How Should Medicare Pay for Medical Care?
by John Goodman
May 11, 2011
Source: The Health Care Blog
There are basically five possibilities. To compare them, let:
S = each unit of service, or a package of services
P = the price of each unit of service, or the price of a package of services
Then the government can:
1. Dictate every service it will pay for and the price it will pay for each of them (fix S and P), leaving providers to compete only on amenities, including waiting times.
2. Dictate S, but leave providers free to compete on P, say, through a system of competitive bidding.
3. Dictate P, but leave providers free to compete on what S they will provide for that price.
4. Initially fix S and P, but leave providers free to opt out, substituting different bundles of S & P as long as government’s cost goes down and quality of care goes up.
5. Initially fix S and P, but allow patients to opt out, managing a portion of the funds directly and making their own purchasing decisions.
Alert readers will recognize (4) and (5) as NCPA solutions, (3) as the Rivlin-Ryan plan, and (1) as the status quo. But I’m getting ahead of the story.