgery, and the like. That means working to free doctors’ clinical decision-making from financial influences that spur over-treatment of many and under-service of others.

We suggest this structure:
• Patients would enroll with groups of primary care doctors, who would receive risk-adjusted capitation payments. These would be divided between two securely separated budgets.
• One budget pays doctors’ own incomes. The second budget pays for all the care doctors control—hospital care, prescription drugs, and the rest. Savings from this second budget can’t be diverted to boost doctors’ incomes. Doctors must make trade-offs to deliver all needed care and stay on-budget.
• Doctors are liberated to act professionally in patients’ best interest. The only motive to deny marginally useful care to one patient is to reserve the money for services that will benefit patients more.
• Savings are recycled to better serve us all.

One advantage of this approach is that it can be tested on a small scale. Other approaches should also be tested. This will increase the chance that we will develop solutions in time to address the health cost crisis that steadily undermines insurance coverage in our state.

Alan Sager and Debbie Socolar
Directors, Health Reform Program
Boston University School of Public Health

This program aired on August 2, 2007. The audio for this program is not available.

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