How to Pay for Healthcare Reform, Part 1

How can we pay for healthcare reform? The simple answer is to determine what saves money while improving care, and then focus our attention. Part 1 of this article looks at issues of cost, quality, and access. Part 2 will present the 12 steps we as practitioners must follow to save money while improving care.

Translating data into information is the essential and relatively easy part; giving feedback at the doctor-patient touchpoint is not so easy, nevertheless, it is the vital missing step. Figure out how to do this and you will have more than enough savings to make health care not only more rational, but it will also be of more even quality and cost-effective at the same time.

Healthcare is Irrational -- It Costs Too Much but Realizes Too Little

Let's say you purchased a new flat screen TV and now need an armchair. How do you choose one? Your decision would be based on cost, quality and access, or in this illustration, 1) ease of use, 2) aesthetic appeal, functionality, and durability, and 3) cost, especially how much you spend in relation to how much benefit is derived over a fixed or standard period of time (what in health care, we call an “episode of care”).

How does this armchair help us understand how to pay for healthcare? It explains how you should make purchasing choices and what happens because of your decision, over time.

The analogy is transferable: healthcare advocates couch these three criteria in terms of equity in access, benefit, and affordability. Managed care organizations and indemnity insurers repackage the same criteria in terms of restricted networks, disease state or case management (process and outcome measurement), and profit or fund-balances if they are a ‘non-profit’ organization. (Note: non-profits also afford multimillion dollar bonuses). Doctors see the same conditions as office and on-call hours, patient satisfaction and practice growth, and accounts receivables vs. overhead.

The challenge is because healthcare resources as well as reform options are limited:

• Are we going to cut costs by reducing access? That will only increase costs in the long run because deferred or late care is usually more expensive.

• Cut fees to doctors? They'll only increase visits and procedures to compensate.

• Raise quality (eg, hire a social worker, extend mental health benefits, pay for health education)? Overhead goes up and as insurers balk, they raise premiums. • Cost-share with patients? They'll split pills, not get their pills, put off that test, visit or shot; they might even suffer financial and then organic stress.

• Cost-shift to doctors as in capitation? Here, the incentives to deliver good, affordable, accessible care are misaligned and doctors will subtly defer patient visits or refer a lot when they are not accountable for making the referrals.

“Cost,” “quality,” and “access” are the legs of a three-legged stool -- each leg bears critical weight; take one away and you cannot have stability. The best way to achieve balance, however, is through outcomes research -- it can and does reveal what we have to know at the point of contact with the patient to provide better care, then and in the future.

If you were to buy that armchair, knowing the real field experience with the product and service, surely you could make a better choice. According to research by Don Berwick, costs can be reduced “without a single instance of harm, without rationing effective care, without excluding needed services for any population you serve.”

Once we understand what works and what does not, we can align the incentives so that better healthcare resonates with better health. When it does not, it may be time to move on! We'll take a look at what we know works in part 2 of this article.

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Reforming Healthcare & Managed Care