The Many Legal Barriers Standing in the Way of Health Care Reform

Obsolete law adds costs to the system at every turn. Instead of penalties for referrals, there needs to be greater incentive for collaboration.



We are on the brink of a huge shift in how we think about, deliver, and pay for health care in America. Philosophically, we are changing from our traditional focus on treating patients with truly urgent problems to preventing those conditions in the first place. On the financial side, the shift is a move away from paying based on the quantity of services rendered and more toward paying based on the quality of services. Unfortunately, some existing laws are a barrier to this necessary transformation.

Though Medicare became law almost half a century ago, its payment system is still essentially intact: a "fee-for-service" (FFS) reimbursement system that pays providers for each intervention they perform, without regard to whether the treatment improves patient health. Health spending has soared since then: National health expenditures were $27.1 billion in 1960; today they are over $2.6 trillion.

The FFS system cemented the practice of largely focusing on treating disease instead of on preventing patients from getting sick in the first place.

Solving the nation's most entrenched problems See full coverage

Around the turn of the 20th century, this treatment model was appropriate. Acute, infectious illness, such as tuberculosis or influenza, were major causes of death at this time. But today, chronic disease -- long-term conditions requiring careful management -- are far more prevalent and costly.

The cost burden on our health system today comes from managing and treating chronic conditions. In 2008, 616,000 people in the United States died of heart disease, while annually about 785,000 Americans had their first heart attack, and 470,000 had another heart attack. Heart disease represents an estimated yearly cost burden of about $108.9 billion in medications, care, and lost productivity.

Today, chronic disease accounts for about 75 percent of total health care spending. An acute disease-focused, per-intervention model of care delivery and payment cannot address America's current needs.

FFS encourages care fragmentation, poor coordination across different provider settings, and in some instances, unnecessary care that exposes patients to risk without providing any value to health.

Instead, we need to promote care coordination, higher quality, and lower costs. The ticket is more clinical integration, which means various types of health professionals coming together to care for a patient population. Clinical integration can include anything from a fully integrated, Kaiser Permanente-type system that employs professionals in a common facility, to collaborating across multiple settings to improve coordination around a single chronic condition. 

Transitioning to increased clinical integration is necessary, but won't be easy. In addition to cultural and financial barriers, legal barriers exist. It can seem daunting if not impossible to propose new models of care delivery with these laws as strong disincentives:

Antitrust: The Sherman Antitrust Act prohibits negotiations between providers that could result in excessive market power. Providers with unchecked leverage over a market can fix or raise prices excessively for their own gain. Unaffiliated health care professionals who form a new care organization to better coordinate care may represent a large share of the market that could be considered anticompetitive.

Anti-KickbackPayments to induce Medicare or Medicaid patient referrals -- or ordering covered goods or services -- are considered kickbacks. Incentives to refer patients for unnecessary services for financial gain are wasteful and potentially harmful to the patients. However, such incentives to encourage good physician behavior as adherence to guidelines for evidence-based practice should not be precluded by law.

Presented by

Julie Barnes is the director of health policy at the Bipartisan Policy Center (BPC). More

Prior to her role at BPC, Barnes served as deputy director and later as acting director of the New America Foundation Health Policy Program. Barnes also served as a litigator and regulatory counsel in the Health Care Practice Group of Crowell & Moring's Washington, D.C. office. In addition to litigating compensation and benefit disputes, her practice included advice and counsel to managed care organizations, self-funded employers, behavioral health organizations, disease management companies, and health-related trade associations on state, and federal regulatory and litigation matters.

Barnes is the author of several policy papers, the editor-in-chief of a legal textbook published by the Bureau of National Affairs entitled Managed Care Litigation, and is a frequent speaker for the American Health Lawyers Association and the Governance Institute. She received her law degree from American University's Washington College of Law and undergraduate degree from the University of Iowa. She is a member of the Maryland and District of Columbia Bars.

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