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Comment by colinmhayes | Hacker News Reader

This is why we need medical payments to be capitated, not fee for service. The way medical care currently works has horrible incentives. Medical providers have an incredible informational advantage so patients just do whatever their doctor tells them. Since doctors get paid for doing things they routinely tell people to do things that are proven to have little efficacy. Medical providers should instead be paid per patient they cover. Especially now that hospitals are so consolidated it's relatively easy to tell if health outcomes are better or worse than average over the group of patients they cover. By punishing providers for achieving bad outcomes and sharing the savings they obtain by cutting waste we can drastically reduce healthcare costs.

Medicare and Kaiser permanente are leading the charge with this style of insurance and have already shown it to be cost effective while not reducing the quality of outcomes.

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This is tricky to implement as it introduces other perverse incentives: namely that health care providers stop treating very sick people. You see this in some cases with surgeons already that have a very high success rate. They'll only opt for surgery if it's a relatively minor need, but if it's complicated or there are potentially complicating issues they'll pass.

Outcomes for very sick people being worse is taken into account so providers aren't punished if their success rate is lower for those patients. We have all the data we need to know what the outcomes should be for a provider over the course of a year. Anyway, providers have to precommit to their pool of patients, so it's not like they can just pick the lucky ones.

Capitation is admittedly a much more complicated way to administer health care, but fixing the incentives is absolutely worth the pain we may face in the short term. Which we might not considering how well these programs have been shown to work.

Huh, I didn't expect to come across something I have such direct knowledge of.

I used to work with this data directly - I worked with MACPAC to prepare reports for the CBO on the efficacy of pay-per-performance programs, especially as it pertained to the possibility of switching Medicaid from a fee-for-service model to a pay-for-performance model. (6-9 years ago)

I just wanted to chime in on this one quote:

> We have all the data we need to know what the outcomes should be for a provider over the course of a year.

The data here is exceedingly low quality, especially for Medicaid. Medicare is in a better state due to being centrally administered. We do *not* have all the data we need to make pay-for-performance more than an extremely rudimentary approach. Is that rudimentary approach still better than fee-for-service? Maybe - that's a complicated question I let the public health PHDs write very long reports on.

you're not fixing the distortive incentives with this scheme, just transforming them. 'capitation' incentivizes hoarding of patients, most obviously by incentivizing the minimization of treatment times and associated costs but also through outright fraud (by falsifying records, etc.). so you're essentially trying to maximize patient outcomes by capping costs, which is a terrible proxy metric all around.

to actually improve healthcare, we'd need to increase spending per person (by an order of magnitude or more, using more team-based medical care rather than 1-on-1), for not only direct care costs, but also research and development. what we absolutely need none of is deadweight losses, like profit-maximizing medical administration, big pharma, and the whole medical insurance industry. medical 'insurance' has become a complete misnomer, as it no longer serves to mitigate the distasterous effects of low probability, high impact events, but as a socialization of routine medical care, which is not insurance at all.

The healthcare industry is gradually shifting from a fee-for-service model to a value-based-care model. This will take a long and we'll probably always have a hybrid model with varying levels of financial risk spread across insurers, providers, patients, and government.

As an incremental step forward bundled payments are a good approach. For common interventions like a hip replacement the insurer gives the provider a single lump sum for everything instead of having separate line items for surgery, anesthesia, medical device, antibiotics, hospital stay, physical therapy, etc.

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