How should government set payment levels for physicians and providers?

Lessons from Roberts and Hsiao about reforming health payment methods:

• Fee-for-service payment encourages health-care cost increases.  Nations would be wise to avoid this method unless there are strong reasons to do otherwise.  
• The salary-plus-bonus payment method is superior to salary only.  The former can motivate health professionals to increase productivity and improve quality of services.  This advantage is especially evident for specialists, provided they are employed by organizations such as hospitals or insurance programs. 
• Capitation payment for primary care has much to recommend it, especially when there are competing services in the same community. 
• For high- and middle-income countries, per-admission payment and simplified DRG payment to hospitals have desirable incentive effects but also create administrative complexity.  For hospitals in low-income countries, global budgets may be preferable because of their more limited administrative requirements. 

And here are recommendations for setting payment levels for physicians: 

Setting the right payment level is a contentious and sensitive affair.  Competitive bidding has much to recommend it when there are competing providers and the process can be combined with selective contracting...  Attempting to set a reasonable payment level based on cost data is also likely to be controversial; payers and providers will rarely accept one common set of data as truly objective.  

International experience shows that bilateral negotiation can produce mutually acceptable results in certain circumstances.  But once governments become involved and the situation becomes politicized, governments are likely to find themselves under substantial pressure from well-organized provider groups to devote additional resources to health-care salaries. 

On the fee-for-service model

It increases access to health care, but drives up costs:

This is the only form of payment under which the provider does not have any incentive to select healthier patients; in fact, the opposite is true.  Under FFS, the provider bears no risk for the cost of treatment.  The payer, the insurer, or the patient is entirely at risk for the cost of care.  Theoretically, patients and third-party payers have a reason to question the need for additional services and negotiate lower payments.  In reality, however, patients and third-party payers can seldom negotiate effectively due to the professional power of physicians.  

Studies in many countries, both developed and developing, have found that a fee-for-service system promotes an excessive use of services and an increase in costs (Barnum et al. 1995).  Comparing resource utilization under two provider-payment methods (FFS and capitation) in Thailand, Yip et all (2001) found a significant difference in the average length of stay, drug charges per admission, and lab costs per case.  Under FFS, resource utilization was consistently greater.  A study in the United States (Krawelski et al. 2000) found similar results.  Costs were significantly lower under medical group practices paid by capitation than those paid by FFS.  

That's from Roberts and Hsiao, in their chapter on Payment.

Middle class life in the Cote d'Ivoire

BBC Africa gives two examples of what middle class life is like in the Cote d'Ivoire.  On the good side, the economy sounds much stronger than it did a few years ago:  

During the crisis I had to stop working; I lost everything; I had to spend all my savings just to live, to eat.

Now I put money aside every day. I started my savings again just five months ago because I want to buy a computer. Maybe in three months I will have enough money to buy one.

Right now I don't find I have enough money to do what I want to do because I need to pay for so many things so it's not easy to start a good business.

If one of my brothers calls me and says he needs money, I give him some money. I have two younger brothers and three sisters; I'm the eldest.

I cannot say I'm wealthy but I cannot say I'm poor because if I'm living it means I can sustain my life.

Unfortunately, there are still serious repercussions from the crisis: 

My father died in 2004 and that's when I stopped going to school because I had to work to find money.

It was hard to find work then because it was just after the first crisis. Everyone fled to Abidjan and everybody needed jobs.

I don't have any savings or any emergency fund. There is nothing in my bank account. 

Everything I earn goes on rent, bills and food. There's nothing left for savings. 

When there's a death in my family I go to my friends for help, to give me a little something. It's like that.

Yes I am scared if I lose my job because there will be nothing to pay for my rent. 

The importance of exercise

A recent study finds that exercise lengthens life span, regardless of weight:

A little exercise each week can lead to big gains in life expectancy. And that’s true regardless of your current weight, according to a new review study that included more than 650,000 people. 

People who got the full recommended amount of exercise saw an average 3.4-year gain in life expectancy. People who got half as much exercise still lived an average 1.8 years longer. 

In fact, exercise was a bigger factor than body weight in many cases. People who were normal weight but were inactive actually lived an average of 3.1 fewer years than obese people who kept up high levels of activity.

How to finance your health care system

Here's Roberts and Hsiao with some wonderfully specific and concise suggestions on health system financing:

• For the world's two billion poor people who live in rural areas, many goals would be advanced if private out-of-pocket spending were substantially replaced with prepaid community financing schemes.  Such schemes could use the current spending more efficiently and effectively, improve the quality of health care, and pool some of the risks to reduce impoverishment due to large medical expenditures. 
• To the extent that they are affordable, social insurance schemes have the greatest potential for providing effective risk protection.  In low-income countries, such schemes are likely to be limited to workers in the formal sector.  As national income rises, governments can expand such coverage by providing subsidies from general tax revenues.  In high-income countries, compulsory universal systems are likely to be cost-effective.  
• Private insurance has high administrative costs and tends to decrease risk-pooling.  From an equity perspective, adverse effects are minimized if it functions in a supplementary role (to social insurance) to cover otherwise uncovered services and to provide higher levels of service quality.  In high-income countries, upper-income individuals are likely to demand such coverage, because they want better care than public arrangements typically provide.  
• Basic public health and preventive care will generally have to be tax-supported if a nation wants to have a cost-effective pattern of resource allocation to maximize health status.  Out-of-pocket payment or insurance schemes are likely to under-provide such services from an allocative efficiency viewpoint.  
• These observations in turn lead us to a view about the appropriate financing strategy for countries at different income levels. 
• Low-income countries: Social insurance for the formal sector; community financing in rural areas--with modest subsidies from general revenue; public services for the poor, perhaps user fees for public hospital care, with low-income exceptions, if these can be properly implemented. 
• Middle-income countries: A similar overall strategy with more subsidies for expanding the social insurance system and extending community financing to secondary care.  Public services need to be organized in a way that is accessible to the poor. 
• High-income countries: Universal social insurance with general tax revenue subsidies for low-income groups has much to recommend it.  Private insurance is likely to play a role for upper-income groups.