Attempted Cost Controls

The earliest methods were nothing more than reductions in reimbursement. This method is still used today. Physicians
respond by expanding services, performing more procedures, and seeing more patients. Medical organizations lobby congress
and many provides refuse to see Medicare and Medicaid patients as the reimbursements simply do not cover the office overhead
of caring for them. And costs go up.

In the 1990’s managed care sought to have relatively less expensive primary care
physicians ‘manage’ all patients, controlling referrals to relatively more expensive specialists. Early conflict between
specialties was soon overshadowed by cost savings as health care plans competed with each other and, by virtue of their large
size, negotiated discounts from provides. Soon, however, managing patients became micromanaging physicians. Patients became
consumers and insurers found new methods of control with such nice sounding names as Health Maintenance Organizations, keeping
you healthy costs less, and Preferred Provider Organizations, limiting your choice of providers costs less. Restrictions to
access became severe enough for congress to debate a Patient’s Bill of Rights. Capitation, in which a fixed amount is allocated
for each patient regardless of that patient’s needs, placed providers in the role of assuming risk and created huge incentives
to withhold care. Capitation even placed some health plans in the absurd situation of enticing physicians with the promise
of relatively healthy patients. Today government, unions and businesses join in various forms to gain leverage to negotiate
for lower costs. And doctors and hospitals have increased their own bargaining power and now negotiate to lessen or even restore
at least some of the lost concessions all the while struggling under a bureaucratic mountain of regulations. And costs go

Enter consumer driven care. The hope is that the tax benefits of medical savings accounts will enable individuals
to negotiate best prices with providers and insurers. In this way market forces are introduced. Additionally the consumer
becomes at least partly responsible for the cost of their health care decisions, something called ‘price sensitivity’.
There is, however, a fundamental difficulty with this approach. While a consumer can safely refuse the purchase of an appliance,
house, automobile, etc. they generally can not refuse when it comes to health care without risking serious consequences. This
is especially true when care is needed immediately or very soon. Significant decisions must be made while seriously ill. And
the only measurable information currently available is cost. But this is slowly changing.

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