Problems with Healthcare Payment Systems

The following is a selection of published and unpublished papers and presentations describing problems with current healthcare payment systems. If you have papers or presentations that you think should be included here, please email them (or links to them) to us.

"Aligning Payment Policies With Quality Improvement," in Crossing the Quality Chasm: A New Health System for the 21st Century, Institute of Medicine, 2001.
"...financial barriers embodied in current payment methods can create significant obstacles to higher-quality health care. Even among health professionals motivated to provide the best care possible, the structure of payment incentives may not facilitate the actions needed to systematically improve the quality of care, and may even prevent such actions. For example, redesigning care processes to improve follow-up for chronically ill patients through electronic communication may reduce office visits and decrease revenues for a medical group under some payment methods. Current payment policies are complex and contradictory, and although incremental improvements are possible, more fundamental reform will be needed over the long run."

"When The Price Isn't Right: How Inadvertent Payment Incentives Drive Medical Care," by Paul B. Ginsburg and Joy M. Grossman, Health Affairs, Web Exclusive August 9, 2005, pp. 376-384.
"Unintended overpayment of some services, in combination with other market factors, is driving increased use of expensive care, which in turn could be an important driver of health care cost trends. Reimbursement systems are highly dependent on provider charge data that rarely provide accurate and up-to-date indicators of relative costs. As a result, newer services, in which productivity is increasing over time, tend to be more lucrative. As the largest payer, and one whose reimbursement policies are followed by private insurers and Medicaid programs, Medicare can address this issue by taking steps to make its prospective payment rates reflect relative costs more accurately."

"Primary Care - Will It Survive?" by Thomas Bodenheimer, New England Journal of Medicine 355:9, pp. 861-864.
"Serious effort is required to develop a national primary care payment policy. Public policy on primary care does not exist; the fortunes of primary care are dictated not by the health care needs of the country but by a specialty-rich, quantity-based reimbursement system. Few legislators, particularly among those responsible for the trend-setting Medicare program, are aware that primary care is struggling. An educational campaign is needed — to explain the nature and causes of the threats to primary care's survival; to provide well-documented information on the benefits of primary care, focusing on the potential for a strong primary care–based system to control health expenditures; and to offer concrete proposals for reforming both primary care at the microsystem level and the payment scheme at the macrosystem level."

"Providing Care at the End of Life: Do Medicare Rules Impede Good Care?" by Haiden A. Huskamp, Melinda Beeuwkes Buntin, Virginia Wang, and Joseph P. Newhouse, Health Affairs, Volume 20, Number 3, May/June 2001.
"In this study we assess problems faced by several types of providers delivering end-of-life services under fee-for-service (FFS)Medicare. We identify important ways in which Medicare benefit design and financing rules both facilitate and create barriers to effective end-of-life care...Recommendations for changing Medicare policy: (1) Adopt a patient-level outlier policy for high-cost hospice cases; (2) Explore the need for rebasing hospice rates; (3) Pay a higher per diem for the first and last days of a hospice stay; (4) Estimate the net cost of adding some key services; (5) Consider the interaction of hospice per diem rates and Medicare drug benefit; (6) Engage in further study of key issues."

"In Medicare, Let's Start Paying for What We Want," by Stuart Guterman, Baltimore Sun, February 16, 2007.
"We need to recognize that Medicare pays for "performance" now: highly variable performance that fails to meet our standards or to justify the tremendous amount we spend on it. Medicare needs to move from the current model, under which it pays for "more" and "more complicated," to a new model in which it pays for "better" and "more valuable." In other words, if indeed you get what you pay for, we ought to start paying for what we want."

"The Implications of Regional Variations in Medicare Spending. Part 1: The Content, Quality, and Accessibility of Care," by Elliott S. Fisher, David E. Wennberg, Therese A. Stukel, Daniel J. Gottlieb, F.L. Lucas, and Etoile L. Pinder, Annals of Internal Medicine 2003:138, pp. 273-287.
"Regional differences in Medicare spending are largely explained by the more inpatient-based and specialist-oriented pattern of practice observed in high-spending regions. Neither quality of care nor access to care appear to be better for Medicare enrollees in higher-spending regions."

"The Implications of Regional Variations in Medicare Spending. Part 2: Health Outcomes and Satisfaction with Care," by Elliott S. Fisher, David E. Wennberg, Therese A. Stukel, Daniel J. Gottlieb, F.L. Lucas, and Etoile L. Pinder, Annals of Internal Medicine 2003:138, pp. 273-287.
"Medicare enrollees in higher-spending regions receive more care than those in lower-spending regions but do not have better health outcomes or satisfaction with care. Efforts to reduce spending should proceed with caution, but policies to better manage further spending growth are warranted."

"Regional Variations in Health Care Intensity and Physicians’ Perceptions of Care Quality," Letter from John C. Peirce and response from Brenda Sirovich and Elliott S. Fisher, Annals of Internal Medicine 2006:145, pp. 788-789.

"Variation in the Tendency of Primary Care Physicians to Intervene," by Brenda E. Sirovich, Daniel J. Gottlieb, H. Gilbert Welch, and Elliott S. Fisher, Archives of Internal Medicine 2005:165, pp. 2252-2256.
"Varying rates of health care spending across the United States reflect the underlying tendency of local physicians to recommend interventions for their patients."

" Is Technological Change In Medicine Always Worth It? The Case Of Acute Myocardial Infarction," by Jonathan S. Skinner, Douglas O. Staiger, and Elliott S. Fisher, Health Affairs, 2006:25, pp. w34–w47.
"We examine Medicare costs and survival gains for acute myocardial infarction (AMI) during 1986–2002. As David Cutler and Mark McClellan did in earlier work, we find that overall gains in post-AMI survival more than justified the increases in costs during this period. Since 1996, however, survival gains have stagnated, while spending has continued to increase. We also consider changes in spending and outcomes at the regional level. Regions experiencing the largest spending gains were not those realizing the greatest improvements in survival. Factors yielding the greatest benefits to health were not the factors that drove up costs, and vice versa."

"The Primary Care-Specialty Income Gap: Why It Matters," by Thomas Bodenheimer, Robert A. Berenson, and Paul Rudolf, Annals of Internal Medicine 146, pp. 301-306, 2007.
"A large, widening gap exists between the incomes of primary care physicians and those of many specialists. This disparity is important because noncompetitive primary care incomes discourage medical school graduates from choosing primary care careers. The Resource-Based Relative Value Scale, designed to reduce the inequality between fees for office visits and payment for procedures, failed to prevent the widening primary care–specialty income gap for 4 reasons: 1) The volume of diagnostic and imaging procedures has increased far more rapidly than the volume of office visits, which benefits specialists who perform those procedures; 2) the process of updating fees every 5 years is heavily influenced by the Relative Value Scale Update Committee, which is composed mainly of specialists; 3) Medicare's formula for controlling physician payments penalizes primary care physicians; and 4) private insurers tend to pay for procedures, but not for office visits, at higher levels than those paid by Medicare. Payment reform is essential to guarantee a healthy primary care base to the U.S. health care system."