"Perverse Incentives"

Words matter!

David Kahn, from Columbia University Medical Center, a fellow psychiatrist, has a wise letter in today's New York Times:

Don’t Polarize Health Care

To the Editor:

Re “With Health Care for Nearly All, Massachusetts Now Faces Costs” (front page, March 16):

In the coming debate about universal access to more affordable health care, let’s agree not to use the phrase “perverse incentives,” which you invoke to describe the current fee-for-service system of “paying physicians and hospitals for each patient visit.”

The prospective payment alternatives, such as bundled fees for episodes or capitated fees for populations, each provide incentives to withhold care, no less a dilemma that could also be labeled as perverse. Rationing of expensive procedures under either system, whether fee-for-service or prospective, will no doubt be similarly declaimed.

Calling any of these reimbursement systems “perverse” will only polarize the difficult discussions ahead.

David Kahn
New York, March 16, 2009

The writer, a psychiatrist, is vice chairman for clinical affairs, department of psychiatry, Columbia University Medical Center.

Dr. Kahn is 100% right. All payment systems have risks and benefits. Fee-for-service payment is in no way uniquely "perverse."

For many years I practiced at a not-for-profit HMO, the Harvard Community Health Plan. I viewed the combination of (a) capitation and (b) not-for-profit status as an ideal form of compensation in which a large medical group was committed to taking care of a defined population. Clinicians and patients understood that if we saved money in one area we could use it for the benefit of the insured population in another area. There was an opportunity for collaborative co-management of the practice at the population level as well as in the clinician-patient dyad.

But just as fee-for-service payment can reward overtreatment, capitation payment can reward undertreatment. Opponents of a form of payment call the risks "perverse." Supporters of the payment system, as I was for capitation of not-for-profit HMOs, call the risks "potential concerns to be guarded against."

Dr. Kahn's larger point - that the health care reform process could be scuttled by emotions - is all too real. That's what Harry and Louise did in 1993. It will take skillful and forceful leadership by President Obama and Secretary Sebelius to keep the process from drowning in demagoguery this time around.

I am opposed to building a health care system on fee-for-service reimbursement. But if I ever call the risks fee-for-service creates "perverse incentives," please tell me to wash my mouth out with soap!