Here is one interesting proposal for reforming Medicare:
Each fee is meant to reimburse the doctor for the time and skill he
or she devotes to the patient. But it is also supposed to pay for
overhead, and this is where the problem begins. To Medicare, a doctor’s
overhead (or “practice expense”) includes such items as rent, staff
salaries and the cost of high-tech medical equipment. When the agency
pays a fee to a doctor who has performed a CT scan, it is meant to
cover some of the cost of buying or leasing the scanner itself.
Services using more expensive equipment generate higher fees.
…The cost of a CT scanner is fixed, but a doctor earns fees each time it
is used…a scanner becomes highly profitable as soon as
it’s paid for.
In contrast, the doctor-patient visit, which
involves no expensive equipment, offers no significant profit
opportunity. So the best way for a doctor to make money in his practice
is not to spend time with patients but to use equipment as much as
Doctors who do their own CT scanning and other imaging order roughly
two to eight times as many imaging tests as those who do not have their
own equipment, a 2002 study by researchers at the University of North
Carolina found. Altogether, doctors are ordering roughly $40 billion
worth of unnecessary imaging each year…
So what’s the solution?
For their time, doctors should be given a stipend for each of their
patients. It should be larger for patients with complicated medical
conditions and smaller for those who are healthy, and it should not be
influenced by the number of services or tests a doctor orders.
overhead, doctors should be paid an amount that covers the typical cost
of tests and treatments needed to address a patient’s condition. This
strategy – known as “case rate” or “prospective” payment – is standard
in American hospitals. The hospital receives a payment for dealing with
a patient’s underlying condition rather than individual payments for
each test and treatment. This approach offers no incentive to run
unneeded tests, and it has been credited with substantially slowing the
growth in Medicare payments to hospitals.
Of course this penalizes patients with chronic conditions, namely those which show more complications over time than average for the specified class of ailment (e.g., Bill Walton’s foot). At some margin of unexpected complicatedness, the money runs out and people find it very hard to get their doctor on the phone or for an appointment. If the relevant alternative is death, this policy is relatively egalitarian; if the relevant alternative is a smooth recovery, this policy is relatively inegalitarian.
I believe this idea deserves serious consideration.
Addendum: Via Mark Thoma, here are other ideas.