I just posted a wonky piece on the other website I write for, the Seattle-based Publicola, exposing a potentially problematic side of the public option, at least for hospitals in states like Washington (or Minnesota and Wisconsin) that have efficient healthcare delivery systems.  

I encourage you to read it, but the basic premise is that the fee-for-service style of Medicare reimbursement benefits those hospitals that provide quantity of service over quality. Thus, states with less efficient care, like New York and Florida get two times the reimbursement rates of states like Washington that get good outcomes for their patients, quickly. And those efficient providers fear that if the public option is based upon Medicare reimbursement rates they’re losses will be compounded and they may eventually go broke.

Now the best way to deal with this isn’t scrapping the public option. It’s moving away from fee-for-service medicine. In fact, everyone I spoke with for this piece from the insurance company rep to Adam Smith, the liberal Congressman from WA argued for a new pay model. How would such a scheme work?

“[We need to] go to the medical home model where you pay a flat fee for access to primary care,” Smith said.  “Instead of on a fee for service or per visit basis, that’s where we can save money.”

And who could be against that? Well, there is the obvious of course. The above sounds like a perfect fit for fiscal conservatives and deficit hawks, but as we know, the conservative movement tends to only be fiscally conservative when it undermines the other side. Still, that is old hat.  Specialty providers who are incentiveized out the wazoo (sp?) under the current fee structure can also be can be expected to oppose scrapping fee-for-service. They would make a marginally smaller stack of money if the structure was reformed, so of course they are committed to fight to the last cartridge against it.

As Shannon Brownlee, healthcare wonk extraordinaire, told me: “One man’s waste is another man’s revenue stream.”