Fixing Costs of Health Care - Part 1

Imagine there's a button on your desk, designed to be pressed every time you hear a bell. And every time you press the button, $5 is deposited in your checking account. You hear the bell every few hours, and you push the button each time.  Looking around, though, you notice that no-one is watching you press the button. Apparently they trust that you are only hitting the button when the bell rings.  But you're a good, honest person... Right?

A few days in, and Starbucks has re-launched their seasonal peppermint mocha.  It's you're favorite. But, expensive gourmet coffee isn't in your budget.  No-one's watching, and you really want that mocha. It's for mental health, right? And you've been loyally pressing that button every time the bell rings... And maybe you missed one while you were in the restroom... So, just to be safe, you hit that button one extra time. No real harm, and you get your mocha.

That peppermint mocha was good. You could use one every day. What's the harm? You hit the button just one extra time each day, except Monday - you need two that day. It's hard to get going on Mondays...

I could go on.  But everyone can likely see where the normal human response might lead to in this hypothetical scenario. Eventually the person here is hitting the button willy nilly and is buried in coffee and muffins. Heck, maybe they have a Starbucks installed in their office, with a personal barista.

What I describe is not very different from the way that the vast majority of our US healthcare payment system is structured. The term in the industry is “Fee-For-Service” which basically means the payer makes payment to a healthcare provider every time they bill for a service - or every time they hit the button.

But, doctors are good people, right? They go to school for a long time. They have patient best interest in mind (usually – or so we hope). They treat us when we're sick, and help us get well. We like them.

So, what's the problem here? Doctors should be paid for what they do and know, right? Would anyone argue that doctors should be paid for their services? But, doctors are people.  And just like the button situation, they get paid for services – so the more services you do, the more money you make.  Mix normal human tendencies with cost pressures (think liability insurance to protect against lawsuit) and you have a mixture ripe for problems.

And let me be clear, fee-for-service in healthcare is not just limited to doctors – it’s the basis for payment for all healthcare providers and suppliers.  The more you do, deliver, or ship, the more revenue comes in.  In fact, when it comes to risk of fraud, generally providers like physicians are seen in the lowest risk category.  

Now, let’s look at that button again.  Your brother-in-law, who drove his 20 year old RV to your house for Christmas, learns about your button.  He’s a slightly less than upstanding citizen, and he’s been out of work since he left the service, and he blacks out every time the microwave is used, because of the plate in his head… (anyone catch the National Lampoon’s Christmas Vacation reference???) He wants a button too.  Suppose he can get one, and he sits there, hitting the button once every second, racking up huge sums of money.

Back to reality – and we can talk about hitting the button in healthcare – healthcare fraud.  Less than upstanding people, who understand how the payment system works (hit the button, get $$), and they know how to play it -  setup companies to bill for services, don’t actually do them (or do them badly) and make tons of money.  And for a long time, almost no-one was looking.

So, what to do?  There are lots of ideas, some in practice, some not.  

First, you declare war on fraud, which is what the government has done recently.  Huge sums of money are being fed into the healthcare fraud battle to root out and eliminate fraud, waste and abuse.  New contractors, new divisions within Centers for Medicare & Medicaid Services (CMS), strike forces between Department of Justice, Office of Inspector General, Department of Health and Human Services and US District Attorneys and even private-public partnerships (like the National HealthCare Anti-Fraud Association (NHCAA)) are gaining more and more support to combat the “bad-guys.”

But is it enough?  If the War on Drugs (similar to this War on Fraud) has shown us anything, it’s that spending tons and tons of money on enforcement doesn’t guarantee you will quickly win the war.  The enemy is often agile, flexible, and highly motivated.  The enemy in this war always seems a step ahead, and despite spending lots of $ on the battle, they never seem to be eradicated.  They’re cockroaches – they never die, and if you stomp on 1, there are 10 in the wall, waiting until you turn out the light.

To be continued…