http://healthaffairs.org/blog/2008/02/25/the-need-to-aggregate-what-should-come-next-for-medicare-physician-payment/?utm_source=rss&utm_medium=rss&utm_campaign=the-need-to-aggregate-what-should-come-next-for-medicare-physician-payment The Policy Journal of the Health Sphere Thu, 24 May 2012 07:58:29 +0000 hourly 1 http://healthaffairs.org/blog/2008/02/25/the-need-to-aggregate-what-should-come-next-for-medicare-physician-payment/comment-page-1/#comment-16439 Farmanux News Tue, 04 Mar 2008 23:02:30 +0000 http://healthaffairs.org/blog/2008/02/25/the-need-to-aggregate-what-should-come-next-for-medicare-physician-payment/#comment-16439 [...] Editor s Note: This is the seventh and last post in a Health Affairs Blog series on Medicare physician compensation and the Sustainable Growth Rate mechanism. Paul Ginsburg, Robert Berenson, Mina Matin, Jay Crosson, Frank Opelka, and Eugene Rich have contributed earlier posts. One of the advantages of coming last in a series of blog postings is that I can comment […] Read more [...] [...] Editor s Note: This is the seventh and last post in a Health Affairs Blog series on Medicare physician compensation and the Sustainable Growth Rate mechanism. Paul Ginsburg, Robert Berenson, Mina Matin, Jay Crosson, Frank Opelka, and Eugene Rich have contributed earlier posts. One of the advantages of coming last in a series of blog postings is that I can comment […] Read more [...]

]]> http://healthaffairs.org/blog/2008/02/25/the-need-to-aggregate-what-should-come-next-for-medicare-physician-payment/comment-page-1/#comment-16101 bfalit Tue, 26 Feb 2008 05:08:15 +0000 http://healthaffairs.org/blog/2008/02/25/the-need-to-aggregate-what-should-come-next-for-medicare-physician-payment/#comment-16101 This post is right on point. The focus of reform should be the proper alignment of providers' incentives. Optimal alignment arises with long-term (ideally life-long), comprehensive capitation agreements. Long-term agreements to provide all necessary medical care leave the risk-bearing provider with an incentive to maximize value over the life of the contract. Shorter and/or less comprehensive capitation agreements dilute the effect by skewing incentives. Shorter agreements encourage suboptimal preventative care and potentially delayed treatment. Similarly, carve-outs promote value maximization only within the realm of services contracted for by Medicare. Large numbers of enrollees and reinsurance are needed to make such long-term contracts feasible, as are good, risk-adjusted outcome data to determine the quality offered by competing providers. But most importantly, Medicare must use the most advanced system of formal risk adjustment available so that providers are encouraged to innovate and care for the sick. While there are many obstacles to the (exclusive or non-exclusive) use of risk-adjusted, long-term, comprehensive capitation agreements (which are beyond the scope of this post), it is worthwhile to recognize such a payment system as the ideal mechanism for aligning the financial interests of providers with the long-term health of the patient. Entities that enter into such contracts with Medicare will experiment to determine the optimal mechanism (via payments or otherwise) to provide individual physicians with an incentive to deliver value-maximizing care. This post is right on point. The focus of reform should be the proper alignment of providers’ incentives. Optimal alignment arises with long-term (ideally life-long), comprehensive capitation agreements. Long-term agreements to provide all necessary medical care leave the risk-bearing provider with an incentive to maximize value over the life of the contract. Shorter and/or less comprehensive capitation agreements dilute the effect by skewing incentives. Shorter agreements encourage suboptimal preventative care and potentially delayed treatment. Similarly, carve-outs promote value maximization only within the realm of services contracted for by Medicare. Large numbers of enrollees and reinsurance are needed to make such long-term contracts feasible, as are good, risk-adjusted outcome data to determine the quality offered by competing providers. But most importantly, Medicare must use the most advanced system of formal risk adjustment available so that providers are encouraged to innovate and care for the sick. While there are many obstacles to the (exclusive or non-exclusive) use of risk-adjusted, long-term, comprehensive capitation agreements (which are beyond the scope of this post), it is worthwhile to recognize such a payment system as the ideal mechanism for aligning the financial interests of providers with the long-term health of the patient. Entities that enter into such contracts with Medicare will experiment to determine the optimal mechanism (via payments or otherwise) to provide individual physicians with an incentive to deliver value-maximizing care.

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