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March 14, 2005

Roger Lowenstein Writes About David Cutler and Health Care

Yet another excellent article by Roger Lowenstein:

The New York Times > Magazine > The Quality Cure?: Half of the growth in spending is for chronic conditions like asthma, obesity and diabetes.... In their case, particularly, [David] Cutler argues, quality will pay....

[Mark] McClellan, the Medicare administrator and former Cutler collaborator, is taking a gamble that pay-for-performance will work. Medicare has started half a dozen pilot programs to test various incentives. In one, hospitals scoring in the top 10 percent in a set of quality measures for certain conditions will be given a 2 percent bonus.

Medicare is also testing incentives that reward doctors for savings. The American Medical Association is nervous about anything that smacks of encouraging doctors to withhold care (a battle it fought with H.M.O.'s in the 90's), but it appears to be willing to look at schemes that link pay to quality....

Cutler says that Medicare's willingness to experiment is hugely important. Private health plans do not have the clout to force a clinic to purchase software or adopt performance goals. But Medicare is so big.... Reoriented to managing ''health'' rather than merely costs, H.M.O.'s might again become a useful part of the health-care landscape, Cutler says. Managing care, he says, was a necessary idea that went off the tracks as H.M.O.'s became remote, single-minded cost-control freaks....

Cutler says that the next step is for Medicare to go beyond trials and move from a fee-for-service model to, in part, pay-for-performance. ''If Medicare has to pay more to doctors -- which it will, given current projections -- don't raise fees across the board,'' he explains. ''Set up a bonus fund that goes to M.D.'s who follow guidelines or have the best measures of outcome.''...

To make coverage universal, Cutler advocates a $6,000 credit for poor families (and less, on a sliding scale, for others)....

Cutler's idea is to preserve the diversity of America's system while subsidizing people's access to it -- to let the G.E.'s and the HealthPartners of the world, and also the Mercks, continue to innovate.... [T]he government might spend an additional $100 billion a year.... Cutler's plan would seem not to brake the projected future escalation of spending. By 2040, according to various projections, that spending could rise from its present $1.8 trillion to something like $3 trillion -- that is, to 20 percent of G.D.P. or conceivably 25 percent. This is why so much attention is focused on cost.... Cutler's answer to these fears is not exactly cavalier.... If we institute a more results-oriented, and a more health-conscious, system, our dollars will buy us better care and probably cheaper care. By emphasizing prevention and effective treatments for the chronically ill, we might also reduce the rate at which spending grows.... But the drive to keep spending down will forever be challenged by technology's efforts to overcome it. If it turns out that gene therapy delivers a cure for cancer, and if that turns out to be something that most Americans want, we should be prepared to pay for it and indeed to tax for it, Cutler says. Spending a fifth, even a quarter, of our resources on life-enhancing and life-prolonging miracles would not be the worst of fates.

Posted by DeLong at March 14, 2005 08:16 PM