Archive | May 2011

Medicare Voucher Program Illustrates “Third Rail” Risks

The backlash over Rep. Paul Ryan‘s plan to alter Medicare from its current form to a premium support model illustrates that Social Security is not the only so-called “third rail” in American politics.  The premium support (voucher) concept would shift Medicare from paying as it currently does, to giving premium support which would be used by beneficiaries to purchase insurance in the private market.

Although Ryan was chastised, he deserves some credit for acknowledging that escalating health costs will eventually require that something is done, and that the current model may not be sustainable.  In a way, Medicare vouchers can be viewed as a version of food stamps.  The analogy is limited, but in such a system, government outlay is capped.  A notable difference is that the food stamp program does not set the prices for groceries.  Another important difference is that food sellers are involved in vigorous competition, and that combined with consumer discretion and price sensitivity means consumers can expect good value.  Healthcare does not work in this manner.

As noted by analysts, premium support will not work if insurance premiums grow faster than the vouchers, as all metrics seem to indicate they will.  Before long, beneficiaries will fall behind as premiums rise, perhaps very far behind.  The system could work if forces ensured that health systems competed vigorously on price, service and outcomes, and if the public could make informed choices regarding coverage options.  Altering the Medicare system in such a fashion seems very unlikely due to political and practical barriers, especially in the short term.   But the efforts towards transparency and working to lower the cost of services through market forces should continue, and ideas toward this end should be welcomed.

Congress Likely to Power Down the IPAB

What is the iPAB?  (Small i nod to Apple).  It is a component of the healthcare law, specifically termed the Independent Payment Advisory Board.  A panel of 15 yet-to-be-named people will do the work that the Sustainable Growth Rate formula has been unable to do:  control the growth in Medicare spending.

Since passage of the SGR, Congress has stopped formula-driven cuts from taking place in every year except one.  As a result spending has increased, and the volume of services provided has increased.

On the surface, IPAB looks good; politicians can outsource the dirty work of cutting payments and take that responsibility off their hands.  But the understanding that they would eventually be held responsible for the fallout has led to a bipartisan interest in keeping payment powers in their hands.

As we learned from the recent financial crisis, formula-driven investment policy doesn’t always work.  Sometimes it fails spectacularly.  Similarly, formula-driven payment schemes can work for a while, but are eventually exposed as arbitrary, centrally planned price controls, that do not reflect proper valuation of the services performed.  Such schemes typically result in distortions and market inefficiencies, now being seen across many areas of the healthcare landscape.

Congress has stopped past formula-driven cuts because it understands that they don’t make economic sense.   Widespread physician employment does not change the current limitations to the payment system, although the next-generation payment structures might.  For now those are untested and not likely to be implemented on a large scale basis for at least several years.

Regardless of IPAB’s ultimate fate, eventually Medicare spending will have to be brought into balance with what can be sustained.  Although Paul Ryan’s voucher system was widely panned, he at least acknowledged that there is a limit to what the government can afford to pay for care.  Physician payments are only one component of Medicare’s spending problem, and a small one compared to other segments.  As of 2010, physician payments represented only 13% of overall Medicare spending.

Regulatory efforts are better centered on fostering conditions that will cause market participants to lower costs and increase quality and coordination of their own accord.

Three Points About Scope of Practice

Scope of practice and the role of “non-core” cosmetic providers is a contentious topic whenever it comes up among the various specialties involved.  This is evident by perusing any “Doctor Message Board” website and following relevant posts.  Often the commentary quickly denigrates in quality and becomes venomous.

A refreshing view of the topic is Jeffrey Frentzen’s editorial in Plastic Surgery Practice.  He correctly points out the multispecialty contributions in the development of plastic surgery as a discipline.  These influences were essential, but there are important differences between the World of Medicine in that earlier time and now.

Today, “non-core” practitioners do not enter the field to make new contributions, or to solve previously opaque medical problems.  They do it mostly to improve their economic viability, which is very understandable.  I think there are three points to keep in mind in order to have an intellectually honest discussion about scope of practice:

1) It’s about patient safety (partly)

The public deserves properly trained practitioners, yet there are many ways this training can be provided.   There is no one foolproof method of training.  As in insurance-based fields, many new procedures are learned after leaving residency.  Training meant as an adjunct to an already competent practitioner is different from training designed to circumvent not having done a formal residency in a given area.

2) It’s about economic domain (turf)

There are some scope of practice battles in the coverage of hand and facial trauma, depending on the specifics of the community.  There are far fewer battles over low remuneration reconstructive areas.  If patient safety was the only concern, these would be contested as well.

3) It goes both ways

Each specialty has its area of core competence, and additional skills can be developed with training and experience.  No specialty has maximal expertise over every area, and anyone can get outside of their “comfort zone” if they are not careful.