The Responsible Doctor-Patient System

This report explains that the main cause of steadily rising healthcare costs is the method of reimbursement used by insurance companies, who have now become trapped in an economic "death spiral" of their own creation, by ignoring the natural tendency of people and organizations to act in their own self-interest. The problem can be resolved by creating appropriate financial incentives. Insurers must align the financial interests of the caregivers with the interests of the patients by restoring the link between money and treatment effectiveness. In other words, insurance companies should pay doctors more if they get us well more cheaply, and insurers should charge their customers less if they make efforts to stay healthy.

If the reimbursement problem is adequately resolved according to the proposals outlined in this report, costs should stabilize and then actually decline over time, which should in turn help resolve many of the other health-related issues, such as who pays, the large number of uninsured, etc. If the recommendations in this report are adopted, a new insurance concept that could be called exclusive physician responsibility will become part of all future health insurance contracts. This insurance concept, along with increased financial responsibility for patients for their own behaviors, forms a new system currently referred to as the Responsible Doctor-Patient system.

The Responsible Doctor-Patient system is comprised of four major principles:

Principle #I: Pay for Performance Insurance companies should pay doctors just once for the degree of improvement in a patient's condition or quality of life, up to a pre-set limit established for that condition. The doctor no longer seeks reimbursement from the insurance company for every office visit or every treatment effort made -- if there is no improvement, the doctor will receive no reimbursement. The key feature however, is that doctors would be entitled to keep the full amount available for reimbursement (assuming the patient received the maximum amount of improvement), even if the doctor's actual expenses were much lower. With this method of reimbursement, it is in the doctor's own financial self-interest to treat patients as quickly, as completely, and as cheaply as possible. This approach also means that doctors are similarly discouraged from withholding treatment when real improvements in the patient's condition would be likely. It also lowers insurer costs considerably, since the insurer no longer cares what the doctor does, as long as it is effective, thus eliminating the need for utilization review and appealing claims.

Principle #2: The Doctor is in control This principle means, among other things, that ail payments and costs are coordinated through the doctor's office -- including hospital care, supplies, medications, and lengthy travel expenses, for treatment of the condition itself as well as treatment of any related side effects. This is necessary so that the doctor can effectively monitor and control all of the costs, and it prevents costs from being improperly shifted to the patient. Patients pay only the insurers, insurers pay only the doctors, and vendors bill only the doctors.

Principle #3: Identify the good doctors For this system to work well, patients should have objective performance information when selecting a physician. Insurers would publish basic statistics about the percentage of the total amount available that they had reimbursed individual doctors for treating various conditions, as a simple but useful measure of a doctor's effectiveness. Doctors would be encouraged to become more proficient to retain patients and their own profitability.

Principle #4: End discrimination by insurance companies Require insurers to accept everyone who applies and charge everyone the same rates regardless of age, sex, and health status. But allow insurers to charge higher premiums to people who engage in proven unhealthy behaviors that the person could be expected to change. This would encourage individuals to adopt healthier lifestyles in order to reduce their premium costs. The report also explains how HMOs and other ideas are not likely to succeed as desired, because they do not maintain the necessary link between money and treatment effectiveness. It also describes how to address the lobbying efforts that will probably be mounted against making the necessary legislative changes.

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