In the debate and discussion of methods of financing high quality medical care is the daunting challenge of the ever-rising cost of care. While some may blame the insurance companies for excessive rate increases, the reality is that no matter who pays for medical care, be it insurance companies with private or commercial clients; government or taxpayers with Medicare, Medicaid (Medi-Cal in California), or SCHIP (Healthy Families in California); or individuals directly (those who do not purchase health insurance and pay cash for services); medical care is expensive.

The State of Massachusetts is discovering this reality in their experiment to mandate that everyone in the state have medical insurance. In this article in the New York Times, state officials speak about ways to limit the cost of medical care. That state spends 33 percent more for medical care than the national average.

According to the NYT article, “They want a new payment method that rewards prevention and the effective control of chronic disease, instead of the current system, which pays according to the quantity of care provided…The commission is looking at various options, but all would do away with the fee-for-service system, which provides perverse incentives by paying physicians and hospitals for each patient visit. The changes under consideration include reimbursing for episodes of care rather than individual visits and bundling payments to groups of providers who would together take responsibility for a patient’s health.”

Under our current system doctors and hospitals earn more money the more services, treatment and procedures that they do to diagnose and treat a patient. The more they do, the more they earn. What we know is that doing more does not always result in better outcomes. The idea of “reimbursing for episodes of care” means that a doctor or hospital would be responsible for all of the care and treatment of a specific illness. It is easier to apply this to “acute” illnesses (e.g., heart attack) where all of the treatment is provided in a single setting. The idea of reimbursing for episodic care is gaining traction. This article in the New England Journal of Medicine describes the idea in more depth.

The idea of rewarding medical providers for the care they provide, rather than for the procedures they perform, is not new. HMOs were introduced in the 1990s and actually lowered the cost of medical care. Consumers revolted however and did not want access to specialists limited. Consequently we have had run away inflation spending on medical care. Let’s hope this approach works this time.