In an op-ed in the New York Times, Elisabeth Rosenthal turns to a topic I suspect we’ll be hearing a lot more about in the coming weeks, months, and years—how to reduce the cost of healthcare:
But the nation is fundamentally handicapped in its quest for cheaper health care: All other developed countries rely on a large degree of direct government intervention, negotiation or rate-setting to achieve lower-priced medical treatment for all citizens. That is not politically acceptable here. “A lot of the complexity of the Affordable Care Act arises from the political need in the U.S. to rely on the private market to provide health care access,” said Dr. David Blumenthal, a former adviser to President Obama and president of the Commonwealth Fund, a New York-based foundation that focuses on health care.
With that political backdrop, Obamacare deals only indirectly with high prices. By regulating and mandating insurance plans, it seeks to create a better, more competitive market that will make care from doctors and hospitals cheaper. But it primarily relies on a trickle-down theory of cost containment. The Princeton health economist Uwe E. Reinhardt has called it “a somewhat ugly patch” on “a somewhat ugly system.”
The cost control aspects of the PPACA rely on assumptions I find questionable. For example, it assumes that insurers will pursue cost control when all of their incentives point them in the opposite direction. And, given the increases in deductibles and copayments being required for the new plans available in the healthcare exchanges, it appears to assume that economizations by patients will reduce the cost of care, something for which I see little evidence. Patients don’t routinely order echocardiograms for themselves—those are ordered by physicians. Patients also don’t order CAT scans, MRI scans, or PET scans for themselves or distinguish among which of those is the most important for diagnosing their particular complaint. It’s just barely possible that patients can shop around for the cheapest sources for those tests. Of that I’m skeptical as well. It will require a real sea change among physicians who continue to consider shopping around as unethical and are reluctant to rely on sources for tests with which they are unfamiliar.
I also think that pointing to Britain, France, or Canada as models for cost reduction, concluding that healthcare costs less there than here because they have systems of universal insurance, is more than likely an instance of reverse causality, post hoc propter hoc. That’s not necessarily an argument against universal insurance, it’s just pointing out that in the absence of a commitment to cost reduction there’s much evidence that universal insurance per se will produce those reductions.
I’ll conclude with the following observations:
- The majority of healthcare spending is government spending.
- Healthcare spending is already blowing a hole in state and local government budgets.
- We have not seen a decline in healthcare costs in the last year.
- We have seen a decline in the rate of growth in healthcare costs in the last year.
- The reading of that decrease that’s most favorable to the PPACA attributes 8% of the reduction to the PPACA.
- That’s 8% of the decrease not 8% of the costs.
Finally, “politically impossible” means “unpalatable to the party leadership”. As long as those most likely to demand heroic measures in end-of-life care and no limits placed on federal spending on healthcare constitute important Democratic constituencies, I see little prospect of the Democratic Congressional leadership accepting anything that will actually control costs.