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A New Approach to Medicare: Implications for Health Care Reform and for Medical Education

Cook, John S. DPhil; Rabkin, Mitchell T. MD


Medicare Parts A and B engender a system of payment and delivery at odds with that of health maintenance organizations (HMOs). Most evident in the conflicting incentives and requirements levied on primary care physicians participating today in both traditional Medicare and HMOs, the dichotomy has vitiated the promise of managed care and constitutes a significant factor in both the rising cost inflation in health care and the growing dissatisfaction of patients, physicians, payers, and insurers. The resulting impact affects the robustness and quality of medical education as well as the character and quality of health care delivery.

An innovative incentive-based system of payment and delivery is proposed as an alternative option for Medicare, with expectation that the system, which the authors title Medicare-New, or Part N, could trigger a more effective approach to health care reform for Medicare, foster more rational support for medical education and the care of the indigent, and benefit private insurance programs as well. Positive changes in both public and private sectors would strengthen both medical education and the access to and quality of health care throughout the nation.

Dr. Cook is an independent consultant in health care in Williamstown, Massachusetts, and Dr. Rabkin is professor of medicine, Harvard Medical School, and Institute Scholar, the Carl J. Shapiro Institute for Education and Research at Harvard Medical School and Beth Israel Deaconess Medical Center, Boston, Massachusetts.

Correspondence and requests for reprints should be sent to Dr. Rabkin, the Carl J. Shapiro Institute for Education and Research, 330 Brookline Avenue, Boston, MA 02215; telephone: (617) 667-9400; fax: (617) 667-9122; e-mail: 〈〉.

The authors are deeply grateful to Lucy Johns, MPH, Stuart H. Altman, PhD, and Harold A. Cohen, PhD, for helpful advice and critique of the ideas and presentation of this manuscript.

An article on a related topic follows this one.

While the nation's attention remains focused on issues such as terrorism and the stock market, other issues understandably fade from center stage, even while their importance grows. Among these are the financing and delivery of health care and, within that, the future of medical education, both undergraduate and graduate. Ludmerer's lucid exposition1 has brought a valuable perspective to the educational issues, but there is no comparable approach with respect to the financing of medical education. The support for medical education previously garnered from clinical revenues at academic medical centers has become eroded and, given the present trajectory, may soon disappear. Even Medicare's valuable funding for medical education is under siege. Thus not only does the nation face a challenge in relation to the delivery and financing of health care, we confront a threat to medical education and the expertise of the physicians it will produce in the years ahead. While the components of medical education include the substantive interactions among students, house officers, patients, senior physicians, and other teachers, an equally critical and problematic factor is the financing to pay the costs of these necessary interactions, a factor that also relates to the financing of health care costs overall. Absent a solution to the latter, there is little hope that medical education in the United States can sustain the excellence that has helped propel the nation's quality of care to its present high level.

That “something must be done” about health care in the United States is evident, even without consideration of the future of medical education. Insurance premiums are rising in double digits as a result of advances in technology, pharmaceutical costs, the growth and aging of our population, and the artificial depression of premium rate increase in recent years past, attributed—largely falsely—to the beneficial impact of market forces unleashed by managed care. Patients are not happy with managed care, physicians are increasingly restive in general, the nation's cohort of 40-plus million uninsured may be enlarging, and employers—concerned about the premium costs they shoulder and hesitant to take on more—may be looking even to diminish that component of their benefits costs. Organized medicine has not been helpful in offering effective solutions. The same can be said for academic medicine. Even among health policy experts there are few, if any, new ideas.

The nation vacillates between appreciation of the legitimate reasons for growth in health care costs and an uncomfortable albeit justified feeling that there are some excesses in the commitment of resources that, if properly curbed, might temper that growth and make more manageable its payment. Among the efforts to trim costs has been a rein on payment for medical education, in particular, the costs associated with training residents, the immediate graduates of medical school. Medicare has worked to shave both “direct” and “indirect” medical education payments to teaching hospitals. Private payers have refused to contribute to these costs of training newly-minted physicians. The trimming and reduction by Medicare and others of payments to physicians for care given to patients, combined with the push for productivity, leave teaching physicians with less time to teach, yet much learning by medical students and residents comes from observing senior physicians as role models. And often, projected relief such as improvement in physician payment tends to come with the requirement of being “budget neutral,” that is, matched with a comparable payment decrease elsewhere.

While it is true that there remain actions for the profession to take toward more prudent use of resources, the growing emphases within the profession on quality of care and on evidence-based practice, and the increasing use of information technology to provide useful benchmarks for decision and action in clinical medicine, are hopeful signs. In the end, however, without a reworking of the system of health care payment and delivery, and a realistic approach toward greater albeit appropriate payment for appropriate care, health care in the United States and the medical education that makes it possible will suffer increasingly.

Now, with appreciation of the mounting threat to medical education and thus to the training and capability of tomorrow's physicians, it is time for academic medicine to develop answers, not simply for the sake of medical education but for the future health and well being of the nation. New ideas can provoke discussion that may lead to answers.

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To begin, we suggest these general principles for successful health care reform:

  • Cost control is not possible without a budget.
  • The budget must provide fair payment for the services covered.
  • Medical care decision making should be done by physicians and their patients, based on the best scientific evidence available being applied to the care of the individual patient.
  • Along with appropriate payment to the providers of care, there should be reasonable economic incentives for all involved to meet budget targets, to meet standards for quality of care, and for patient satisfaction.
  • The incentives should be substantially comparable across the spectrum of payers.
  • For the advancement of medicine in the United States and the continuation of its excellence, appropriate support for medical and nursing education should be provided; because patients of all payers benefit, all payers should participate.
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Since better treatment arises out of better diagnosis, we offer a new diagnosis of a present illness of health care in the United States, focusing on the paradigm of care: that is, the model that describes—or prescribes—the organization, financing, clinical management, and care delivery elements characteristic of any system of health care payment and delivery. These elements in turn generate incentives that influence the behaviors of providers and consumers of care and those who pay for it. Each insurer, such as Medicare or a health maintenance organization (HMO), creates its paradigm of care through the economic incentives in its payment arrangements to physicians and other providers, in the organizational requirements it places on physicians, in the distribution of insurance risks between the insurer and participating providers of care, in the authority it vests in or removes from physicians to make medical care decisions, and in any restrictions on clinical management it imposes to control fiscal outlays. For physicians and their practice organizations, the paradigms of the major insurers with which they contract determine to a significant extent the character of their practices, and the consistency of the respective incentives from one insurer to another will depend upon the compatibility of those several paradigms. Today, the two prevailing paradigms of insurance and of care—described below—are in fundamental conflict.

Specifically, a problem hitherto ignored is that “managed care,” as exemplified by staff-model HMOs such as Kaiser—Permanente HMO, is predicated on a paradigm that conflicts with the paradigm of traditional Medicare, Parts A and B. The conflict is most evident in independent practice associations (IPAs) of physicians that serve patients over 65 (and some disabled patients of any age) under Medicare and also serve a younger population of HMO members under managed care paradigms in which the IPA and/or the physician become fiscally accountable for the costs and volumes of HMO member services. Most physicians do face this conflict,2 and for professional, ethical, and administrative reasons, it is unpalatable for physicians to provide different styles of care based upon the differing paradigms of any individual patient's insurance coverage. To be most effective, paradigms of the various insurers should be reasonably comparable, but today both physicians and their IPAs face conflicting paradigms that confront them with incompatible incentives.3

With traditional Medicare, financial risk rests in the federal Health Care Financing Administration (HCFA), now named the Centers for Medicare and Medicaid Services (CMS). Medicare-participating physicians provide office care with essentially no economic incentive for prudent clinical management, except perhaps fear of challenge for “fraud and abuse.” By contrast, through their IPAs, many Medicare-participating physicians have HMO arrangements for patients under 65 whereby a measure of financial insurance risk is allocated by the insurer to the IPA. In response, the IPA can adopt arrangements such as capitation prepayment to the physician in the effort to foster efficiency and cost-cutting. In theory, physicians would respond to this limited payment arrangement by operating their practices in ways that make fiscal sense without harm to patient care. But were they to do the same for Medicare beneficiaries, some of those responses would command no payment from Medicare. Examples might be diagnosis and treatment via telephone or e-mail, counseling and monitoring patients on preventive services such as strict diet instead of instrumentation for coronary heart disease, coordinating arrangements for home care, checking on the administration of prescription drugs, and assuring the availability of hospice, nursing home, or other institutional services. Thus, were the IPA physician to adopt this approach to all patients, the financial benefits from the incentives in the IPA's payment arrangements to temper resource commitment to HMO patients would likely be offset by revenue losses for similar efforts toward Medicare patients where no such incentives exist. Conversely, the unmanaged style of office practice allowed by Medicare has dire fiscal consequences for an IPA when applied to HMO patients for whom the IPA bears insurance risk, and similarly unfavorable consequences for its physicians who would provide such services yet receive no incremental compensation in return.

Whether Medicare patients receive too much care or HMO patients too little is not the issue; it is the inherent conflict of the paradigms, Medicare versus the HMO/IPA, and the incompatibility of their respective incentives. The promise of managed care was creation of vertically integrated delivery systems, combining insurer and provider functions under owned or exclusive arrangements. These integrated insurer and delivery systems (demonstrated in the successes of Kaiser—Permanente) are united by the same incentive: to live within a budget fixed in advance by prepaid premium income. In theory, such systems would compete with one another on the basis of cost and quality of the care, but the nationwide promise has not been fulfilled. There are various reasons for the present disenchantment with managed care, but when it is implemented in an office practice side-by-side with Medicare, the conflict of the two paradigms undermines the robustness of the managed care effort.

For example, concerned that provider organizations are weak at managing utilization, resource commitment, and financial risk, most HMOs today have adopted (or contracted with provider groups to adopt) aggressive, intrusive, centrally managed, and often less physician-monitored methods for controlling costs. These target inpatient hospital use—preadmission certification, concurrent review, and discharge planning—but also restrict patients' access to ambulatory care through requirements for prior authorization of service, denial of financial coverage if the HMO's rules are not followed, and retroactive denial of payment to physicians and other providers. Provider organizations that shoulder all or a portion of the financial risk have adopted similar approaches.4 However, neither HMO members nor HMO-participating physicians have accepted, and indeed many resist, this distortion of the original managed care concept.5 HMO enrollment growth slowed in 1998 and 1999, with the less restrictive Point of Service (POS) option accounting for what HMO growth there was.6 Employers—sensing consumer backlash—began offering health insurance products with broader networks of physicians, out-of-network coverage, and less restrictive access to care.2 Out of that tension, the use of capitation has stagnated. Market turmoil has erupted with failure of delivery systems that had accepted extensive capitation risk, and several prominent physician practice management organizations have gone bankrupt, although only in part because they could not resolve the conflict.7 Nearly all physician groups and their sponsoring HMOs have separated into independent organizations with conflicting purposes, and a new variety of “managed care” has emerged to displace the vertically integrated model.6 Several states have enacted restrictions on HMOs under the rubric of “patients rights” with requirements for mandated benefits, grievance procedures, and consumer protection, and the issue has become national. With employers' health care costs topping 10% growth in 2001, and looking to grow further, it seems reasonable to conclude that the HMO and managed care, as they operate today juxtaposed in most practices with Medicare, will not resolve these conflicting paradigms,8 nor will they rationalize the nation's health care financing and delivery.9,10 Something new is needed.

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The approach we propose must begin with Medicare as the nation's largest health care insurer. It is designed to blunt the conflict of paradigms and create a system encouraging acceptance by patients and providers while fostering prudent commitment of resources and strengthening quality of care. It offers the opportunity to minimize the present incompatibility of incentives that is preventing successful realization of a viable HMO paradigm. We propose adding a government-sponsored option, Medicare-New, or Part N, to the traditional Part A and B arrangements.

Unlike the insurance options created for Medicare beneficiaries with passage of TEFRA (1982) and the Balanced Budget Act of 1997 (Medicare Risk HMOs, Medicare + Choice organizations11), and demonstration plans such as PACE, Medicare-New, or Part N, would be offered by CMS (formerly HCFA) and operated under a new paradigm to be set forth in federal regulations. And unlike such Medicare options as the proposed but never significantly implemented Provider-Sponsored Organization (PSO), which places the insurance, marketing and other risk and administrative functions with the physicians' organizations,12 Part N would be administered through CMS as with Medicare Parts A and B. The purpose of Part N would not be to privatize Medicare, but rather to create a viable government-established competitor to conventional Medicare (Parts A and B), largely eliminating the conflict of paradigms and attractive enough to be selected voluntarily by Medicare beneficiaries.

Each Medicare-eligible person would be offered Part N as an alternative to Parts A and B. Those selecting Part N would pay a premium for the coverage as in Part B, and choose annually a primary care physician (PCP) participating in Part N who would become responsible for providing or arranging all of the beneficiary's covered Medicare services. In contrast to Medicare Part B, with Part N the patient would face no deductibles or co-payment for PCP-authorized physician services, thereby enjoying a meaningful incentive to follow the PCP's service authorization. However, the Medicare beneficiary would have the choice of self-referring to any physician at any time without PCP authorization, in which case the standard Part B deductibles and co-payment would apply to these self-referred physician services.

Medicare would use its contracting power to foster the voluntary formation of primary care physician organizations of perhaps ten to 20 PCPs to provide services under Part N and to arrange for the participation of specialists under the Part N paradigm. Each participating PCP would be paid on a “per-member-per-month” (PMPM) basis, risk-adjusted, with the level of payments related to the current costs of typical PCP services under Part B. Annually, this baseline amount would be adjusted for the PCP organization's fiscal performance, the results of patient satisfaction surveys of Part N beneficiaries, and the evaluation of the PCP's services and referrals in terms of selected quality criteria. Each Part N Medicare beneficiary selecting a PCP in a particular medical panel would have a per-member-per-month budget credited to the medical panel's account, including amounts for specialty consultations, emergency unit visits, and all covered Part N services other than inpatient hospital care. The medical panels would be accountable clinically and financially for their Part N beneficiaries but their insurance risk will be limited through reinsurance arrangements provided by Medicare, and supported by effective information systems, the core clinical management structure aimed at monitoring and controlling budgetary outlays. Because the determination of medical need typically requires professional judgment, it is proper that the patient's physician be the judge of what resources should be committed within the constraints of the overall budget.

To assure that the PCPs have strong incentives to participate in Part N and meet its criteria regarding budget, patient satisfaction, and quality, we suggest that PCPs be eligible for a PMPM incentive payment in substantial proportion of the baseline amount for favorable performance on all criteria, and that poor performance result in a discount from the baseline amount not to exceed a given percentage. Thus the PCPs and their physician organizations would enjoy a more flexible practice style, including advice by telephone or e-mail, when appropriate, and including preventive efforts, and could provide a wider range of services, including arranging for home health, rehabilitative, hospice, or nursing home care. With capitation operating within an overall budget, these clinicians take on the clinical and financial responsibility for the health of their patients. Their concern encompasses health as well as illness, and prevention as well as treatment, applied over the lifetime of the patient. These are the best approaches to cost control.

As needed, panels of primary care physicians could add physician specialists, evolving into forms of multispecialty group practice. Or the PCP could refer patients to specialists outside the panel on the basis of the quality and cost of their services. These specialists and other providers, including hospitals, clinical laboratories, home health agencies, etc., would be paid by CMS based on Medicare's payment arrangements for Parts A and B. However, for PCP-authorized services, the specialists would not bill the patient for the standard patient co-payment. Rather, these co-payments would be made in whole or in part by CMS from the overall budget surplus, if any, of the PCP group. Thus the participating specialist will also have an incentive to support the PCPs in the control of expenditures. As with Parts A and B of Medicare, CMS would specify the available coverage and benefit options for Medigap policies, which can cover some of the payments not made by Medicare. However, to maintain the incentives of Part N, these policies would not cover the co-payment portions of physician services.

With patients annually enrolled, the PCP would be freed from pressure to refer on the basis of which specialist reciprocates through reverse referral of patients for primary care. Rather, those specialists who practice prudently and provide high levels of patient satisfaction and effective care of high quality will garner the bulk of Part N authorized services.

Because the cost of inpatient care is typically the largest component of lifetime health expenditure, the annual amounts credited to the budgetary accounts established for medical panels will not include hospital payment. Part N cost control for inpatient hospital care will begin with Medicare's present per-case system, where hospitals do have incentives to reduce their costs per case by reducing length of stay, reviewing ancillary utilization, and tempering personnel and supply costs. But what will limit inappropriate use of inpatient services for patients who could be treated in less costly settings? While the medical panels will not be at risk for the costs of an individual inpatient hospitalization, their payment arrangements can include incentive payments targeted at limiting their enrollees' annual total of inpatient admissions to some pre-established standard related to the risk of the population enrolled.

This creates the PCP's incentive to avoid marginal inpatient care. The PCP has additional disinterest in hospitalizing patients unnecessarily, being liable also for the costs of specialty physician services provided to inpatients, a liability that also encourages the PCP to select the more cost-effective hospital-based specialists. By generally excluding the costs of hospital care from the physician's budget, Part N further limits risk to the medical panel and encourages choice of hospital on primary considerations other than cost, thus leveling the playing field for urban versus suburban hospitals (where differences in basic wage rates may exist), academic medical centers with their added teaching costs, and those hospitals with high levels of indigent care. Ideally, the burden of reasonable medical education costs would be distributed broadly among all insurers and patients, since all benefit from the education of physicians.

What about “freedom of choice?” Each Part N beneficiary would be free to choose on an annual basis whether or not to adopt the traditional Medicare program or Part N as his or her coverage option. Each beneficiary electing Part N would sign up with a specific primary care physician yet retain the opportunity annually to make a change. Furthermore, with Part N there is no loss of freedom of choice, since the beneficiary can self-refer to any specialist at any time, facing a deductible and co-payment equal to that of Medicare Part B.

Any CMS-sponsored option to Medicare Parts A and B would of course compete with the plans currently offered by the Medicare + Choice organizations and the Risk HMOs (the Managed Medicare plans) that currently enroll about six million Medicare beneficiaries. As an attractive Medicare option featuring point-of-service choice and a benefit design proved successful in the private sector, Part N will likely draw Medicare enrollees from the existing Managed Medicare plans. However, all Medicare + Choice organizations and Risk HMOs could readily organize their participating primary care physicians and specialists along the lines required by Part N. Were they to do so, a Medicare beneficiary electing to leave an existing Managed Medicare plan in favor of Part N would most likely select the very same PCP from whom he or she was currently receiving care. Then, with the addition of Part N enrollees moving from insurance under Parts A and B, the Medicare + Choice organization or Risk HMO would increase its number of Medicare beneficiaries operating under a managed care paradigm.

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At the nation's academic medical centers and teaching hospitals, several products are delivered—clinical care to those who have a source of payment, clinical care to those who do not, research, and graduate medical education (in both residency and fellowship programs) where newly-minted physicians care for patients under the supervision of senior faculty. While research costs are not subsumed within the costs of clinical care, the costs of teaching and of charity care are typically incorporated within payment for clinical services, specifically for costs of inpatient care paid by Medicare and Medicaid, although not paid for specifically by private insurers. These costs are delineated as “DGME,” or direct graduate medical education costs (payment of the salaries of the young physicians in training, and the costs of some teaching faculty), “IME,” or the indirect medical education adjustment (which takes into account the additional hospital costs of running these educational programs), and “DSH,” the disproportionate share adjustment (which recognizes to some extent the charity burden of any hospital).

The pressures on providers of care to trim their rising costs make no distinction among these different categories of expenditure, and cutbacks in payment directed toward inpatient costs tend to affect each of those categories, regardless of the category in which the cost escalation has occurred. As a result, financial support for both medical training and care of the indigent has declined, and as inpatient costs continue to rise in an unchanged system of payment, that support appears to be increasingly vulnerable. Part N offers a more reasonable approach to the understanding, recognition, and support of these activities—medical training and charity care—the first of which is an absolute necessity and the second, inevitable until the United States adopts universal health insurance.

Under Part N, the cost of inpatient hospitalization is the responsibility of the hospital and not that of the PCP. As a result, the per capita payment arrangements for payment to the physician are not tied to payment for graduate medical education or charity care, nor are payments for graduate medical education and charity care directly influenced by payments to the physician. Furthermore, in the coming years the current linkage of payment for graduate medical education to the inpatient component of health care costs will of necessity weaken because so much care is moving from the inpatient to the outpatient sector. Ambulatory care costs will thus rise relatively, but also rise because of the nation's growing and aging population, and the inclusion of more expensive yet effective pharmaceuticals and technology. As a result it will become unreasonable for the costs of DGME or graduate medical education to remain linked solely with inpatient costs; the same will be true for IME, which is based on the resident/bed ratio. The argument thus becomes strengthened that these costs be distributed among all aspects of care because the training itself is intimately connected with all aspects of caregiving. The argument then reasonably extends to include all payers (as would exist with universal health insurance).

The tensions will still exist, of course, between the legitimate growth in costs of care and the need for temperance in overall expenditures, but with Part N, its incentives for prudent commitment of resources and for quality of care, and its resolution of the conflict of paradigms, the opportunities will exist for more rational payment of the costs of what is truly needed in the way of clinical care and also for reassurance that the government, private payers, and the people are getting proper value for those expenditures. This is in contrast to today's financing of health care, where both graduate medical education and the care of the indigent suffer from progressive underfunding. And absent fundamental change, little improvement can be foreseen, as illustrated by the federal government's contemplating the argument that since residents accept a relatively low salary, they are, in fact, paying thereby for their own training.

In defense of fair payment for graduate medical education, consider the long-standing argument that it is no more appropriate to pay for graduate medical education than it is to pay for any schooling, such as the education to become a lawyer or a plumber. That is a valid argument, but with medical education it applies to medical school, which is not supported by the DGME and IME funds; DGME and IME relate to residencies and, in some instances, fellowships. These are positions of training after completion of professional school—training in doing the work under the supervision of senior professionals during which one earns the right and certification to be an independent practitioner. Just as the cost of the training the law clerk (after his or her professional schooling) or the cost of training the plumber's apprentice (after his or her schooling) is included in every bill for legal services or for the work of the master plumber, it is only reasonable that every beneficiary of medical services participate in paying the cost of the doctor's apprentice, the resident or fellow during his or her period of training to become an independent practitioner. In bringing more reason to the practice of health care, and greater prudence to its expenditures, Part N supports this argument and thus can help reverse the growing underfunding of training in medicine. New York State has underscored the reasonableness of this position with the passage of its Health Care Reform Act of 1996, mandating broad support for both graduate medical education and indigent health care. The law was more recently renewed as the Health Care Reform Act of 2000.

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If Part N proved highly attractive to Medicare beneficiaries—as we believe it would—the influx of Part N enrollees to the Medicare + Choice organizations and Risk HMOs would promote the development of a system of health care delivery, organization, and payment responsive to the Part N paradigm, a system that could apply eventually, with appropriate modifications, to all managed Medicare plans and to private-sector HMOs as well. More generally, it is intended that Part N would serve as a springboard for private-sector initiatives based on compatible paradigms that would operate in tandem with Part N to control costs but without the centralized bureaucracies and other disadvantages of today's managed care plans, and yet allow competition in the private sector on the basis of quality, service, and cost. We project that Part N would achieve reductions in payments on the parts of both CMS and the Medicare beneficiary relative to the cost levels of Parts A and B. At the start, CMS payments might increase slightly, but in the long term, Part N should generate savings. And Part N could provide a cost-control framework should Medicare coverage become extended to include prescription drugs. There are, of course, many specifics to be worked out in fashioning the detailed implementation of Part N as a Medicare alternative, or as adapted by any other insurer. In this article, we present only the basic concept and why it is needed because of the conflict of paradigms confronting both physician and patient.

The managed care paradigm of Part N reflects our conviction that medical care decision making should rest with providers and patients, that insurers should take a back seat in the specifics of cost control, and that financial accountability should be placed with physician groups operating under a paradigm that gives physicians fair payment but with economic incentives to meet appropriate fiscal targets. It emphasizes that financial incentives matter, not only for physicians but for patients and others involved in health care as well.13,14 It also reflects our appreciation—shared by others15—that whatever direction Medicare takes, given a future with growing numbers of an increasingly aging population and the inevitable advances in useful and appropriate technology, additional public funds will be required. It is likely that traditional Medicare will persist for decades to come. Since its paradigm will not disappear, the challenge is to develop a method compatible yet competitive* with traditional Medicare and sufficiently robust to encourage a viable system of financing and delivery broadly applicable, the incentives of which will encourage higher quality of care, restore professional autonomy, reassure patients, and be as prudent as practicable in the commitment of resources. Only through effective reform of health care delivery and financing will today's downward slide in the training of tomorrow's doctors be reversed and the capability of medicine in the United States go forward in optimal fashion.

The paradigm we propose is not completely new. What is new is its application—redressing today's incompatibility of incentives through addition of a new option to present-day Medicare, and then its subsequent potential for private insurance programs for those under 65. Also, were the Part N paradigm applied in programs designed to expand coverage, CMS could reduce the millions currently uninsured.17 What is fundamental is Part N's assault on the conflict of paradigms with its incompatibility of incentives that confounds our health care today.

Medicare-New, or Part N, calls for significant yet manageable change by physicians, insurers, and the public. For the primary care physician, the tradeoff is resumption of the professional responsibility of managing the clinical care of patients in return for a workable system of prepaid capitation. For the participating specialist, market advantage will develop through the provision of high-quality care, prudent resource use, and patient satisfaction consistent with the goals of the referring PCP. For insurers, the tradeoff is relief from the burden of clinical management in return for a workable system of cost control. For the medical educator, it offers the opportunity for more general and more rational support. And for the public, it is a more orderly system with complete freedom of choice in return for an out-of-pocket cost of self-referral. For success, both an effective information management system and fair payment levels are required, along with meaningful incremental payments to physician groups that meet fiscal, patient satisfaction, and quality criteria.

The critical question is whether physicians, other providers of care, insurers, the public, the industrial and governmental and political sectors, and the various interest groups involved with health care are sufficiently fed up with today's status quo—and sufficiently concerned about tomorrow's—to move beyond declaring, “Something must be done!” The essence of futility is to keep doing the same thing and expect different results. It is time to be effective about making health care in the United States the reasonable and workable benefit it should be for all. And in doing so, academic medicine can work to strengthen the future excellence of medical education and health care in the United States. Medicare-New, or Part N, warrants serious consideration for implementation.

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    © 2002 Association of American Medical Colleges