The top health-policy adviser to Sen. Barack Obama is an ardent supporter of pay for performance for physicians so long as they are comfortable with the standards set for them.

by Mark Crane, Contributing Writer, MedPage Today 


Boston, MA, March 14 —
The top health-policy adviser to Sen. Barack Obama is an ardent supporter of pay for performance for physicians so long as they are comfortable with the standards that are set for them.

In a wide-ranging interview with MedPage Today on the Democratic presidential hopeful’s views on some of the hot-button health issues of the day, David Cutler, Ph.D., dean for the social sciences and a professor of applied economics at Harvard University, conceded that implementing pay for performance is not an easy proposition.

Yet it could reduce wasteful health spending and help physicians provide better care if they have a substantial input in how quality standards are set, said Dr. Cutler.

“The current system financially penalizes physicians who want to spend the time with patients needed to achieve quality outcomes,” said Dr. Cutler. “Pay for performance needn’t be punitive for doctors if we use well-validated measures that doctors feel can work for them.

“If a system is just imposed on doctors, though, it will be a disaster,” Dr. Cutler added. “We want to work with doctors, not just do unto them. We need physician buy-in for reform to work.”

Dr. Cutler served on the Council of Economic Advisers during the Clinton Administration and has advised the presidential campaigns of Bill Bradley and John Kerry. Ironically, he helped draft the Clinton health plan in the 1990s.

“I respect Sen. (Hillary) Clinton very much and have no substantial objections to her current plan,” he said. “I just think Sen. Obama’s plan is better and he can bring all of America along to implement real healthcare reform.”

Dr. Cutler spoke about Medicare policies, how to control health costs, electronic medical records, insurance reform, and other health topics.

On pay for performance, Dr. Cutler said that “we should increase payments for doing a good job and cut them for providing needless services.” But he acknowledged that pay for performance hasn’t been tried on a large enough scale to know if it can succeed. “It’s where we need to experiment.”

How might a system work in actual practice? Details are sketchy but as one example, Dr. Cutler favors increasing pay for appropriate long-term care for chronic patients, such as diabetics. Rather than reimburse physicians on the basis of volume alone, he would have plans that provide bonuses if patients get annual eye exams, have blood sugar and cholesterol below certain levels, take aspirin daily, and other evidence-based measures. The system might set up a bonus fund for doctors who follow guidelines or have the best measures of outcomes, and pay less for procedures, drugs, and services that seem discretionary.

The Obama plan would require greater transparency about quality and costs, requiring hospitals and providers to collect and publicly report measures of healthcare costs and quality. These would include data on preventable medical errors, nurse staffing ratios, hospital-acquired infections, and disparities in care. Health plans would also be required to disclose the percentage of premiums that go to patient care as opposed to administrative costs.

Dr. Cutler sees the annual debate over the “sustainable growth rate,” the formula that typically results in planned annual Medicare pay cuts for physicians, as “a reflection of just how bankrupt our health policy is. Of course, it must be reformed but as a part of system reform. That’s not to say the problem should be held hostage to overall reform, but if we just zero in on this one issue without making bigger fixes, no one will be satisfied.”

The Obama plan calls for investment by the government for health information technology and comparative effectiveness research to measure the worth of various treatments. “You have to put the effort in up front,” Cutler says. “The Bush Administration often talks about these measures, but talk is cheap and there’s no serious engagement.”

Investment in electronic health IT can lower costs, he says. Obama would invest $10 billion a year over the next five years to move the system to broad adoption of standards-based electronic health information systems. “Physicians would receive some technical and financial help to implement this,” Cutler says. No decision has been made on how much, or if there will be penalties for those who don’t comply.

The Obama campaign believes that greater efficiency and financial incentives can squeeze out wasteful spending that may account for as much as one-third of the nation’s healthcare bill. “There’s a tremendous amount of spending that doesn’t result in better health,” Dr. Cutler said. “If we’re serious about reform, we can cut spending without rationing or hurting patients. Obama’s plan can save $2,500 a year for a typical family on health insurance costs.”

Dr. Cutler cited the work of John Wennberg, M.D., a healthcare researcher at Dartmouth, who found that areas like Boston and Miami, which spend far more than other communities, don’t achieve any noticeable improvement in mortality. This disparity is a ripe area for cutting costs and improving quality, Dr. Cutler said.

The Obama plan calls for a national insurance exchange that will increase competition among insurers and bar them from “abusing their monopoly power through unjustified price increases.” The plan would force insurers to pay out a reasonable share of their premiums for patient care instead of keeping huge amounts for profits and administration. Like the Hillary Clinton plan, it would prohibit insurers from turning away applicants because of pre-existing conditions. “With a new set of rules that everyone has to follow, insurers will comply,” said Dr. Cutler.

Obama doesn’t favor a national market for health insurance supported by Republican presumptive nominee Sen. John McCain so that patients could buy policies written by companies in another state. “Most of these proposals don’t say that insurers can’t turn away the sick or must charge reasonable premiums,” Dr. Cutler said. “It just isn’t a reform that works.”

Obama also disagrees with McCain on the urgency of tort reform. “The single biggest thing we can do is to reduce medical errors that hurt patients,” said Dr. Cutler. “We need to get better information to doctors. Sen. Obama doesn’t favor mandatory caps on awards for pain and suffering because he believes that penalizes people who’ve been seriously injured.” Obama would strengthen antitrust laws to prevent insurers from overcharging physicians for their malpractice insurance, he adds.


Published: March 14, 2008

Reviewed by Zalman S. Agus, MD; Emeritus Professor

University of Pennsylvania School of Medicine.

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