I found Seema Verma’s op-ed in the Wall Street Journal on Medicare and Medicaid reform a mixture of sound advice and wishful thinking. As is pretty typical in these pieces she does a pretty decent job of stating the problem she wants to solve:
The current rate of growth in Medicare and Medicaid is unsustainable and jeopardizes the country’s ability to fund other priorities such as education, infrastructure and public safety. While the Medicare board of trustees has warned that the program is headed for insolvency in as little as six years, Medicaid has become the largest budget item in most states. Medicare and Medicaid collectively are one of the largest contributors to the national debt and will be the largest federal budget item by 2030, according to the Congressional Budget Office.
It’s her proposed solution that caused me to raise an eyebrow. She suggests changing from the present “fee for services” system to a capitation system.
I’ve written favorably about capitation systems in the past. Under a capitation system a physician is paid a fixed amount for each patient under his or her care. Part of the payment is related to patient outcomes. The advantage of a capitation system is that it aligns the physician’s, patient’s, and the taxpayer’s interests. Here’s her description:
In value-based care, instead of getting paid only when a patient gets sick or for rendering a specific treatment, a doctor is prepaid a fixed amount based on the patient’s health status. This payment method, called capitated payment, is used to cover all the patient’s healthcare-related costs. The prepaid amount creates incentives for the provider to make investments in the type of care that avoids expensive emergency-room visits and hospital stays.
To ensure that care isn’t rationed, part of the doctor’s reimbursement is tied to quality and patient outcomes. For example, doctors can use part of the capitated payment to cover the costs of home modifications to prevent falls, to provide medically tailored meals for diabetics, or to send a nurse to a patient’s home to administer medications.
Value-based reimbursement can also be used to address new high-cost medications. If a patient doesn’t show meaningful improvement after taking the medication, the drug manufacturer’s reimbursement would be reduced or not paid at all.
I’m skeptical for a number of reasons first and foremost because I find it hard to imagine how a capitation system could work alongside a fee for services system for private insurance. I think the only way it would work would be within the context of a full-fledged national health system. Another issue is that historically such systems have been resisted by physicians and medical practices. A capitation system for the U. S. was proposed 80 years ago. The idea died in its infancy due to physician opposition. Again, a capitation system for Medicare was tried in the 1970s. It gained very little participation from physicians. What’s different now?
Something she doesn’t mention. For such a system to work, physicians would not be able to pick and choose among patients. Practices would either be closed to new patients or open to any patient. It’s hard for me to see that gaining much acceptance.







