Capitation and Managed Care Return as Global Payments and Accountable Care Organizations

Massachusetts covered 97% of citizens under its requirement that residents purchase health insurance. The state assists residents with health coverage based on household income. However, Massachusetts doesn't like the cost. It plans to shift payments from fee-for-service. NYT reported:

Instead, primary care physicians, specialists and hospitals would group themselves into networks that would be responsible for a patient’s well-being and would be compensated with a flat monthly or annual fee known as a global payment.

Global payments, it is thought, would reward health care providers for keeping their patients well rather than for merely treating their ailments. If the cost of treating a patient was less than the global payment, the provider networks, called accountable care organizations, would keep the difference as profit.

It is thought? America did this in the 1990's. It was called capitation and payments were made to managed care organizations. It produced widespread dissatisfaction by those covered. Eventually, businesses moved away from managed care due to employee complaints.

Note Massachusetts' first step covered the vast majority of people. The second step may control costs via a "new authority that would be created to establish and oversee the new payment system." That's the Obama game plan, require people to buy health insurance and control payments via MedPAC, an unelected body.

The House Ways & Means Committee read their health reform bill. I noted from the CSPAN program that taxes associated with reform begin in 2011, while reform itself doesn't start until 2013. Watch Massachusetts. They are the model.

Don't believe politicians who say they'll improve on capitation and managed care.

Global payments are hardly a new idea, as the concept closely resembles the capitation model that incited a backlash by consumers who accused health maintenance organizations of skimping on care. But members of the Massachusetts commission said their plan would offer financial incentives for performance that would transform physicians into care coordinators rather than gatekeepers.

Financial systems for performance? Is this is addition to the incentive to provide care below the capitated payment? What will be incented? The last round saw:

Per-member/per-month visits, pharmacy utilization, specialty referrals, inpatient days, ER visits, and charges per case or visit.

It produced widespread physician resentment and a public outcry about perceived perverse incentives. Politicians promise better measures, but the result will be the same. Doctors and hospitals will focus on maximizing payment, not quality.

Recall how incentive pay imploded Wall Street. They packaged investment junk for the public. Goldman Sachs bet against the products held by their customers. It made them billions. Goldman is as unpopular as managed care at the moment.

Don't forget the decade of widespread stock option backdating by corporate executives. Stock options were the "most pure form" of incentive compensation. Yet, nearly 30% lied, cheated or stole.

Incentives distort, a clear theme in high quality care communities. Doctors are paid a fair salary and supported in a laser like focus on quality.

Global Payment and Accountable Care Organizations are repackaging, simple bait and switch. You can buy it. I'm not.

Update 8-3-14:  Restricted provider networks are back and people aren't happy, but there's no employer to complain to and the government doesn't listen to people..