Squaring The Circle

This post depends on the previous post which, in the peculiar mapping of time in blogs, appears immediately below it. If you find some points a bit confusing refer to that post.

So we have two different systems of medical care delivery in the United States:

In the fee for service world patients buy medical procedures and treatments. If they are lucky they have adequate insurance to make these purchases and they can rely on a personal relationship with a skilled and conscientious physician who can serve as their guide through the mazes of modern medicine. If they are not so lucky they may find themselves looking on the internet for guidance. The square.

In some cases large medical groups sell prepaid health care.
Patients buy a full range of health care services from the group which provides them, as it sees fit. The group has a long time horizon - doctors usually spend their entire career in the group and new doctors are always joining - and this consideration, plus medical ethics, goes a long way to assuring that the quality of medical practice in the group is high. Although doctors do get a share of group profits, the most immediate concern with any particular patient at any particular time is good medical practice. Many doctors join a group practice like this because they do not want to spend a great deal of time dealing with billing and other business aspects of medicine. The circle.

If you do not believe me about the quality of prepaid group practice look up the NCQA ratings for Kaiser California.

Unfortunately the same market forces that are making life difficult for doctors in the fee for service world are having the same effect on doctors who belong to the large medical groups that sell prepaid care.

Even though Wonks Anonymous would argue that these groups offer some of the best quality and most economical care, this is not enough to compete in the brave new world of health insurance. In this new world, led by health plans that have nothing whatever to do with the provision of medical care, the price of health insurance is driven down by various means: Doctors are underpaid. Sick patients are refused coverage and people who retain their insurance are generally expected to pay for a greater share of their medical costs. For further material on this see the health insurance and health policy indexes in this blog.

Aside from the fact that they have a hard time paying themselves less, doctors tend to balk at refusing coverage to the sick and at charging excessive amounts to individuals who need expensive care. Unlike insurance company bureaucrats, they actually see the results. Further problems arise because many doctors opted for prepaid group practice because they were averse to the detailed billing and coding required in the brave new world where we must set a price for everything and focus primarily on that price.

The doctors, who once stood at the center of prepaid group practice, now find themselves pushed to the periphery by the insurance people who have become so necessary to the survival of the business. In fact the insurance folks have even come to regard the doctors as an impediment - a drag that is preventing good performance in the race to the bottom.

Unfortunately single payer, the real alternative to the health insurance industry, has no particular attractions to doctors in prepaid group practices. It is the same, square, fee for service system.  Admittedly it is vastly improved by the elimination of particularly noxious and useless middlemen, still it emphasizes individual, billable services at the expense of building relationships with patients and other doctors. Furthermore it retains the baroque billing systems that have developed among us. How do you fit a round peg into a square hole?

Well, Wonks Anonymous has a place where we might start. Medicare currently has two payment systems: fee for service and capitation - fixed payment per patient. Doctors usually choose fee for service and insurance companies usually choose capitation. This is also the preferred payment method for medical groups that are accustomed to offer prepaid medical care. As many have said before, any single payer plan should look like Medicare. Wonks Anonymous believes that capitated payment should be part of the arrangement.

Naturally some changes would be needed. Current capitation rates are 15% higher than average Medicare costs and this bonus needs to be eliminated. If you cannot provide or coordinate medical services for the same price as everyone else then you have no business providing the services. The fixed payment offered to all who chose to opt out of the fee for service system should represent the average cost for care - adjusted naturally for known medical conditions and overall patient risk of illness.

A further adjustment needs to be made. Doctors and hospitals in the fee for service world should not need to bill providers who are paid a fixed fee for members. This being the current practice. Instead they should be able to directly bill the single payer. Payments made to providers outside of the medical group would be deducted from the per member fees paid to the group. There might be some stop loss provisions here to cover the rare $6 million dollar burn case etc.

Nor should the group be able to prevent its clients from seeking care outside. When this occurs the costs of care would be deducted from fees owed by the government. Of course a member who chose to go outside the group often might be told that his or her participation as a capitated member was no longer desirable and offered further services on a fee for service basis.

As with everything the devil resides in the details and this is a very general proposal. Wonks Anonymous offers it as the start of a discussion that he hopes will bear fruit. Advocates of single payer please note: Prepaid group practice in California alone serves about 6 million people. This is not a constituency that you should be ignoring.

Is anybody out there listening?


What did you think of this article?

  • No trackbacks exist for this post.

  • 10/14/2008 9:20 AM R Garth Kirkwood MD wrote:
    Although much of what Wonks Anonymous says in this post and the preceding post may be correct, solutions do not appear to be forthcoming.

    In my view, this is because Wonks Anonymous has so far been unable to extricate himself from the belief that the dollar bill is the bottom line in health care. It is not.

    The doctor---patient relationship is the definition of health care and the widespread existence of sound, ongoing, independent-from-payer-influence doctor---patient relationships in every American community has to be the bottom line, if significant beneficial change is to occur.

    All other sectors of health care, whether they be hospitals, drug companies, doctors' practices etc. etc. must choose this new bottom line as their goal in place of the dollar bill. A properly operated single payer, with financing of same coming from everyone living in the USA, can readily and completely control the price paid for services and product, while ensuring that businesses in the health care arena achieve good, acceptable profit margins and health care professionals earn a quite acceptable income.

    Of course to do this, the bogus nature of the words, "not-for-profit," currently in use in our health care system would have to be made transparent and then removed.

    Wonks Anonymous needs to explain the $2.5 billion profit announced by Kaiser Permanente for the first nine months of 2007, which was reported in the San Francisco Business Times on Wednesday, Nov. 7, 2007. A true "not for profit" institution might take this money and open up clinics all through California with the instructions to their salaried doctors to evaluate every patient that walks through the door in a complete manner dictated by the duties, which both the doctor and the patient assume, when they enter into a doctor---patient relationship.

    In keeping with the geometric analogy, a solution for our health care miseries comes forth from a Pyramid, An American Health Care Pyramid, The Pyramid of Support for Doctor---Patient Relationships for Everyone. This concept is fully developed in the book, EQUAL HEALTH CARE FOR ALL, which is now available as a Free download from the web site: http://www.equalhealthcareforall.org">http://www.equalhealthcareforall.org

    R. Garth Kirkwood MD
    Reply to this
  • 10/21/2008 10:19 PM Kimberly Cross wrote:
    Okay, you've asked for comments, so here goes:

    I must tell you that I've refrained from making remarks like this because I don't want to sound like a clueless weenie whiner (bleep that as you must), but I feel I could follow these arguments better if you would condense your thinking somewhat, and give your writing the benefit of some well-placed punctuation. Try as I may to understand them, constructions like the one below leave me at a loss:

    "Doctors and hospitals in the fee for service world should not need to bill providers who are paid a fixed fee for members. This being the current practice. Instead they should be able to directly bill the single payer. "

    Who/what are the "providers?" What do they provide? Who is paying the fixed fee? Who is the "they" in the fourth sentence? Who is the single payer? A person? Do you mean a Single Payer system/plan?

    I'm sorry to be obtuse, but there's a whole lot of jargon in there. It is true that you explain some of these terms in the preceding paragraphs, but writing "providers" when you might mean either health-care providers or insurance providers - or writing "single payer" when you might mean either a state-run system or some hapless individual - creates confusion which makes it difficult to extract your meaning.

    So far as this layperson can tell, the thinking here is good. But your theories would be far easier to follow if you took a bit more time to edit your writing before firing it off. Ideally, I would think you'd want your readers to be able to explain some of these ideas in casual conversation, and in order for that to happen, you might want to try writing with the average non-industry non-wonk in mind.

    p.s. the boldface is useful.
    Reply to this
  • 11/27/2008 7:38 PM ohio pediatrician wrote:
    Capitation was a disaster---it made salaried docs complacent and nonproductive. Small practices lost money because of small panel sizes, put more at risk if there was even one catastrophically ill patient.

    One problem with the current system is that patient "risk" is the cumulative effect of lifestyle, environment, education, behavior, and previous health care experience. Improving health care outcomes means that all of the factors determining health must be addressed, and good outcomes for the general population will take at least one generation or 30 years. The current insurance system, including capitation, divides health risk into annual increments, with patients being tossed around like hot potatoes so that no one system is "stuck with" the high-risk patient.

    I went into medicine for the joy of helping people. However, after working 80 hour weeks, week after week, and watching my income plummet below $50,000 while that of insurance executives rose to levels I will never see in my lifetime, I wonder how much longer I can devote to this service profession.

    Excellent comments, except that the salaried docs that I know are not really complacent or non-productive. Other motivations work as well as profit.

    The only way that I can think to improve lifestyle is regular medical care. If some one gives you good advice and you don't follow it then it is you problem but most people in this country never even get the advice. It will take a generation which means that we need to start now.


    Reply to this
Leave a comment

Submitted comments are subject to moderation before being displayed.


 Email (will not be published)


Your comment is 0 characters limited to 3000 characters.