Monday, October 5, 2009

Reducing payments to physicians

In today's Wall Street Journal there is a commentary piece about a provision of the Baucus bill that would cut payments to any physician in the top 10% of costs to the program by 5%. What type of incentive would this set up?

Well, interestingly, even if every physician cut their costs, 1 in 10 doctors would still be in the top 10%. So, this starts off as a bit of an odd idea when it comes to potential implications. While a more complicated rule might be difficult to interpret, a more complicated rule might also be more fair. For example, why not penalize the top 10% of physicians based on costs it they exceed some level of cost growth over the previous year but not otherwise. That way, on the outside change that all physicians cut their patients' utilization by 5% in the same year, the top group would not be penalized for already having been very expensive when their own behaviors made such a difference.

The other problem with a system like this is that it is not clear which services would go unused when physicians (in concert with their patients, hopefully) try to reduce health care utilization. In short, previous studies suggest that when there is a cost-based pressure to control expenditures, a mixture of care that would not be considered essential as well as care that might be deemed necessary are cut. So, in physicians' rush to control costs to avoid the penalty, in the end the physicians who remain the highest sources of expenditures will still be penalized and in the process of reducing care they may forego some very important and necessary services.

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