As reported by the American Medical Association (hat tip Tyler Cowen), Massachusetts is poised to enact legislation sounding the death knell of fee-for-service medicine as soon as 2011. Fee-for-service medicine refers to the system of paying doctors according to the number of services that they perform rather than by some other metric. So, for example, under the fee-for-service model (which dominates American health care), doctors are paid for each and every test and procedure that they perform. This incentive structure obviously has an effect of encouraging doctors to order more and more tests and procedures as such overtreatment is more lucrative than the alternative.
As I’ve blogged about previously, a recent article published in the journal Health Affairs estimates that the direct and indirect costs of medical malpractice lawsuits add only 2.4% percent annually to our nation’s health care tab (while compensating those injured by medical malpractice). The article stated that the cost of medical malpractice lawsuits is dwarfed by the expenses attributable to the fee-for-service model.
Under the Massachusetts legislation that could be introduced as soon as January 5, 2011, health insurers would begin paying doctors under a “global payment system” – i.e., paying doctors a flat fee based upon the number of patients seen monthly, with adjustments made for patients’ ages and health conditions. It will be interesting to see what effect this new legislation will have on health care costs.

This blog is maintained by the Boston medical malpractice lawyers at The Law Office of Alan H. Crede, P.C. The blog neither contains nor offers legal advice.