NEJM: Payment Reform — The Need to Harmonize Approaches in Medicare and the Private Sector (Peter V. Lee, J.D. et.al)

I agree with this article that one of the biggest problems with the health care payment system is fee-for-service, which basically pays doctors by the number of specific tests they perform. It does not take a stretch of imagination to see how such a system might be abused. From my understanding, both medicare and private insurance companies use this system to reimburse physicians. The article makes the point that although much attention has been on reforming Medicare, Medicare actually represents only 19% of total health care spending.

"Medicare must help lead the effort to change payment, but if we’re going to create a higher-value system overall, we need to change how all public and private payers reimburse for services."

The problem with fee-for-service is that it doesn't link health care to quality outcomes. As a result "fee-for-service payments undercompensate evaluation and management services as compared with procedures and technical services, do a poor job of providing incentives to clinicians for collaboration, do not improve efficiency...and do little to encourage wellness and prevention." This issue is talked about extensively by Atul Gawande in his book Better.

A few alternatives to fee-for-service are proposed in the article. There are as follows:
1) Bundled payments to cover the range of services related to a defined medical condition
2) Global fees to cover the entire cost of care (regardless of the setting) over an extended period for a person with a condition such as cancer
3) Extra payments for patient-centered primary care delivered through medical homes
4) The rewarding of Accountable Care Organizations for achieving the desired performance in caring for a defined population over the course of a year

According to the authors, these alternatives need to be individually piloted to determine which of these options will achieve the best results. The authors emphasize the importance of not only reforming medicare payments, but also private sector payments in order to promote needed change in health care delivery.

Payment Reform — The Need to Harmonize Approaches in Medicare and the Private Sector