Health care is changing, not necessarily for the better

Whatever you think of Obamacare, the U.S. health care system before Obamacare was a mess. Obamacare, the Affordable Care Act, is an attempt to straighten it out. So said Dr. Michael Richards, speaking to the New Mexico Workers’ Compensation Association. Richards is Executive Physician in Chief of UNM Health Systems – one of the the leaders responsible for moving New Mexico’s health care system into the new century.

As Richards spoke, the doctor sitting next to me was muttering. This transformation is going to be hard on doctors, especially those in private practice.

The problem, as we hear often, is that the US spends more than twice as much per patient as other advanced countries, but our outcomes are worse, our error rates are among the highest, and alarming numbers of Americans have little or no access to services.

The ACA addresses three goals, Richards said. These goals conflict with each other, so regulatory processes are needed to keep them in balance.

First is insurance reform, especially to improve access by abolishing the limits for people with pre-existing conditions. This is good for those patients but it adds cost to an already costly system.

Cost control is essential. Sobering numbers: According to Richards, in New Mexico, for those insured through the new exchanges, the average cost per patient is $6181 per year. The average premium, after subsidies, is $120 per month. By simple math, that’s $1440 per year, which means $4741 is being paid by someone other than the consumer — you and me, one way or another.

Richards projects a gradual shift from the current fee-for-service model to a “capitation” model, in which the primary care physician gets a certain amount of money per patient. This changes the doctor’s incentives: he will want to save money by avoiding errors and unnecessary procedures. The change also burdens the doctor with variables outside his control, like the patient’s lifestyle choices. No wonder my doctor friend was muttering.

The third goal is quality and outcomes – measuring results.

When these three goals intersect, doctors in private practice will want to look good by being able to report success. Therefore they will prefer to avoid treating the sickest patients who need services the most. Those patients will increasingly rely on public facilities like UNM.

Richards predicts New Mexico’s regional hospitals will increase their focus on urgent care and outpatient treatment, leaving complicated medical care to centralized facilities like UNM. That looks logical: expertise, specialization and high-tech machinery will be concentrated in one centralized location.

The presentation didn’t address other aspects of this systemic change, like the role of medical liability, the logistics of transporting patients, or the inefficiencies in how the system is financed. These and other factors will affect New Mexicans’ access to health care, especially in the smaller communities.

But if capitation is really the future of health care, what will we need insurance companies for?

In the current system, the insurance company is the instrument of cost control, especially under managed care. While insurers today have less control over whom they will cover, they still have significant control over what services they cover and how much they pay.

Insurance companies are also the risk-takers. They absorb the risk of covering high-cost patients by also insuring healthy patients.

In a capitated system, the primary care provider gets a fixed amount of money per patient and has to determine how to allocate it. That sure looks like risk management to me.

If we’re really moving in the direction Richards predicts, the dividing line between the insurer and the primary care provider becomes rather fuzzy. The new hybrid looks a lot like a combination of medical group practice and insurance company. We’re only beginning to find out what that approach will do to quality and outcomes.

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