Some Problems with Today's Healthcare Payment System

Patients with chronic illnesses require ongoing advice, care, and assistance from healthcare providers to manage their conditions. Healthcare payment systems have many problems associated with them that discourage high-quality, efficient care for such patients, including:

• Fee-for-service systems generally do not pay adequately (or at all) for many elements of primary care and preventive care, particularly for the more complex care issues associated with the elderly and other people with chronic conditions.

• Fee-for-service systems may not pay adequately for the time needed by a provider to make an accurate diagnosis and to develop an appropriate care plan and discuss it with their patient and the patient's family members, particularly in complex or unusual cases. At the same time, providers are not financially penalized for ordering more tests, regardless of whether they are necessary to make an accurate diagnosis/prognosis.

• Fee-for-service systems generally do not pay providers more to manage the needs of patients with complex conditions, particularly through mechanisms other than office visits. Many patients need this on an ongoing basis, while others need it temporarily after discharge from the hospital (e.g., encouragement and assistance in complying with post-discharge instructions).

• Certain types of providers (e.g., nurse practitioners, pharmacists, etc.) or services (e.g., telephone or email follow-up and monitoring of health status) are generally not covered as reimbursable services under payment systems (even though the providers are licensed to provide the care and the services have been demonstrated to improve outcomes), reducing the likelihood that they will be used even if they are more appropriate than providers/services which are covered.

 • Fee-for-service payment systems reward providers for providing more services, even if they are unnecessary or of low value.

• Payment systems reinforce fragmentation of care by paying multiple providers for multiple services or tests for the same patient, regardless of whether the care is coordinated or duplicative.

• Patients generally do not have a financial incentive to adhere to prevention and disease management recommendations that could improve outcomes and reduce healthcare costs. Moreover, they may have a financial disincentive because of required co-payments or because some services are not covered by their health insurance plan.

• Many payers do not have mechanisms for encouraging or directing patients to providers which provide care at lower cost (for the same quality) or higher quality (at the same cost).

• Payment systems often reward expensive treatment measures in the final stages of life, even though providing palliative care, rather than aggressive treatment, to patients in the final stages of terminal illnesses can reduce costs and improve patient comfort.