Patient Incentives

Article excerpt

Why we need them, and how they can work

PAST EFFORTS TO IMPROVE CANADA'S HEALTH CARE SYSTEM HAVE focused either on more money or on incremental administrative reforms. While helpful, these efforts have failed to deal adequately with the steady rise in health costs that soon will present the provinces with more profound fiscal difficulties than any they have faced to date.1

One major problem is the continuing lack of financial incentives to restrain the demand for health services, improve their efficiency or reduce the costs of providing them. No matter how much money is allocated or what administrative reforms are made within the realm of the politically possible, without stronger financial incentives for people to use services more carefully the health care system will inevitably be short of the money required to provide the level of service the public demands.

At this late stage in medicare's development, the introduction of appropriate financial incentives will be difficult both technically and politically under the Canada Health Act. Nor will the introduction of incentives be a silver bullet that resolves all problems in the industry. But we believe incentives, properly designed and implemented, can serve the interests of Canadian health care consumers by stabilizing the financial condition of the system and improving its performance.

The issue is not just whether new incentives can restrain the growth in costs to a more acceptable level, but whether they might also help to narrow the gap between our level of spending and our performance - including, obviously, prompt provision of needed health services. Using Organization for Economic Cooperation and Development (OECD) definitions, Canadian health spending was US$2,312 per capita in 1998. This placed us in the high-spending category among OECD countries (fifth after the United States, Switzerland, Germany and Norway). At the same time, Canada ranked only 30th in overall performance efficiency as judged by a weighted index measuring health outputs and finance method.2

We focus on incentives bearing directly on public demand for health care services paid for by governments. Many observers argue that patient demand for health services is highly insensitive to direct financial incentives.3 Or, arguing in the alternative, they say that to the extent they work at all, these incentives postpone the use of health services, and that making up for the delays ultimately costs the health care system more.

The conventional premise is that the doctor is gatekeeper for the system, and the patient a passive participant. But the weight of accumulated evidence suggests that this basic picture may be wrong. While doctors and other professionals do have considerable influence on individuals' use of the system, patients themselves are sensitive to financial incentives. Moreover, being rational, patients may act more quickly, rather than delay treatment, if doing so is likely to save them money. Support for this contention is bolstered by the recent proliferation of consumer-oriented private medical insurance plans in the United States with the feature that participants who cost-effectively manage their health care usage receive monetary rewards at year-end. 4

Patient incentives would also have an indirect effect on the suppliers of health services. More meaningful management information and a clearer image of consumer preferences would provide a much stronger basis than now exists for steering supplier behaviour and structural change. Single-payer, fee-for-service systems typically lack incentives encouraging providers to find least-cost effective treatment patterns. Conversely, capitation systems, like representative managed-care health organizations, can sometimes fail to encourage health professionals to allocate enough resources to a particular patients care. Bringing to the table patients' financial interests as well as their health interests will encourage them to work with providers who arrange healthy, cost-effective care and treatment regimes. …