Quality and Value in Health Care Explained

Published November 15, 2016

The congressional echo chamber, on both sides of the aisle, constantly talks about the great reform fad: “payment for value” and “quality” care. And the Medicare version called MACRA passed nearly unanimously, with cheers from the marbled halls of the AMA tower. ObamaCare too constantly harps on “quality.”

Politicians seem to think that payment for value is an original think-tank inspiration, instead of the way things always have worked, at least outside of medicine. There was the BMW, the Mercedes-Benz, and the Citroën SM (early 1970s), and then my grandpa’s car, of which he said “it beats walking.” The difference is the answer to the question: value to whom?

Now Medicare and soon all “health plans” want to pay only for “value,” instead of for doctors doing work, and it all has to be “high quality.” Grandpa can just walk, or stay home, if he can’t get the highest quality—but he’ll still have to pay into the “health plan.”

Despite all the promises of Medicare and ObamaCare, the reformed system is like taking away Grandpa’s reliable old Chevy, with its stick shift and hand choke. Instead he must choose a model (these days there may be only one available on the Exchange) that resembles a BMW only in price. The price is so high that is divided into monthly chunks. As soon as he can’t pay it, they tow the vehicle away, leaving him both broke and without wheels. It drives like a Yugo, is often waiting in line at the shop for preauthorization, requires high-test fuel he can’t afford, and can’t go to a lot of the places he wants to go because they are “out of network.”

Grandpa would like to forgo the smoke detector, the computerized monitor of beverage consumption, the automated health warnings in 50 languages, and the condom dispenser, but these are not optional. They are needed for “value,” and he has to pay for them.

You may think this piece is a mixed metaphor, and that I have confused Grandpa with a car. But that’s just it: the “healthcare system” is mostly about the payment system, transporting trillions of dollars around, and only incidentally about medical care for patients. Maybe half the revenue sucked into the system buys something recognizable as a medical service or item used by a patient. Maybe less.

The whole system of calculating value or determining quality in medicine is designed by and for bureaucrats and technocrats and their abstract concept of what is good for “society” or the system. The 2200 pages of the MACRA Final Rule have to do with that kind of value.

In a free market, there is always the option of saying “no thanks.” No value means no payment. But with Medicare and ObamaCare, there is no way to decline to pay the army of compliance staff, auditors, executives, and writers of constantly changing and incomprehensible rules. Their share comes off the top.

Patients probably don’t care about the average blood pressure of patients in the doctor’s practice or about his documentation of anti-smoking advice or any of the other dozens of “quality” metrics he must record—but they all pay a share of the $50,000 or so it will cost him to collect such information every year under MACRA. Grandpa might be willing to pay for unhurried hour of a doctor’s time, without the intrusion of an electronic medical record. Or for a treatment that may greatly improve his life, such as home oxygen, for which he does not meet some “expert’s” criteria. But that would involve “balance billing” or payment for an “unnecessary” or “inappropriate” service. Such things are federal crimes.

But while Grandpa might not be allowed to make do with his old car, or old-fashioned doctor visit, he will get counseling on “end of life”—free of charge.e

The new Administration needs to recognize true value: the value of human life and liberty. These can’t be expressed in dollars. But when people have liberty, they are in charge of determining the dollar value of goods and services they buy with their own earnings. With medical care, as with cars, their voluntary decisions, based on honest price signals, will optimize value and allow supply and demand to come into balance. It will bring about the lowest cost without shortages and coercive government rationing.

The Medicare system of price controls, the new MACRA methodologies, and the managed care methodologies of ObamaCare all disregard patient values, while at the same time adding a huge overlay of dead-weight costs.

They all belong in the junkyard.