Connecting the dots to measure value

Gallery

This gallery contains 1 photo.


Last week, IBM celebrated 100 years of business and coincidentally posted  annual sales of $100 billion.  Recently, several profiles and news stories acknowledged  this milestone; and IBM itself has hosted many “parties”  to celebrate. The roster of American companies and … Continue reading

Medicare, time to replace the model


Problems, by in large are man-made.  Humans, among all living beings, are the only ones who actively make their own environment, and specifically the cultural constructs of that environment.

Sure animals show similar behaviors, birds build nests and ward off other intruders; but animals don’t prosecute killers, nor does the animal kingdom employ different species  to build out their environment.

Unemployment or the Federal Deficit are both human problems  of our own making.  Irrespective of the choices made,  passive or  active, logically motivated or merely “the right thing to do,” problems arise from some break down  in objective  reality.

Today David Brooks , New York Times column  entitled Where Wisdom Lives, describes the philosophical choices the Republican Party and Democratic Party must face to resolve the Medicare problem and present political  logjam.  For all his brilliance and clear understanding of the interdependent pieces that have brought Medicare to this looming state of insolvency, he uses his answer to define the problem.   Good  technique for effective communication, but not a good fit for problem solving.   His mention of  Medicare’s basic structural flaw–reimbursement as pay for service model, suggests an alternative assessment.

What problem exactly was Medicare intended to resolve?  Wikipedia describes Medicare simply as a social health insurance, providing those eligible to receive “covers 80% of the Medicare approved amount of any given medical cost.”   So is the problem the insurance or the costs? or social coverage?

The Pay for Service model, a wonderful cultural construct and mental model of  healthcare delivery  matches the model used in the care and health of automobiles.  Auto insurance policies are structured very similarly to health insurance plans.  Correspondingly, these models also shape government regulations that curb the practices of the insurers, mandate coverage and resolve claims.  Fundamental differences between cars and people seem  entirely irrelevant when choosing or defining the problem that Medicare in its current model solves.

Cars are disposable and replaceable; and the marketplace  determines both reimbursement limits and clear, directional prices that consumers and insurers incorporate in their choices.  Where is the human depreciation schedule, or  the human after market and blue brook valuation equivalent  to those that exist in the automobile market?  No matter how abhorrent an idea, these do exist in part created by Medicare and the Federal government.  In the automobile insurance market, there’s no philosophical debate about when to send a  car to the junkyard or rebuilt.  Not all body shops’ repair or service estimates match nor do every insurer’s reimbursement.  The insurer establishes the limits of what it will pay, and the insured chooses replacement or repair.

In the healthcare system, insurers may expect a co-payment or ask that you obtain  pre-certification before a procedure, but people rarely, if ever, are given a cost estimate.  Most health practitioners couldn’t give one  if they wanted to.  Billing departments set the price and the invoice reflects what Medicaid, or the insurers have negotiated for reimbursement.   At the auto shop, if it’s an insurance related claim, sure there is some pricing adjustments.  But for the majority of service, maintenance or repairs, the repair shop provides the estimate. Then based on an understanding of the cost and relative perception of value, its possible to negotiatewhat work  is done   When our body may  need “repairs,” or “servicing” doctors increasingly review the pros and cons of the different alternatives with us, but cost does not enter the conversation., other than whether insurance may or may not cover the procedure.

In short, the pay for service model is NOT the model of healthcare in the US , because the choices we make are not based on price, they are based on a higher ethical or moral standard of care.  For Automobile service, price is directly linked to the  election of a transaction for service.  Choices for obtaining healthcare services are often made for us, not by us.  Who is making the choice for whom?  Perhaps the idea of Medicare was to make it clear that eligible people would get the healthcare they need.  Philosophically the burden for charitable care was shifted to society, the public and off the care providers…for both medicare and medicaid.  The arrangements for payment preceded the mechanisms for pricing and though adjustments have been made,  the absence of clear market signals compromise the objectivity of any proposed change. Market signals may be inappropriate for healthcare services, and the recent downturn have demonstrated that even a well established market system like the automobile industry couldn’t respond swiftly enough and required governement assistance.

David Brooks  points to the  two parties opposing philosophies that pit wider market driven control against central planning.  What it doesn’t do however is help us use our experiences with a very broken pay for service system to recognize how badly this model fits the consumption process of health care delivery. Rather than getting stuck in a philosophic debate, or stoking the fire of fear, can’t we find a better fitting model?

Goodness of fit test for a model?

Ever been asked to solve a story problem?  Fit, is crucial  when  choosing a method, or evaluating which  different math  model best matches  the information and situation presented in the story or problem.  Wikpedia on solving math problems explains :

“This question can be difficult to answer as it involves several different types of evaluation.”

Likewise, here is a more complete explanation of matching models and problems that teachers:

” In this step a chose of how to solve the problem will have to be made. The choice could be as simple as writing a math equation. More complex problems may require the formulation of an algebra problem or the use of a problem solving strategies. Strategies such as guess and check, draw a picture and work backwards can be used on many types of problems. Sometimes more than one strategy will work on problem in which case the solver can select their favorite strategy or use the easiest one.
Read more at Solving a Math Story Problem: Five Easy Steps for Completing Any Problem

Much of the debate continues to focus on philosophy. The  insurance model  doesn’t fit the larger understanding of the problem.  Evidence points to runaway costs, or services untethered to a cost based evaluation where there is no market mechanism  to help providers and recipients  make a service choices. Just as a car that goes in for regular maintenance is cheaper then the breakdown on the road, the missing cost signals have also compromised  both our attitudes and service mechanisms to provide lower cost maintenance health regimens.  Likewise, it is difficult to discuss quality of care in the absence of cost.  Not every investment to prolong life may prove qualitatively appropriate, yet insurance companies are making the call for us.  If that is morally repugnant, then let’s find a some common ground and then move forward before it’s too late.

Costs of Care , a social venture non-profit organization committed to greater transparency of costs in healthcare delivery offers this model:

In the American political system, our ability to get mired in philosophic debate is  ever present.  Our ability to find the best frame , or clarify our intentions and find the best model match is imperfect at best.  But there’s no time to waste if we are serious about tackling ticking time bombs like Medicare.

I’d be pleased to hear further thoughts or  suggestions that might help either redefine the problem or be a better fit for the problem as defined.