letters | why access to insurance may not cut health costs

Fee-for-service billing raises health costs

RE “THE SECRET benefit of health insurance” (Ideas, June 23):

The Oregon study on individuals newly insured by Medicaid concluded that access to health insurance led to less clinical depression, presumably through less fear of untended health care needs or their costs. Compared to a similar group not covered by Medicaid, the study also found that those insured demonstrated increased health care spending with no resulting clinical benefit.

That latter finding cannot be used to support an argument against the Affordable Care Act, or “Obamacare,” and its goal of broader coverage. The increased cost relates to the fact that Medicaid paid through traditional fee-for-service billing, which is inherently inflationary. Medicaid places little restraint on doing more, and sometimes the result is unneeded diagnostic studies and treatments rather than a focus on keeping patients healthy. We know that as costs rise, health does not necessarily improve.


The nature of health care, as well as its cost, depends primarily on the way it is paid. Obamacare recognizes that and is creating pilot programs — accountable care organizations, etc. — with various payment modes other than traditional fee-for-service. If the nation doesn’t migrate from fee-for-service as its dominant payment mode, coverage through Medicaid, Medicare, Obamacare, or future successors will not solve today’s challenges to cost and quality.

Dr. Mitchell T. Rabkin

Professor of Medicine,
Harvard Medical School

CEO Emeritus,
Beth Israel Deaconess Medical Center