NCPA - National Center for Policy Analysis


July 30, 2009

To confront America's health care crisis, we do not need more spending, more regulations or more bureaucracy.  We do need to liberate every American, including every doctor and every patient, to use their intelligence, creativity and innovative abilities to make the changes needed to create access to low-cost, high-quality health care, says John C. Goodman, President, CEO and the Kellye Wright Fellow with the National Center for Policy Analysis.

One step that could achieve this goal is to free doctors, says Goodman.

Medicare pays for more than 7,000 specific tasks, and only for those tasks.  Blue Cross, employer plans and most other insurers pay the same way.  Notably absent from this list are such important items as talking to patients by telephone or e-mail, or teaching patients how to manage their own care or helping them become better consumers in the market for drugs.  Further, as third-party payers suppress reimbursement fees, doctors find it increasingly difficult to spend any time on unbillable services.  This is unfortunate, since it means that doctors cannot provide the type of low-cost, high-quality services that are normal in other professions. 

To make matters worse, providers often face perverse incentives, says Goodman.  When  they lower costs and raise the quality of care, their income typically goes down, not up.  

For example:

  • Geisinger Health System in central Pennsylvania gives heart patients a "warranty" on their surgeries.
  • Patients who have to be readmitted because of complications pay nothing for the second admission.
  • Whereas most hospitals make money on their mistakes, the warranty forces Geisinger's staff to provide higher quality care (to avoid readmissions) but lowers Geisinger's income from Medicare and other payers.

To change these perverse incentives, says Goodman:

  • Medicare should be willing to pay for innovative improvements that save taxpayers money.
  • And doctors and hospitals should be able to repackage and reprice their services (the way other professionals do), provided that the total cost to government does not increase and the quality of care does not decrease.

This change in Medicare would almost certainly be followed by similar changes in the private sector, says Goodman.

Source: John C. Goodman, "10 Steps to Free Our Health Care System," Brief Analysis No. 669, July 30, 2009.

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