October 11, 2015

End-of-Life Care

In the Thursday, August 13, 2009, Wall Street Journal , I read an article entitled “End-of-Life Provision Loses Favor.” In this article, the reporter Janet Adamy refers to a provision on the House of Representatives version of the health care reform legislation which directs Medicare to pay physicians for sessions with patients in which they counsel patients on the need for living wills, health care powers-of-attorney, and other aspects of end-of-life planning. On the one hand, the provision is one way to get doctors to take the time to get patients to do end-of-life planning, but as Ms. Adamy points out:

“Opponents say the provision shows that architects of the health-care overhaul want to ration seniors’ care.”

Care rationing is highly controversial, and probably could not sustain the support of a majority of Americans.

How did health care reform proponents end up in this situation?

The answer is relatively simple, and the solution is also relatively simple conceptually, but, as will be evident, it is unclear whether elected officials have the political will to adopt the solution.

The problem with Medicare, Medicaid, and, for that matter, most private insurance is that these systems are designed as fee-for-service systems with payments approved on a transaction-by-transaction basis. Each system has highly-detailed rules on what will be reimbursed, and each system’s reimbursement rules and how they are administered vary significantly. The entire fee-for-service methodology, whether it is administered by the government or by private insurance companies, essentially creates a system of micromanagement of a very sensitive and private physician-patient relationship.

A much better alternative methodology is to group all providers who deliver care to a defined group of Americans into accountable care organizations, to pay a lump sum to the organization based on targeted cost and quality objectives, and to reward higher quality combined with lower cost through higher payments. In such a system, the organization decides how to pay individual physicians, and, most likely, physicians are regulating the physician-patient relationship, not government officials and administrators or insurance administrators. In such a system, outsiders get out of the way of the physician-patient relationship. This concept has been extensively studied and refined by my good friend Dr. Elliott Fisher of the Dartmouth Health Policy Institute.

Cost and quality are policed, based on overall results, not rules governing individual transactions, which, over time, get manipulated by the physicians and other providers.

There are practical implementation challenges with what I have described, such as determining how accountable care organizations might be created, how to measure quality, how to set cost targets based on the risk levels of populations, and how to create incentive payment schemes. However, these challenges are far easier to manage and have far greater potential to take down cost than having a micro-managed government-run system, or a system run by insurance companies.

Government’s role should be to set budgets and to identify standard-setting bodies such as the Agency for Healthcare Research and Quality organization or the National Committee for Quality Assurance to define quality metrics, and to retain actuaries that can help define the risk level of the population being served.

Private insurance companies can be third-party administrators and can help provide catastrophic coverage for each population, so that the large cases that unexpectedly occur within a population can be managed better.

Going back to the issue of end-of-life counseling, in the system I have described, doctors would routinely do end-of-life counseling because it would reduce costs and improve quality of care, which would result in higher incentive payments to the system in which they operate. They would not be micromanaged, and the individual patients would not feel like the government or any private insurance company was telling them what decision to make.

Why is this difficult for politicians to implement?

  • Politicians have a great deal of difficulty creating a regulated system and leaving it alone. Invariably, they learn about a tragic mistake, or a situation that appears to be a mistake, but is not one, and they want to intervene.
  • Elected officials have a difficult time giving up on micromanagement of private sector transactions that they have been micromanaging for several decades. Jobs would be lost, and some sectors of the public would criticize for not overseeing “Waste” and “fraud” sufficiently closely.
  • Even though the system I propose has been used successfully by Kaiser-Permanente and would be great for quality of care, physicians who have made a great living in the fee-for-service system would undoubtedly lose income and would lobby actively to resist change.

Nevertheless, the system I propose is far more likely to reduce health care cost increases and to improve quality and expand coverage than any other. In addition, it is more likely to avoid the kind of wrenching distraction this end-of-life counseling provision has created.