THE COMING crisis is as predictable as it is worrying. Nearly a fifth of every dollar spent in this country is spent on health care. Without reform, that number will only rise as the baby boomers retire. Younger generations will suffer, as money is taken from building roads and educating children to paying for Medicare to cover boomers' health costs.
It should go without saying, then, that if two hip implants are functionally equivalent, surgeons should use the cheaper of the two. It should be obvious that people who do not need to languish in a health-care facility should be sent home to recover. But Medicare discourages coordination and thriftiness by handing providers a fee for every individual service each provides. Reshaping the way Medicare pays doctors could save money while improving care.
Yet waste scored a victory when Health and Human Services Secretary Tom Price decided to stop or scale back “bundled payment” experiments the Obama administration had begun.
The idea was to give hospitals a flat payment covering the duration of a procedure and recovery. The payment would be based on historical costs and care quality, building in some savings for Medicare. Hospitals whose costs came in under the fee could keep the difference. Those whose did not would lose money.
A February study in JAMA Internal Medicine found that an HHS-led bundled-care program for joint replacement surgeries, which required about 800 randomly selected hospitals to participate, saved $5,577, or 21 percent, per episode. Once the right incentives were in place, practitioners collaborated more, wasted less and started making some of the obvious decisions they were previously never asked to make. Surgeons selected the cheapest effective implants. Hospitals matched patients to the right recovery program, which is not necessarily intensive. The researchers found that applying the program nationwide would save the government $2 billion annually. HHS was set to expand its experimentation to cardiac and other forms of care.
Mr. Price officially nixed the expansion and scaled back the joint replacement program. This was disheartening but no surprise. In a letter he sent last year to the agency he now heads, he accused HHS of "experimenting with Americans' health" and exceeding the law by forcing hospitals to participate in bundled-payment schemes.
It should be clear: These programs do not illegally infringe on doctors’ freedom to practice. Doctors can still set a hip however they like, but if they take federal money, they have no right to dictate how the government pays them for it. Think about how much federal money will be wasted under Mr. Price next time you are stuck in traffic or your child’s school needs new books.
HHS officials now and Mr. Price last year argue that the government should test new payment models but that experiments should be voluntary. Yet only the most efficient providers would sign up; laggards with little interest in changing would continue to collect payments the old-fashioned way. This self-selection means that the government would not save much money and it would be impossible to run a scientifically sound test on how well bundled-payment programs drive efficiency.
Mr. Price should be expanding the programs he is trying to end.
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