A frequent topic on this blog has been the demise of primary care under our third-party payor-dominated health care finance system. Richard M. Hannon, a Blue Cross-Blue Shield executive, provides a particularly lucid explanation in this recent WSJ op-ed on how one of the unintended consequences of Medicare was the negative impact it had on the delivery of primary care to patients:
Medicare introduced a whole new dynamic in the delivery of health care. Gone were the days when physicians were paid based on the value of their services. With payment coming directly from Medicare and the federal government, patients who used to pay the bill themselves no longer cared about the cost of services.
Eventually, that disconnect (and subsequent program expansions) resulted in significant strain on the federal budget. In 1966, the House Ways and Means Committee estimated that by 1990 the Medicare budget would quadruple to $12 billion from $3 billion. In fact, by 1990 it was $107 billion.
To fix the cost problem, Medicare in 1992 began using the "resource based relative value system" (RBRVS), a way of evaluating doctors based on factors such as education, effort and specialized training. But the system didn’t consider factors such as outcomes, quality of service, severity or demand.
Today most insurance companies use the Medicare RBRVS because it is perceived as objective. As a result of RBRVS, specialists-especially those who perform a lot of procedures-do extremely well. Primary-care doctors do not.
The primary-care doctor has become a piece-rate worker focused on the volume of patients seen every day. As Medicare and insurers focused on trimming the costs of the most common procedures, the income and job satisfaction of primary-care doctors eroded.
So these doctors left, sold or changed their practices. New health-care service models, such as the concierge practice and the Patient-Centered Medical Home, drew doctors away from the standard service models that most patients rely on for coverage.
All of these factors have contributed to a fragmented, expensive health system with most of the remaining doctors focused on reactive instead of preventive care.
The solution to the problem is making primary-care physicians the captains of the ship. They must have the time and financial resources necessary to take care of their patients, tailoring care to patients’ specific conditions and needs. And they need the data to track their patients’ results, so they can guide patient progress. They will then be able to slow (and sometimes reverse) their patients’ illnesses, keeping them out of hospital emergency rooms and specialists’ offices. The end result: reduced costs and improved quality of care.
So who really killed primary care? The idea that a centrally planned system with the right formulas and lots of data could replace the art of practicing medicine; that the human dynamics of market demand and the patient-physician relationship could be ignored. Politicians and mathematicians in ivory towers have placed primary care last in line for respect, resources and prestige-and we all paid an enormous price.
The pervasive effect of the now engrained third-party payor system of health care finance is that many patients do not feel any responsibility for their health care expenses. As Arnold Kling has observed, why do we think that that we cannot possibly afford high-quality health care if we have to pay for it individually, but we can afford it if we pay for it collectively?
as a primary care internist i agree with this description. to answer the question, “who did this?”, it was on ronald reagan’s watch, about 1987, when u.s. law changed from capitalist to socialist as follows: 1985, doctor wants 100$, medicare pays 60, grandma, the capitalist, pays the doctor 40 and health care is market based.
by the time reagan left office the doctor wants 100, medicare DICTATES he will take 66 and if he bills for the difference, is subject to 10,000$ fine, per incident, AND imprisonment–the socialist takeover of health care is born, nurtured by W bush’s addition of the government paying for grandma’s medicine—by the time barack got there it was small potatoes to convert the remaining crumbs to government control.
nov 11 charlie rose had feldstein and walker discussing the debt and deficit commission and both addressed the need for medicare to be “fixed” by restoring it to a minority insurance policy with grandma’s savings or lack thereof deciding how wonderful her care would be–gee, i miss what we all thought ronald reagan stood for–wish HE had thought of this.
Dr. Tom, I couldn’t agree with you more that there is more than enough blame to go around both major political parties in contributing to the fractured health care finance system.
As you know, employer-based, third-party payor health insurance took hold during World War II because it was initially exempted from gross income as a way to circumvent wartime wage and price controls. After the war, marginal income tax rates were high and individual medical expenses were tax deductible, so at least some rational incentives were returned to the medical marketplace.
But all this changed in 1986 when the Reagan Administration made concessions to achieve bipartisan tax reform. Individual medical expenses were no longer deductible until they reached 7.5% of gross income, which virtually eliminated individual incentives in the medical marketplace. Not surprisingly, everyone was incentivized after tax reform to move all medical expenses to third-party-payor health insurance. As a result, individual out-of-pocket expenses in the health care market dropped from 22% in 1985 to less than than 10% of the market now.
So, in essence, the Reagan Administration horse-traded personal tax deductibility of medical expenses away, but figured that was acceptable because at least employer health insurance remained a tax-free benefit. I’m sure if we could ask him now, President Reagan would tell you that he expected a future Congress would fix such perverse incentives after the dust settled on the benefits of tax reform. But alas, that never happened and probably never will.