Consumerism And Payment Reform: Seeking To Create A More Perfect Union

Abstract

Promoting market forces through “consumerism” is increasingly described as the silver bullet to the health care system’s dysfunctions. At the same time, many critics have challenged its applicability when consumers have little information but many urgent needs and when most decisions are made for them by others. Often the debaters rehash ideologies, instead of proposing practical solutions. In Customer-Directed Healthcare Reform with Episode Pricing, editor Doug Emery and contributors discuss how a “bottom-up market oriented strategy”—centered on organizing payment and care delivery around episodes of care—holds out the promise of being more patient-centered and cost-efficient and delivering higher quality. The book’s strength lies in bringing together contributors who describe in both theoretical and concrete terms how to make the payment system part of a solution, rather than an impediment to progress. However, far too many of its chapters idealize this strategy as the “one truth” and scapegoat “managed care orthodoxy.” At the core of the “episode orthodoxy” is a well-framed discussion of how to consider differently the three major types of risk in health care: probability risk (the uncertainty of unknown future events—the classical risk for which insurance is purchased); technical risk (the uncertainty associated with how a particular patient will fare once a condition is known—these are risks largely controllable by practitioners based on their expertise and organization); and choice-utility risk (the risk undertaken by consumers in choosing particular paths, which requires consumers to have information that they can act upon). Under fee-for-service (FFS) payment, providers avoid exposure to all three types of risk and therefore have shown little interest in managing any of them. Under capitation, providers are exposed to all three. The lesson of the 1990s—learned the hard way by many medical groups—is that very few providers were able to effectively manage probability risk, and many struggled with choice-utility risk, especially as direct-to-consumer (DTC) drug advertising flourished. There is no doubt that wider testing of episode-based pricing would be worthwhile. One of the merits of this book is its description of four attempts to do so: the Centers for Medicare and Medicaid Services’ Heart Bypass Center demonstrations; Anthem’s Cardiology Services Network; the Oxford Specialty Management program; and Utah’s Designated Service Provider program. Each program showed substantial financial savings and improvements in clinical quality; some showed improved patient experience. So why hasn’t episode pricing swept the health care market? The four programs constitute a grim picture of inadequate legacy information systems; consumer confusion; entrenched providers; regulatory concerns; and lack of consistent, committed leadership when the status quo appears “good enough.”