This paper examines two interrelated aspects of healthcare reform in Massachusetts. The first section analyzes a proposal to shift physician reimbursement from a fee-for-service model to a pay-for-performance salary structure, arguing that linking payment to patient health outcomes and enrollment numbers rather than services rendered will reduce unnecessary procedures, lower billing costs, and create self-sustaining cost controls. The second section addresses the tension between market justice and efficiency in healthcare financing, contending that the American market-justice ideal is largely theoretical, as costs are already distributed semi-communally through cost-shifting onto insured patients — making a unified insurance pool both more honest and more efficient.
One of the major problems of the current healthcare system implemented by the State of Massachusetts is the cost of maintaining the program and providing the necessary healthcare to Massachusetts citizens dependent on the state insurance program. Ideally, the program would be paid for through revenues generated from business contributions, premium payments into the state system, and general tax funding. Revenue can only make up half of the solution for paying for the system, however; costs must also be effectively managed and strictly limited if the program is to be successful in the long term. One proposal for limiting these costs is switching from a reimbursement-for-services model of physician payment to the creation of performance-based salaries or regular payments.
There are several features of moving to a pay-for-performance rather than a pay-for-service model that have the potential to yield significant savings. As the state would not want to become directly involved — at this point, at any rate — in the hiring of physicians or the maintenance of facilities throughout the state, the salary payments would be based on the number of state-plan patients treated each period, or averaged out over a year, rather than on the specific services each physician provides. Paying per service incentivizes increased service provision and thus increased costs; paying for performance, as measured by patient health outcomes, incentivizes providing the highest quality care in the most efficient and cost-effective manner possible. Physicians would also be incentivized to treat patients enrolled in state plans in order to boost their salaries.
When improved health outcomes and the number of state-plan patients cared for — rather than the number of services provided — become the targets of increased salaries, cost controls will become self-perpetuating. Up-front and even pre-service payments to physicians will lower their operating costs, reduce their billing expenditures, and increase available capital and the speed of payment. This will make state-plan patients more efficient and cost-effective to serve than other patients. Physicians will be incentivized to enroll patients and to keep them healthy, rather than to avoid government patients or to order unnecessary tests and procedures as a means of achieving higher pay from the government.
There are certainly significant complications to this proposal, most notably the need to track physician patient enrollment and the health outcomes of patients in order to determine pay scales. Once a proper system is put in place, however, it could be maintained with minimal human resources and technology.
According to some perspectives, the system of market justice is the most ethically viable way of ensuring healthcare provision on a fair basis — it is, after all, considered the American way. A more objective analysis, however, shows that creating an insurance pool of all U.S. citizens and funding it through the general tax pool would constitute the most efficient healthcare system possible. Reconciling this objective efficiency with the prevailing sense of market justice can be a difficult task, but a straightforward examination of the current healthcare system demonstrates that market justice is far from just in practice.
"Market justice ideal is largely theoretical in practice"
"Insured patients already subsidize uninsured through cost-shifting"
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