Republicans and Democrats alike want to kill fee-for-service. But it might not be dead (yet).

Republicans and Democrats don’t agree on much about Medicare, except for getting rid of the fee-for-service system for paying doctors.

“If reducing the growth of Medicare spending to sustainable rates and moving away from fee-for-service are ‘ending Medicare as we know it,’ then both parties have embraced that goal, writes former OMB Budget Director Alice Rivlin in a Daily Beast commentary.   “Paying providers on a fee-for-service basis offers incentives to perform more services than necessary” she observes, “Health reformers in both parties favor adjusting payments to reward results, improve care coordination, and discourage waste. They also see the massive, largely fee-for-service Medicare program as a potential leader driving the whole health system toward greater efficiency.”  Both also agree on a same target rate of growth for Medicare.

Where they differ is how to move away from fee-for-service, she continues.  To reach the common objective, “Democrats favor regulation and Republicans tout market competition.”  Democrats rely on having the government promote “innovation, demonstrations, and research to develop more effective care delivery and an Independent Payments Advisory Board (IPAB) to design ways of keeping Medicare spending from rising much faster than the economy” while Republicans “prefer giving seniors a choice of comprehensive health plans offering benefits equivalent to Medicare, with the plans receiving a risk-adjusted payment from Medicare (premium support). They hope competing plans will ensure improvements in quality and lower cost, but they would also cap Medicare spending growth at the same rate the president proposes.”

So physicians contemplating the choices in this election might ask themselves. Do you want the government to limit total Medicare spending and have it decide how and how much you will be paid to keep spending under that limit?  Or do you want the government to cap its total financial contribution, turn the money and decision-making over to private insurers, and let them decide how and how much you will be paid to keep spending within the cap?

But despite a seeming bipartisan consensus that fee-for-service payment is the source of all evil, it might yet survive, with major changes.   Paul Ginsburg from the Center for Studying Health System Change takes this contrarian view in a new Health Affairs article. “To many policy analysts, the term provider payment reform means abandoning the fee-for-service approach, which pays clinicians for each service rendered, in favor of broader units of payment—such as global payment or episode bundles—which either cover the whole person regardless of the number of services provided to that person, or cover the whole episode of care for a specific condition” he writes.  “Even if these approaches succeed and are widely adopted, the core method of payment to many physicians for the services they provide is likely to remain fee-for-service.”  

He continues  “To be sure, physicians’ payments will be calculated not only according to volume, but also according to measures of physicians’ quality and efficiency. Both measurement and distribution of payment will be done by the organizations, or systems, such as the accountable care organization within which the provider delivers care.  As a result, for many physicians, these broad payment reforms, such as accountable care organizations, are more accurately seen as enhancements to fee-for-service, rather than as replacements.”

Ginsburg then argues that if fee-for-service is going to continue to be the “core method” for paying doctors, fee-for-service itself must change.  He advocates a range of reforms: better aligning payment for physicians’ practice expenses with relative costs,  reducing the influence of the Relative Value Update Committee (RUC), using more robust data than the surveys done by specialty societies to determine relative values, capturing  quickly any reductions in physician work and practice expense that occur as new technology evolve;  and paying primary care doctors (but not subspecialists) more for their evaluation and management services.  He also advocates for broad payment reforms, including Patient-Centered Medical Home and ACOs; although these models would include a fee-for-service component, total physician payments within these systems also would be linked to measures of quality and efficiency.

So like the famous “I’m not yet dead” Monty Python character in the Search for the Holy Grail, fee-for-service might yet survive, if the politicians don’t decide to put a quick end to it.   But fee-for-service won’t look much like the current system—many surgical and medical specialists likely would see their procedural fees go down, primary care doctors might see an increase in payments for their evaluation and management services, organized medicine would have less influence, and just about all doctors  will see that their “payments will be calculated not only according to volume, but also according to measures of physicians’ quality and efficiency.”  

I am not sure that this is what physicians who want to preserve fee-for-service have in mind—must just want to be let alone to set their own fees—but that isn’t what (most) Republicans or Democrats, or policy analysts from across the political spectrum, have in mind for them.  They might still be paid a fee for each service, but the fee will be determined by the government within a total budget, or a health plan within a total budget, or a health system operating within an at-risk budget, with their payments adjusted upward or downward based on measures of efficiency and quality. Some physicians (especially primary care) may do better under such approaches, some worse, but it will be very different than the fee-for-service system that most doctors are used to, and seem to prefer.

Today’s questions: Do you agree with Rivlin’s view that both political parties have embraced moving away from fee-for-service, and that this would be a good thing?  Or Ginsburg’s view that fee-for-service will likely continue to be a core component of broader reforms, but fee-for-service itself will  have to be radically changed to survive?