According to this article in the NY Times, Massachusetts is getting crushed by health care costs. A vast majority of people in the state have some form of insurance, but the costs of providing health care in Massachusetts is expected to increase by 42% in 2009 alone.
Now Massachusetts is looking at whether it can regulate insurance premiums – i.e. limit what insurers can charge.
Massachusetts is also deciding whether or not to “bundle” payments for health care. In other words, if you need your appendix out, Massachusetts pays the provider one price to take care of you from beginning to end of treatment for that problem. If you get it done cheaper, the provider keeps the change. If there are complications or if expensive testing is needed, the provider pays out of pocket for whatever costs go above and beyond the flat fee. In theory, providers could lose significant amounts of money by treating high-risk patients who are prone to develop complications or bad outcomes.
This prepayment idea was also tossed about by Michael Canon at the CATO Institute.
On its face, the idea sounds good. But underneath the surface, I think that such a system encourages skimpy medical care and encourages cherry-picking of healthy patients.
Remember the HMOs that paid physicians a flat fee for taking care of all the patients? Remember fighting with physicians for appointments and testing because the physicians had to control costs? How will the system proposed in Massachusetts be any different?
In addition, I think there will be a lot of gaming of the system.
I was going to give examples of how the system could be gamed, but will hold off for now until more about the proposal is disclosed.
I continue to think that “prepayment” or “bundled payment” ideas will have an adverse effect on medical care.
Healthcare policy experts interviewed for the article hit the nail on the head:
Changes in payment practices will not be enough to slow the growth in spending, even when combined with other cost-cutting strategies. To truly change course, they say, the state and federal governments may need to place actual limits on health spending, which could lead to rationing of care.
“Really controlling costs requires just stopping spending,” said Stuart H. Altman, a professor of health policy at Brandeis University.