The failed model at the heart of America's health care mess

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As the debate over the future of U.S. health care takes shape, it's becoming increasingly clear that a central problem with the medical system lies in its fundamental model of treatment and revenue. With an ever-increasing emphasis upon the latest medications and the most expensive treatments, the current system seems to actively encourage spending, while de-emphasizing treatment.

Under America's current standard, which New York Times writer David Leonhardt characterizes as "fee-for-service," doctors and hospitals are paid for the amount of care that they provide. Consequently, expensive procedures are often prioritized over cheaper treatments, regardless of their effectiveness.
One example is stents. Numerous studies have shown that angioplasty and stenting -- a common treatment for heart disease -- does not reduce the risk of heart attacks unless it is done immediately after a heart attack. A far more effective treatment is a combination of cholesterol-reducing drugs, diet change, and increased exercise.

In spite of this, however, stent use continues to grow; in fact, some estimates suggest that it accounts for a whopping 10 percent of the increase in the nation's health-care spending since the mid-1990's. According to one industry analyst, up to 20 percent of these procedures, which cost $12,000 to $15,000 apiece, have a minimal effect upon patient health.

The most obvious solution is to adopt a payment structure that decouples hospital earnings from scheduled procedures. Group Health Cooperative of Puget Sound, for example, has encouraged a more patient-based system by, ironically, putting its doctors on salary. In most hospitals, doctors are paid by the appointment or procedure, encouraging them to maximize both: the longer physicians can keep patients under their care, the more money they stand to make. Group Health's salary-based model, on the other hand, pushes its doctors to spend more time on individual patients, seeking more effective treatment, regardless of cost.

The Mayo clinic -- Rochester, Minnesota's legendary hospital -- also puts its doctors on salary. By encouraging them to emphasize treatment rather than billings, the clinic encourages a focus upon what works, not what is profitable.

Unfortunately, however, the Mayo model is unsustainable under the current system. By reducing its procedures, the clinic also cuts its insurance billings and, ultimately, its revenue. Mayo has been able to make up the difference by licensing itself as a brand name, but it is unclear how long its current model will be sustainable.

As policymakers plan the next step for America's health care system, its clear that the first move must be to find a way to make inexpensive health care affordable.

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