The Elephant in the Health Care Room

At long last James Capretta, writing at RealClearPolicy, points out the elephant in the health care room:

Opponents of Medicare for All shouldn’t try to defend the dysfunctional status quo. Instead, they should advance reforms that would make the system work better for patients, and bundle them as the alternative to Medicare for All.

The last two years have demonstrated how difficult this challenge will be for Republicans. The GOP failed in its attempt to repeal and replace the Affordable Care Act (ACA) largely because the Trump administration had no clear vision of where it wanted to take the health system, and House and Senate Republicans had too many conflicting objectives to put together a coherent plan. In the end, the GOP fell short on repeal because they couldn’t agree on replace.

That problem persists. A handful of Senate Republicans have been pushing an alternative vision for the health system built on federalism. In its first iteration, this idea was sponsored by Senators Lindsey Graham, Bill Cassidy, and Bill Johnson, as well as former Senator Dean Heller. The Graham-Cassidy-Heller-Johnson plan proposed to convert the new funding for health coverage provided in the ACA into block grants provided to the states. Those funds, combined with a reformed Medicaid program, could be used by the states to provide insurance coverage in ways that differ from the ACA’s framework.

I disagree with his diagnosis of the problem with our system and I disagree that a “functioning market” for health care can be constructed without addressing the supply side. Our problem, as pointed out by Uwe Reinhardt some time ago is it’s the prices, stupid. Unless and until they can find a way to address that the pressure to do something will be irresistible.

8 comments… add one
  • steve

    The GOP has little actual interest in health care policy. It has even less at the state level. Block grants is really just GOP code for “we will spend less on the middle class and poor people”.

    Steve

  • walt moffett

    At the state level, you would be suprized about how much R legislators invest in medicaid financed nursing homes, personal care homes or take time out to serve as lobbyists and consultants for various hospitals, physician’s groups etc.

    On the national level quite right. There, the main interest is being the party in opposition (which is not a bad thing).

  • Jimbino

    A couple of simple rules would solve our healthcare problems.
    1. Mandate price transparency.
    2. Mandate MFN pricing (One price schedule for all comers)
    3. Mandate insurance coverage for overseas treatment, same as for domestic.

  • Guarneri

    I certainly agree that Republicans failed miserably in providing a viable alternative, probably because they are just as beholden to lobbying interests as the Dems, Steve’s dumb comment notwithstanding.

    I really don’t want to attempt to litigate the introduction of pricing and market functioning again. Serious people understand it’s about price discovery and exposure, but no one appears to want to employ the most fundamental and successful mechanisms in every other market known to man. Defeat has been declared before the battle has been waged. Somehow health care is special. I’m glad I’m rich and can circumvent the ignorance. I feel sorry for those shooting their, and their neighbors, dicks off.

  • Ben Wolf

    After a century of blind “improvement” man is restoring his “habitation.” If industrialism is not to extinguish the race, it must be subordinated to the requirements of man’s nature. The true criticism of market society is not that it was based on economics—in a sense, every and any society must be based on it—but that its economy was based on self-interest. Such an organization of economic life is entirely unnatural, in the strictly empirical sense oi exceptional. Nineteenth-century thinkers assumed that in his economic activity man strove for profit, that his materialistic propensities would induce him to choose the lesser instead of the greater effort and to expect payment for his labor; in short, that in his economic activity he would tend to abide by what they described as economic rationality, and that all contrary behavior was the result of outside interference. It followed that markets were natural institutions, that they would spontaneously arise if only men were let alone. Thus, nothing could be more normal than an economic system consisting of markets and under the sole control of market prices, and a human society based on such markets appeared, there-fore, as the goal of all progress. Whatever the desirability or undesirability of such a society on moral grounds, its practicability—this was axiomatic—was grounded in the immutable characteristics of the race.

    Actually, as we now know, the behavior of man both in his primitive state and right through the course of history has been almost the opposite from that implied in this view. Frank H. Knight’s “no specifically human motive is economic” applies not only to social life in general, but even to economic life itself. The tendency to barter, on which Adam Smith so confidently relied for his picture of primitive man, is not a common tendency of the human being in his economic activities, but a most infrequent one. Not only does the evidence of modern anthropology give the lie to these rationalistic constructs, but the history of trade and markets also has been completely different from that assumed in the harmonistic teachings of nineteenth century sociologists. Economic history reveals that the emergence of national markets was in no way the result of the gradual and spontaneous emancipation of the economic sphere from governmental control. On the contrary, the market has been the outcome of a conscious and often violent intervention on the part of government which imposed the market organization on society for noneconomic ends. And the self-regulating market of the nineteenth century turns out on closer inspection to be radically different from even its immediate predecessor in that it relied for its regulation on economic self-interest. The congenital weakness of nineteenth-century society was not that it was industrial but that it was a market society. Industrial civilization will continue to exist when the Utopian experiment of a self-regulating market will be no more than a memory.

  • steve

    ” Serious people understand it’s about price discovery and exposure, ”

    It is and has been tried in many markets. Has not changed anything. As I think I have said here several times, our network has tried publicly posting prices. Ours are much lower than our competitor hospital. It has not increased our market share significantly. In one or two trials price transparency plus some other method, usually mild coercion, have helped lower spending a bit, but transparency has not had nearly the effect people like you would like to believe. While I agree that markets are wonderful, to date no one has figured out how to make them work in medicine. Serious people want something that will work rather than cling to some principle that keeps failing when used on the current application.

    I dont think you have to be in medicine to understand some of this, but I think it helps. There have been many times when working at one of our smaller hospitals that I have told a patient and family that they would likely not do well, maybe even die, if they had care at the small local hospital, and then had them say they didn’t care and wanted to stay at their local facility. This is with the “big city” hospital (the big city having a population of about 70,000) being one hour away. Knowing that it would also cost more to stay at the local hospital. People just dont always think like homo economics when it comes to medicine.

    Steve

  • In one or two trials price transparency plus some other method, usually mild coercion, have helped lower spending a bit, but transparency has not had nearly the effect people like you would like to believe.

    My recollection of the few attempts at experiments like this is that while people may have spent slightly less they did not necessarily make prudent judgments about when and what to spend, resulting in more variations in spending. Some spent less; some spent much more. They also resulted in worse health outcomes.

    You don’t really need to conjecture too much to know what would happen. Just look back at the system as it was in 1900.

    The point is that in a pure market system prices would likely be optimized but some people would be better off while others would be worse off. The promise of a market system is not that everyone would get the care that they need and if what you espouse is a pure market system you by definition accept that care will not be available to some people.

    I have yet to hear anyone who proposes a pure market system who also wants providers to operate without the protections provided by a regulatory system. There is nothing in a market system that would result in a manufacturer of a pharmaceutical charging hundreds of times the production costs for their drugs. Someone would walk across the street and go into competition with them making the same drugs at lower prices. That’s prevented by our patent system and as long as that’s in place we won’t have a market system.

    The effects of systems in which the supply is highly regulated while demand operates in a market or pseudo-market system are well understood. They aren’t covered in Econ 101 but they are in higher level microeconomics courses. They don’t result in price optimization.

  • steve

    “Someone would walk across the street and go into competition with them making the same drugs at lower prices. ”

    Unless entry costs were too high and/or the drug companies are working with each other. I think it is a bit of both.

    Steve

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