Paying for the wrong behavior and getting it

Why do so many proposals to fix our health care system completely fail to address the twin problems of rising health care costs and uneven quality? Other items that we purchase have improved in quality and many have come down in cost. We have not seen the same results for our health care purchases.

For years we have depended on the insurance industry to manage one of our most significant costs, with dismal results. We have turned over to the insurance industry our most important business tool - the selection of what we want to purchase and how much we are willing to pay, because somehow we think they know best. There is enough data now for us to know this is not the case.

Furthermore, there is abundant data on which services we should value if we want lower cost and higher quality. By looking at the Medicare population researchers have found that the more primary care physicians there are per 10,000 enrollees the better the quality and the lower the cost (See research paper). In fact what these researchers found was that the more you spend the worse the results.

The cost benefits of quality are well known, so this is no surprise. What is a surprise is that with this knowledge we continue to leave the purchasing decisions to insurance companies who have proven for 30 years that they cannot control cost or improve quality. We also pursue regulations and policies that prevent physicians from providing cost effective alternatives to our present broken system. This has to change and the change has to be led by those of us who are paying the bills.

It is no longer acceptable to pay physicians for activity. Put a patient in the hospital where they are exposed to high risks of medical errors and the physician gets paid along with hospital. Preventing the hospitalization pays much less. Which behavior do we want? Why do we pay more for the behavior we do not want?

As long as we pay a lot for a behavior we are going to find plenty willing to behave in that manner. We have to decide what behaviors we want from our health care system and start paying well for those and less for the behaviors we do not want. This is the approach we take with employee compensation and it is time to apply the same incentives to physician pay.