From Joe White:
-----Original Message-----
From: Joe White [mailto:[log in to unmask]]
Sent: 23 February 2009 14:50
To: [log in to unmask]; Oliver,AJ
Subject: FW: FFS
Karen and Adam--
As usual, I still haven't figured out how to reply all on this, so share
if
you wish...
The term "discount" is equivalent to the term "balance" in "balance
billing."
Physicians, hospitals, and other providers have ideas of the fees they
would
like to charge if the entire world wanted to give its entire income to
them.
They post these fees as their standard charges. They generally run at
least
twice what virtually everyone pays.
Fees, then, are actually set by contracts between individual insurers
and
the providers. Medicare and Medicaid fees may not seem like
negotiations
but, given that providers can refuse to contract with those programs
(and in
the case of Medicaid that is not uncommon), those programs' fees are
also in
some sense bargained.
Each private insurer has in principle the option of choosing not to put
a
given provider in the network of providers it offers to its
beneficiaries
(more precisely, in some of the networks -- insurers have multiple
networks
with multiple cost-sharing and other terms). So it negotiates some set
of
billing rates per procedure with each provider. There can of course be
intermediaries in this process: for example, a physician office will
join
various independent practice associations (IPAs) and each will negotiate
its
own deal with the varied insurers in a market.
So what we have, then, is selective contracting for fees -- negotiated
payment rates -- which can vary significantly for the same provider in a
given market. We could as easily call it "variable fee for service" or
"selective fee-for-service" or "insurer-negotiated fee-for-service" as
"discounted" fee-for-service. It is only discounted in comparison to
the
fees the providers would charge if they could get away with it, just as,
in
some systems, "balance" billing is simply the extra billing that a
provider
can get away with. But, in each case, the term suggests that the
provider's
desired fee should somehow be the norm, and the lower fee is in some way
an
illegitimate exception. Which is why I don't like to say "discounted."
The term does have some historical basis. At one point, providers
essentially set their prices, and insurers paid them. As selective
contracting took hold, individual insurers negotiated lower fees than
the
norm, which were in that sense "discounted." But once all payers are
selective contracts, the base for the "discount" becomes absurd. After
all,
the providers are surviving on something like half of their posted
"full"
fees.
The only people who pay the "full" rate are those who show up without
insurance and so have not negotiated fees in advance. Hospitals do
often
bill them the full rate, and that sometimes leads patients to file for
bankruptcy.
Cheers,
Joe White
p.s.: for an analysis that separates out the so-called "managed care"
experience in the U.S. from the actual selective contracting experience,
you
might check my article in the Milbank Quarterly for Fall 2007; it's
online
on their website.
-----Original Message-----
From: Anglo-American Health Policy Network [mailto:[log in to unmask]]
On
Behalf Of Bloor, K.
Sent: Monday, February 23, 2009 6:22 AM
To: [log in to unmask]
Subject: Re: FFS
Is 'discounted FFS' a form of market segmentation and price
discrimination? That would seem to be a fairly predictable supplier
response. But perhaps I have misunderstood the nature of the discount?
Karen
Starfield, Barbara wrote:
> Therein lies the fallacy of thinking that the problem is mostly having
insurance i.e. a way to pay. There is no incentive to controlling costs
when
the vested interests (pharma, medical device manufacturers, specialist
societies, hospitals) like things the way they are. As long as these
interests are in control of policy (which they are), no way of paying
physicians (or hospitals) is going to work. It is interesting that
Daschle,
in his otherwise excellent boo, recommended a Federal Health Board to
make
all of the important decisions but didn't say a word about how such a
board
would be constituted. Conflict of interests is rampant---even the
research
establishment and academia are in the business of using it. You can't
trust
'experts' anymore.
>
> Barbara
>
> -----Original Message-----
> From: Anglo-American Health Policy Network
[mailto:[log in to unmask]]
On Behalf Of Adam Oliver
> Sent: Wednesday, February 18, 2009 7:53 AM
> To: [log in to unmask]
> Subject: FFS
>
> So, it seems as though FFS still dominates in the US, and some
(including
me) might see FFS as particularly inflationary. But other systems also
heavily use FFS and, though health care expenditure growth may be
problematic, it has not been as problematic as it has been in the US.
>
> The key might therefore be the keep the FFS system within a reasonable
overall budget constraint. It seems to me that a special feature of the
US
is that the payers (employers, government) are more willing to pay the
increasing fees charged by providers without too much questioning, so to
control total US health care expenditure growth, there needs to be
reform
not necessarily of the way physicians are paid, but of the control that
the
payers exert over total budget. I guess this was tried with managed
care,
and then the backlash (which was really a backlash against HMOs rather
than
managed care wasn't it? - the number of PPOs exploded between the-mid
1990s
and now - but let's not wind Ted up any further about definitions of
managed
care).
>
> Another reason why this type of reform (i.e. strenghening the role of
the
payer) may be particularly difficult in the US is that there are so many
different sectors within the one country (this point came to me from
speaking to Larry Brown and Howard Berliner, so if my ideas here are
useless, we can blame them...). So if you take the Oregon experiment, a
main
reason why it seemed to fail is because Medicaid patients and their
advocates thought that it was unfair that their care was being further
constrained whilst that of those covered in the private sector wasn't.
In
many other countries, these cross sector comparisons within a country
may
not be quite so much of a problem (this might feed into Michael and
Anna's
debate about whether different baskets of services across states would
be a
problem in a Medicaid for all programme).
>
> Anyway, I should do some work, and should refrain from writing what
everyone already knows. But greater payer control seems to be the key
(?),
but that might call for a more unified system than previous reforms and
plans to build upon the existing system (Medicare/Medicaid, and last
year's
Obama proposals). But that may be politically impossible. So perhaps we
should study education instead.
>
> Best,
> Adam
>
>
>
> Please access the attached hyperlink for an important electronic
communications disclaimer:
http://www.lse.ac.uk/collections/secretariat/legal/disclaimer.htm
>
--
Dr Karen Bloor
Senior Research Fellow
Department of Health Sciences
Seebohm Rowntree Building
University of York
YORK YO10 5DD
Tel: +44 (0)1904 321369
Please access the attached hyperlink for an important electronic communications disclaimer: http://www.lse.ac.uk/collections/secretariat/legal/disclaimer.htm
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