Financial Incentives in Health Care

I think that, for the most part, liberal democrats really mean well when they make recommendations regarding medical care. Unfortunately sometimes those with little first hand knowledge of health care come up with some quite erroneous assumptions. This is seen in a post from Ezra Klein today where he writes:

Indeed, the reason people get medical care — in particular expensive medical care — is because their doctors tell them to. I have never in my life sat up in bed and thought, “huh, I should really get some laparoscopic surgery.” If I get a surgery, it’s because my doctor told me to. And if I can’t afford it, I have to ignore his diagnosis.

For that reason, if you want to safely cut back on care patients buy, you need to get doctors to stop recommending so much wasted care. You can do that in a few ways: Put them on salary rather than on fee-for-service deals, so they don’t make more money when they recommend treatment. Create new research institutions that test the cost effectiveness of care so they have a better idea of which treatments are worth recommending. Offer bonuses for using proven therapies. Etc, etc. But this idea that the way to better run medical care is to rejigger the financial incentives so patients have to ignore their doctor’s advice is really quite bizarre.

People do not receive care simply because a doctors tells them to. A doctor is not going to tell a patient out of the blue to have laparoscopic surgery. If such a recommendation is made the patient most likely presented with a complaint for which this is the best way of diagnosing and possibly repairing the problem. Another possibility is that a test showed that the procedure is necessary.

Ezra is concerned with doctors who recommend “so much wasted care” but the actual evidence is that Americans receive far too little care as opposed to too much. There are far too many people with cardiac risk factors who are not being treated with Statins. There are far too many patients in Atrial Fibrillation who are not being anticoagulated. There are far too many diabetics and hypertensives who are not being treated to goal. There are far too many people who do not receive recommended screening tests for cancer such as colonoscopies (another procedure mentioned by Ezra).

There is certainly the possibility that an unscrupulous surgeon might recommend unnecessary procedures for the income but this is not as serious a problem as Ezra might suggest. This is also where it is beneficial to start with a good primary care physician who can be involved in the management of the case, as opposed to relying solely on the surgeon’s recommendation.

It is an erroneous assumption to assume that doctors on salary will order less than those in fee for service practices. Often the opposite is true. While I am in private practice, a large number of local physicians are employees of the local hospitals. I receive no financial benefit from Ezra receiving laproscopic surgery, whether or not it is necessary. I will also avoid referring to individuals or institutions which I feel are overly quick to do surgery or other tests. On the other hand, a salaried physician is placed under pressure to refer within their system and to increase overall revenue for the system. A salaried physician is far more likely to refer within their system, even if this mean unnecessary procedures being done, than a good primary care physician in primary care who will make decisions purely based upon what is good for the patient as opposed to what is good for his employer.

Salaried physicians are also often under pressures to refrain from using treatments which are beneficial due to cost. Some liberal bloggers have become overly enamored with the VA system based upon statistical analyzes, forgetting that statistics is the science which demonstrates that the average human has one testicle and one breast. Those who actually deal with the VA see a totally different situation than is described in some liberal blogs. For example, the literature shows quite convincingly that it is necessary to lower the LDL in a high risk cardiac patient to under 70 to achieve regression of blocked coronary arteries. To save money the VA is not willing to spend more on medications to lower the LDL much below 100. Actos will decrease mortality in many diabetic patients (provided it is avoided in those prone to congestive heart failure) but the VA will only pay for less expensive diabetic medications. For those who do have congestive heart failure, another expensive drug, Coreg, will improve mortality. The VA requires more severe cases than is recommended by most cardiologists before they will approve the medication, denying many patients the benefit of a drug which can prolong their lives. (Fortunately Coreg is going generic, and undoubtedly the VA will reassess their cost-driven analysis of when it can be used.)

Ezra recommends that we “Create new research institutions that test the cost effectiveness of care.” There has been increased emphasis on evidence-based medicine for several years, which includes consideration of cost effectiveness. This is done in our current research institutions, making it unnecessary to build who new institutions. This also helps to reduce unnecessary surgery if such studies show that more conservative treatment is more effective.

Ezra recommends that we “Offer bonuses for using proven therapies.” This is already being done. Medicare has begun a program to actually provide such bonuses, and incentive programs are becoming more common in other plans. Often these incentive programs provide bonuses for providing more care under the realization that the real problem we face is not excessive medical care but too many patients not receiving care which they would benefit from (and which could reduce costs long term).

At least I’m relieved that Ezra does not recommend increased oversight of physicians. Managed care organizations have attempted to create huge bureaucracies to oversee the decisions of physicians and require approval before many procedures. Over time most found that the vast majority of what physicians recommended was worthwhile and it cost much more to require such authorizations than the money which was saved from denying an occasional procedure.

Contrary to what Ezra believes, the best course is to alter incentives in order to get patients to follow their doctor’s advice. While I don’t agree with making this mandatory, John Edwards appears to realize the value of this in stressing the need for preventative care and routine care of chronic diseases. It is more cost effective to find tumors earlier than later. It is also more cost effective to treat diabetes, hypertension, and hyperlipidemia aggressively, starting at an early age, than to pay for coronary artery bypass surgery, renal dialysis, and treatment following strokes. Besides, as I’ve previously discussed, such care is also desirable for the manner in which it improves the quality of life for patients regardless of the potential monetary savings.

Be Sociable, Share!

Leave a comment