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Dr. Taylor Dickinson's articles and essays discussing his ideas on tax-preserved Universal healthcare...

Healthcare Reform's Achilles Heel

Posted: Fri, Oct 16, 2009

By Taylor Dickinson

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All current proposals for healthcare reform perpetuate a fundamental flaw. There is no sustainable fiscal link between the delivery of care and its funding. As originally conceived, when an insurance company elected to pool the health risk of patients, it simultaneously assumed fiscal responsible for the cost of delivering that care to its clients. In turn this contract relieved both patient and physician from this same fiscal responsibility. By pooling their risk patients could now reasonably expect access to whatever care they would need without monetary prejudice. These are the assumptions and agreements which formed the basis upon which all parties accepted the bargain. As a result both patient and physician could pursue quality care freed from consideration of its potential financial burden. But this bargain dissociated all parties from the economic realities of the medical marketplace. This arrangement fractured healthcare.

The inadequacies of the private insurance model were exposed as science broadened the range of effective medical therapy. An industry based on stable actuarial assumptions was an ill match for the steadily expanding universe created by medical science. To compensate, government introduced Medicare and Medicaid in an effort to protect the poor and the elderly. But medicine’s rudderless marketplace soon swamped this effort. Managed care fared no better. The failure to control cost despite sophisticated external management of the complex issues involved in delivering medical care once again underscores the principle that fiscal responsibility is ineffective when divorced from direct responsibility for patient care.

Today’s reform envisions various combinations of public insurance, insurance exchanges and co-operatives. All pool resources and then purchase services on behalf of clients. None can claim legitimate ownership of the services they supply to their insured. There is therefore nothing new in these proposals. When costs begin to exceed their budgets each of these new insurers will need to find ways to modify the original bargain. The cycle will repeat itself. To protect their own interests they will resort to basic techniques, familiar not only to America, but also to Canada, Europe, and Asia. They can reduce payment to providers, impose road blocks to delay access, ration the number of services that can be provided in any one time frame or flat out refuse to pay. These techniques are all negative. They reduce the availability of care. The savings ultimately come out of patient’s lives: longer waits for diagnostic tests or treatments and shorter visits with their physician. Their negative effect on outcomes will never be effectively measured.

The forgotten factor in healthcare reform is demand. Physicians ultimately respond to the needs of their patients. For patients, healthcare should protect life. This is their bottom line. Inevitably Science will unhinge reform. For example, through mapping of the human genome, science is poised to produce significant therapeutic advances. These, in turn, will precipitate change throughout medical practice. In an age of internet access and consumer awareness, this progress can neither be hidden, nor denied. Healthcare reform that is not predicated upon principles of adaptation to, and implementation of, change will face both economic and moral bankruptcy.

Government sponsored studies of best practices and outcomes as currently proposed are an attempt to influence the demand for care by circumscribing provider behavior. This would seem to be a laudable endeavor. But the manner in which its implementation is tied to economic objectives will determine its ultimate impact. The current emphasis on cost containment will likely lead to it becoming a force to congeal approaches to care, introducing yet another barrier to science and the ultimate betterment of life.

Successful healthcare reform can be measured in several ways. When all is said and done, did it stabilize or reduce healthcare’s portion of the GDP, did it maintain the availability and range of services, did it facilitate the incorporation of new technologies and treatments to provide our people with access to the best possible medicine? Did it achieve the goal of universal care? Moreover, as medicine is practiced, did it improve the healing of the sick, extend life, and relieve pain? There is little in the current approach to reform that would suggest any one of these objectives will be met. Universal care achieved while blinded to the basic flaws in our system seems a poor answer to our current need for change.

Advantages of a Physician Driven Option

A lasting solution to healthcare reform requires that we go beyond our desire to vent our frustration upon a broken system. The strength of medicine lies in our physicians. Its weakness lies in its fragmented incentives. The solution requires that we rescue the systems integrity.

The path to a functional medical marketplace leads us to unexpected places. It begins with the need to examine an apparent paradox: physicians are the solution to successful cost control. Conventional wisdom accepts that physicians are the prime reason for our inability to control cost. It is therefore difficult for us to contemplate the idea that it is not the character of our physicians that we should be questioning, but the configuration of their marketplace. It is the fracture of the economic integrity of that market that we must repair. This begins when we offer physicians the opportunity to create a physician driven health-care reform. But how is this to be done?

It begins with the formation of risk-assuming physician partnerships large enough to assume full fiscal responsibility for the care of their patient subscribers. Furthermore, they must forego fee-for-service and develop a reward system that is focused upon excellence of patient care achieved with fiscal responsibility. In this new arrangement, the medical and financial incentives of the group as insurer and its physician-partners as care givers are all in alignment. The diversity of incentives goes away.

The government can play a pivotal role in this transformation. Out of the current funds being budgeted for health reform, set aside $2 billion to finance the formation of at least one such physician-owned health plan in each state. This would establish a basis for repairing the distortions in the medical marketplace.

By uniting fiscal and patient responsibility within one organizational structure the objectives of reform become the legitimate focus of these new entities. Elimination of fee-for-service further concentrates the group’s effort upon the organization of the delivery of care. They no longer face the expense of elaborate billing systems while the individual providers are freed from the need to generate their own income. Individual success becomes tied to that of the organization.

Electronic medical records become a necessity. Groups must track their activities, both to identify ways to control cost and to assist in the development of new programs. The elimination of obvious waste and reduplication of effort will be a mainstay of their operation. Their practice will need to be economically efficient. This technology will also allow outcomes to be tracked. Part of the success of these groups will depend upon their transparency. Public knowledge of outcomes is critical to this objective.

The real advantages for healthcare reform emerge as these groups begin to develop program approaches to care. Let’s use diabetes as an example. The group assembles one team with all the necessary resources and expertise and charges it with the responsibility to care for all diabetic patients. Their success is measured both by improved outcomes and reduction in overall cost of the program. Their reward is based upon that success. This same approach can be applied to hypertension, stroke, or any other clinical problem that requires multiple areas of medical expertise. Healthcare now acquires a synergistic approach to cost, outcomes and personal reward.

As they become more sophisticated these groups will begin to identify epidemiological situations among their patients and community which adversely affect their financial resources. It will be in their interest to address these situations even though they are not of immediate concern. Reform then acquires the potential to become an ongoing force for social change.

Because physicians’ constant concern is the quality of their own performance they will seek to eliminate redundant or outmoded services and to expeditiously incorporate new therapies or techniques. There will be a constant effort to revitalize their practices in order to make financial room for each new scientific advance. Physicians by nature seek the cutting edge. They will need to reconcile this to their own bottom line.

As an insuring agent these groups will be eligible to compete for contracts within the context of this current reform. To survive they must be at least as economically efficient as their insurance competition. Medicare, however, presents a different economic challenge. Continued fee-for-service in this area would not serve a useful purpose. It would be worth considering two alternatives. Medicare could enter into full risk contracts with these groups and thus shift the fiscal responsibility onto the physicians, or more realistically, allow these groups to offer Part B coverage to Medicare recipients. The same factors which will produce cost savings in private insurance will now apply to this market. The responsibility for controlling pharmaceutical cost should, however, be shared between physician insurers and Medicare. This is still too unwieldy a problem not to require Medicare to share in its risk.

Our healthcare system is seriously flawed. Utilizing the profession as the engine for change would be a uniquely American solution. Because this proposal utilizes the principles of competition it can be viewed as an adjunct to existing proposals. This path provides an alternate approach to reform that can be allowed to mature while the mainstream reform proceeds. It achieves more than just savings, it lead us to an effective reorganization of medicine. It will repair the fracture.

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