Spending less for healthcare means less healthcare happens. Hospitals and doctors perform fewer tests and procedures. Hospital operating budgets shrink. Patients leave the hospital more quickly.
“The decision of how we treat people is incredibly responsive to price,” David Cutler, a health economist at Harvard University, said in a recent interview. “When you don't pay more for extra hospital days, people leave the hospital sooner.”
But what, then, happens to our health?
There is evidence that we can be as healthy—and sometimes more so—with less medical care. Recent public health and medical society initiatives have identified a growing list of treatments with little value. Too much care can put patients at risk of infection or complications.
Research published this week in JAMA Internal Medicine found use of services with “minimal clinical benefit” dropped during the first year of Medicare's Pioneer accountable care contracts. Pioneer ACOs can see profits or losses based on their ability to stay within budget. Spending for 31 minimally useful services dropped 4.5%, the research reported.
But less healthcare can be harmful, too, when patients get less of the care they need. This is the primary risk that policymakers face as they aggressively overhaul Medicare spending under the Affordable Care Act.
The overhaul relies heavily on new contracts for accountable care and bundled payments that allot a limited budget for groups of patients or specific services. Providers that come in under budget keep some of the difference.
By redesigning how Medicare pays for care, federal officials hope to see lower costs from less waste and healthier seniors. Success depends on whether incentives to hold down costs compromise the quality of care. Incentives tied explicitly to quality help mitigate that risk, and Medicare is testing its ability to strike the right balance.
“We love incentives,” said David Grabowski, a Harvard University professor who has evaluated incentives for the CMS. “Yet they have intended effects and unintended effects. You obviously want to maximize the intended effect and minimize the unintended effects.”
Not everyone is convinced that Medicare policy ensures that hospitals and doctors will safeguard quality when profits and losses depend on controlling costs, known as being at risk.
“Being at risk requires pretty active oversight,” Dr. Robert Berenson, a Medicare policy expert and fellow at the Urban Institute. Hospitals and doctors now have financial incentives to hold down healthcare spending with close control of use and referrals.
Yet quality measures tied to Medicare are limited. Experts generally agree that the government has struggled to find the right metrics.
That does not mean that Berenson rejects Medicare's shift toward capitation, which puts providers at full financial risk. It has clear benefits, he said. Capitation gives providers freedom to innovate because payment is no longer limited to the menu of services for which health plans contract to cover, Berenson said. That freedom could improve efficiency.
But providers have found many ways to maximize Medicare revenue without improving health outcomes in the past, he said. Why wouldn't they continue?
