Global Payments Failing In Massachusetts–Should Provide Warning For Obama Administration

Health care reform was necessary to curb the abuses of the health insurance industry and provide affordable care to those without coverage, but some of the reform ideas based upon good intentions have been faulty. The Obama administration has been using health care reform to push for new ways to pay for health care and to push for larger medical practices. Both ideas are counterproductive to the goal of providing more affordable, quality care.

Attempts at getting away from fee for service for health care failed miserably during the HMO era, often leading to restrictions on necessary care and unhappy beneficiaries. Not content with letting a bad idea die, the Obama administration has been trying to find ways to adjust a failed idea to make it work. Massachusetts has provided a model for Obama’s health care proposal, and hopefully the Obama administration can also learn from the aspects which have failed. Attempts to pay physicians and hospitals with the types of ideas they are considering has wound up costing more, and part of the reason is that big groups have managed to use their clout to use the system to increase their income. Boston Public Radio reports:

“Our examination found that paying providers on a global basis has not resulted in lower total medical expenses.”

It’s just a short, no-frills sentence, but it amounts to a bombshell dropped on a central tenet of the Massachusetts governor’s plan for the next phase of health reform.

That finding anchors a report issued this morning by state Attorney General Martha Coakley. And it appears to contradict Gov. Deval Patrick’s argument that shifting to global payments is a key to “cracking the code” of ever-spiraling medical costs…

Global payments are supposed to re-align doctors’ incentives and put a stop to the rise in costs. Under such a global system, instead of being paid for each specific treatment, health care providers are put on an overarching budget for every patient. At the end of a year, if they’re within the budget and meet quality standards, they can win bonuses; if not, they risk penalties. The Patrick administration and private insurers have been pushing doctors toward this model, saying it leads to better, thriftier practices.

But Martha Coakley says: “Our investigation shows that a move to global payments is not the panacea to controlling costs.” The attorney general’s report suggests that in fact, thus far, care has tended to end up costing more under global budgets rather than less.

The report suggests continuing to adjust the system, but it is probably doomed to fail as HMO’s did. Despite the faults of fee for service payment, any other form of payment turns out to work far worse. Concentrating health care in larger groups, rather than lowering costs as the Obama administration believes, leads to higher costs (which really should have been predictable).

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