The Transmogrifying of Fee-For-Service Medicare into Managed Care

In one episode of the long retired comic strip Calvin and Hobbes, the highly imaginative and socially dysfunctional Calvin invents the Transmogrifier. The answer to all both large and small boys’ fondest wishes, this upside down cardboard box is controlled by a large dial that can change its passenger into any shape. Its settings include tiger, bug, eel and dinosaur. The Disease Management Care Blog would really like to have one of those and include ‘motorcycle owner’ on the dial, but, alas, the DMCB spouse will have none of it.

Outside of the DMCB's imagination, however, a very real version of the Transmogrifier lives on thanks to the Congressional plans for Medicare. How else can Medicare dial in ‘value based purchasing,’ ‘quality and efficiency,’ ‘accountability,’ and taxpayer savings’ without the use of an imaginary cardboard box and even more imaginary money?

Yet, our imaginative and dysfunctional legislators have left one key setting off of the dial, and that’s ‘managed care.’ They should put it on because that's exactly what the Transmogrifier is going to accomplish for Medicare when they get done.

Here's why.

Other than Medicare Advantage, most versions of Medicare so beloved by the Democrats and many of our seniors is a fee-for-service indemnity plan. This means it insures the beneficiary against a financial debt (or 'indemnity') incurred as a result of medical treatment for an illness. While Medicare has the advantage of fee setting, its role in the clinical decision-making in the doctor-patient relationship has been historically quite small.

Contrast the coming legislative proposals for Medicare with managed care insurance. According to this link, 'managed care' is any health insurance that uses of a variety of methods of financing and organizing the delivery of health care in which an attempt is made to control costs by controlling the provision of services. These methods (according to this link) can include 1) contracting with selected physicians and hospitals usually for a predetermined monthly premium 2) utilization and quality controls that contracting providers agree to accept, 3) financial incentives for patients to use the provider and facilities associated with the plan and 4) the assumption of some financial risk by doctors, thus fundamentally altering their role from serving as agent for the patient's welfare to balancing the patient's needs against the need for cost control.

Armed with these key insights about just what defines managed care, DMCB compared some key features of the U.S. Senate Finance Committee’s Framework to see if ‘managed care’ belongs on the dial. It may:

Selective Contracting: Under value based purchasing, only hospitals that meet yet-to-be-determined quality thresholds will receive favorable payment rates..

Predetermined Monthly Premiums: While unmentioned in the Framework, the payment mechanism for patients assigned to Medical Home pilots is likely to be a monthly fee. This is otherwise known as partial capitation, which is a common approach in managed care networks.

Utilization and Quality Controls: Physicians that exceed, compared to their peers, ordering high cost imaging services will be penalized. The only difference here is that physicians won’t have much of an opportunity to not agree.

Financial Incentives: That ‘I’ word is used to encourage Medicare beneficiaries to participate in healthy lifestyle programs that meet yet to be determined criteria.

Financial Risk: Under accountable care organizations, providers would be able to keep half of any savings they achieve for the Medicare program. While there are safeguards to promote quality, the fact is that the physicians will be under pressure to balance the patient’s needs against the need for cost control.

If it looks like managed care, and if it walks like managed care .....

Finally, while our political elite fault our seniors for their ‘inexcusable’ cognitive dissonance by 'wanting government out of Medicare,' this may be less evidence of flyover state ignorance than an awareness that their passive indemnity insurance is morphing into growing government activism in the doc-patient relationship. It seems to the DMCB that their concerns deserve more than sympathy or disdainful annoyance. This is a real policy direction that deserves closer scrutiny.

In the meantime, the DMCB plots its nefarious revenge on its wannabe Susan Derkins DMCB spouse.