I recently had a Twitter conversation with a smart observer of the human condition recently who is not in the weeds on healthcare. She asked a damn good question that I want to probe at for a bit.
I am very curious to learn more about stances that argue for the benefits (or costs) of having a marketplace alongside public systems.
I immediately thought about Medicare and Medicare Advantage. Right now there are three primary delivery and payment streams for Medicare.
The first is traditional Medicare where doctors and hospitals are paid on a fee for service model. There is no out of pocket maximum and the benefits are still grafted on the skeleton of Blue Cross and Blue Shield plan designs from the late 50s. They have been modernized and tweaked since then but the basic split is still there.
Next there is the Center for Medicare and Medicaid Innovation (CMMI). CMMI uses traditional Medicare and experiments widely and wildly. (Disclaimer, one of the projects that I am working on at Duke was a CMMI funded project. I also just got read into a pitch to CMMI on a new payment model as well). This is where accountable care organizations, bundled payments, diabetes care management programs and alternative payment models come from. So far, the evidence is that accountable care organizations save some money without losing quality, bundled payments for orthopedic procedures do a good job of compressing prices and lowering total net spend and lots of other things are being thrown against the wall for evaluation to see what works.
The final stream is Medicare Advantage. Here the federal government writes risk adjusted checks to insurers. Those checks are based on the typical cost of a traditional Medicare patient in that geographic area. Insurers make money if they can keep people happy for less than the check that they get from the Feds.
There is good evidence that Medicare Advantage improves quality while lowering cost when there is significant market penetration. Austin Frakt from 2016 has a good round-up:
First, let’s remind ourselves why we might (or might not) expect a spillover effect. If the following two conditions are met, then a spillover could occur:
- MA plans encourage greater efficiency in health care utilization. They might do so by, for example, preferentially contracting with more efficient providers, which would encourage others to become more efficient to gain access to MA networks.
- Providers care for both MA and TM patients in similar fashion, so that if MA succeeds in inducing efficiency enhancing practice, it applies to TM as well.
And the 5th paper he cites has a good summary of the recent research:
5. “Recent Growth In Medicare Advantage Enrollment Associated With Decreased Fee-For-Service Spending In Certain Counties,” by Garret Johnson, Jose Figueroa, and Ashish Jha (Health Affairs, 2016)
The authors bring the spillover literature up to date with an analysis of the association of changes in county-level MA market penetration with changes in county-level TM spending between 2007 and 2014….
A spillover was observed only for counties in the highest quartile of baseline MA market penetration (>17.2). In those counties, a 10% increase in penetration was associated with a $154 annual decrease in TM spending per beneficiary. The results suggest a threshold effect, by which spillovers only occur (or are detectable with OLS methods) when MA market penetration is sufficiently large. The estimated spillover accounts for 11% of the recent slowdown in TM spending and more than offset the payment to MA plans above TM costs.
Martin Gaynor and colleagues have looked at implied competition in English hospitals. They found that increased competition improved quality while holding costs constant. Better care was delivered and mortality rates declined. Lives were saved.
I think my biggest opinion on this is humility. We don’t have an optimal system. And even if we did have an optimal system today, it will be slightly sub-optimal tomorrow. We have a massive learning problem and dissemination of best practices problem. I think competition with well defined rule-sets and regulators that seek to maintain “spirit” rather than “letter” of the law guidelines will find subtle and occasionally blindingly obvious ways to do things a little bit better than the smartest committee of people can find and then implement quickly.
I think there is a strong need for a viable public backstop that sets a high floor with reasonably free flow of people in and out of multiple systems. If a private/parrellel system delivers a great deal without doing systemic harm, it is solving a major learning problem and producing a significant social good. If a private system fails miserably, they just lit some VC bro’s money on fire. That should not be a major societal constraint. Competition keeps everyone honest as long as it is honest competition.