Physician-Led Healthcare Reform: a New Approach to Medicare for All (2020)

Because of the high cost of health insurance, driven by the underlying cost of healthcare, political pressure is rising to move to national health insurance, perhaps in the form of Medicare for All. The COVID-19 pandemic is further showing the need for Medicare for All, as millions of people lose their jobs and their health insurance. 

But even if Medicare for All became the law of the land, it would not solve the underlying problems in the U.S. healthcare system. While a single payer system might reduce health spending 10% by cutting administrative costs, that would be a one-time saving. After that, health costs would resume their upward trajectory, which is consistently higher than the growth in GDP or workers’ wages. 

Medicare for All advocates also propose to slow the growth in health costs by negotiating lower rates with healthcare providers. As a result, doctors and hospitals would likely earn little more than Medicare rates, which would have a deleterious effect on their incomes and on many physicians’ desire to stay in practice.

This book argues that a massive restructuring of the care delivery system could create financial incentives for healthcare providers to reduce healthcare waste, which has been estimated to be up to a third of total spending. The only players in a position to eliminate waste without hurting patient care are physicians, because only they know which services are wasteful.

The linchpin of a restructured system would be primary care groups large enough to take financial risk and powerful enough to influence spending on specialty, hospital and post-acute care. Leaning on the experience of accountable care organizations, the book explains how these primary care groups would have to operate to be successful in a competitive environment. 

To ensure that care quality is high and that costs are kept low, Terry proposes that these primary care groups compete with one another in healthcare markets supervised by regional health authorities. Consumers would choose a primary care doctor in one of these groups and, depending on how well the group performed, their health taxes would be higher or lower. This mechanism, which proved successful in Minnesota in the 1990s and early 2000s, would compel the groups to deliver value to their patients.

Placing primary care physicians in control of the healthcare system would enable them to reduce waste and lower costs by working with the most cost-effective, high-quality specialists, hospitals and post-acute care providers. In turn, the imperative to be selected by the primary care groups as preferred providers would motivate these other entities to be careful stewards of healthcare resources.

Just as accountable care organizations (ACOs) do today, the primary care groups would share in the savings they created. They would take two-sided financial risk, so if they exceeded their budgets, they’d have to pay some of their earnings back to the government. This would create the need for financial reserves and for the expertise of outside firms that could build the infrastructure required for population health management. Consequently, the primary care physicians would have to share some of their revenues with these vendors as well as with their selected specialists. Even so, they would be able to earn substantially more money than their base primary care capitation, based on Medicare rates. Propelled by this incentive and the competition in regional markets, they should be able to bend or even reverse the cost curve.

The book also explains how this approach could end the long-term decline of primary care and restore autonomy to physician practices. One key to the restructuring is the elimination of hospitals’ market power. Not only would healthcare systems have to negotiate rates with the government, but they’d also have to divest their employed physician practices so that they could no longer determine physicians’ economic and clinical incentives.

In addition, the book discusses how health information technology could be improved and could be used to improve coordination of care. And it concludes with a chapter about how new drugs and other new technologies drive up costs and what needs to be done to keep those costs to a level our country can afford.

Rx for Health Care Reform (2007)

Terry’s previous book proposed an earlier version of the same approach featured in his new book. One major difference between the two books is that at the time Rx for Health Care Reform was written, there was little chance that the nation would adopt Medicare for All, whereas the prospect of this happening in the 2020s looks very real.

After a section on the mess that health care was in during the 2000s and the various solutions being offered by the two major political parties, the book dissects the approaches to care delivery reform that were being tried at the time. These included disease management, pay for performance, health IT, consumer-directed care, and provider report cards. In the latter chapter, the limits of the evidence supporting medical practice is discussed.

The next section, entitled “The Money Machine,” describes how physicians, hospitals, and drug companies all pump up their revenues and profits. A chapter on “supply-induced demand,” for example, draws on a body of research about variations in care, reflecting the availability of resources and practice patterns that lead to wasteful use of healthcare in some regions. An in-depth look at why drugs cost so much presages a similar discussion in the new book.

Rx for Health Care Reform provides a detailed road map to the kind of healthcare restructuring needed to reform this system. Because Medicare for All was not in prospect, the system was to be financed by payments from government programs, employers and individuals, all funneled through “utility insurers” that would work for set fees and would have no role in managing care. Again, Terry hearkens back to the Minnesota experiment, which had just ended, as a template for competition among his primary care groups. And like the new book, the earlier one would require hospital systems to spin off their employed groups.

Chapters on uniform hospital pricing, hospitalists, regional planning of new health facilities and equipment, the use of health IT in researching practice improvements, and ways to control the introduction of new technologies round out the book.