Most Americans agree that the cost of medical care has gotten out of hand in our country.
Health care spending in the United States increased by 9.7% in 2020, reaching $4.1 trillion (or $12,530 per person) and representing 19.7% of the country’s gross domestic product. The federal government spent nearly $1.2 trillion on health care in fiscal year 2019. Of that amount, Medicare claimed about $644 billion.
If our country wants to make coverage affordable and improve clinical outcomes, we need to start breaking the unwritten rules of health care.
An unwritten rule we follow is that the best way to pay doctors is transactional. Transactional payments are the basis of almost all financial interactions. A seller provides a good or service in exchange for payment. That’s how we hire piano teachers, rent apartments, and procure Girl Scout cookies. It’s also how we now pay for 95% of doctor visits.
Transactional payment for health care made sense in simpler times when doctors could only provide a fraction of the “products” and “services” they provide today, and patients trusted that they would always receive the best care available at reasonable prices.
These days, researchers and policy experts point out that 25% of the $4 trillion spent annually on health care in the United States is wasted (much of it on unnecessary or ineffective treatments). This is an inevitable and well-documented consequence of quid pro quo payments in health care. But the damage caused is not limited only to the American economy. Often overlooked are the ways in which transactional payments harm patients, physicians, and the physician-patient relationship.
The simple fact is that transactional payments compromise patient health. With transactional reimbursements, physicians are paid to solve specific, identifiable problems. When a person has a heart attack, the cardiologist is paid to perform angioplasty. When a kidney or lung fails, the surgeon is paid to transplant an organ.
These are remarkable, life-saving procedures, but doctors in the 21st century can do something even more remarkable: With preventive screenings, frequent check-ups, and the right medications, they can help prevent heart, kidney, and kidney failure. pulmonary.
How do you pay someone for something that didn’t happen (like a heart attack or stroke)? As it stands, a primary care physician must file an insurance claim for each step of the process. To help a single patient effectively manage or prevent even one chronic disease, a physician must file dozens of claims. When you consider that 133 million Americans suffer from at least one chronic disease, it’s clear that paying doctors transactionally is a costly mistake.
Transactional payments also hurt doctors. In the 21st century, insurers have sought to reduce health care costs by lowering payments to physicians and implementing strict prior authorization requirements. In a transactional payment model, these are the most powerful tools a payer has to reduce medical expenses and recall unnecessary services.
In turn, doctors have been forced to see more patients a day to maintain their income, and they spend up to half of each day on insurance-related tasks, seeking permits and document writing.
Under these circumstances, it is no wonder that doctors became dissatisfied, frustrated and tired (the classic symptoms of “burnout”).
And perhaps most importantly, transactional payments erode the doctor-patient relationship. In a 2019 survey, doctors said gratitude and connecting with patients were the most rewarding aspects of medical practice. And yet, 87% of physicians say patients trust them less today than they did ten years ago.
The federal government and private insurance companies have attempted to address physician reimbursement issues with “pay-for-value” and “pay-for-performance” incentives. These programs have failed to make much of a difference because they simply replace one form of transactional payment with another.
Instead of paying physicians per visit or per procedure, so-called value-based models reward physicians for meeting dozens of preventive screening goals and other “high-value” criteria. Few of these programs have changed clinical quality.
Here’s how a transformational, relationship-based Medicare reimbursement system could work:
• Individuals enrolled in Medicare choose a primary care physician as their lead physician.
• The Centers for Medicare and Medicaid would then pay that physician a one-time upfront fee to provide one year of medical care to those patients (instead of a one-time payment after each medical service).
• The physician’s base compensation would depend on (a) the number of Medicare enrollees they serve and (b) the complexity of each patient’s current medical conditions, which helps predict the amount of care they will have need.
• Each primary care physician would be eligible for additional payments each year, based on patient experience. At the end of the year, enrollees were asked a series of questions about their doctor’s impact over the previous 12 months: Has the doctor helped you live a healthier life? Has it helped you make good medical decisions? Do you enjoy your relationship? Do you trust your doctor’s recommendations?
Benefits of this transformational payment model would include:
• Greater satisfaction. Because doctors would no longer be paid for each service, they could spend a lot less time on paperwork. Instead of those unsatisfying bureaucratic tasks, doctors could spend that time doing what matters: helping their patients prevent and manage their illnesses.
• A significant difference. Transformational payments shift the incentives from what a physician does to the impact a physician has on the patient. Rather than evaluating physicians on a litany of individual actions and clinical metrics, the transformational model rewards physicians for the positive impact they have on the lives of their patients. It is, after all, the reason people choose to become doctors in the first place.
Even with an incentive payment equal to 10% of a physician’s salary, the incremental cost of the program would be relatively small. This is because the income of primary care physicians is only a tiny fraction of total health care expenditures. And the potential return on investment would be huge. By moving from transactional to transformational payments, patients could better manage their chronic conditions, lead more productive lives, and reduce their risk of heart attack, cancer, or stroke.
Undoubtedly, the debate would be about the written rules and the implementation of the program. But it’s time for Congress to put partisanship aside.
Otherwise, we can expect our country’s health problems to get worse with each passing year.
Robert Pearl is a Clinical Professor of Plastic Surgery at Stanford University School of Medicine and on the faculty of the Stanford Graduate School of Business.