One Republican alternative for healthcare reform, presented today by Louisiana Gov. Bobby Jindal in the Wall Street Journal, has the following components:
- Greater transparency in pricing and outcomes, electronic recordkeeping
- Medical lawsuit reform
- Insurance reform via mandated reinsurance and high-risk pools for those with pre-existing conditions.
- Pools for small employers and the self-employed.
- Pay for performance
- Refundable healthcare tax credits for the working poor
There’s also this cryptic statement:
Consumers should be financially invested in better health decisions through health-savings accounts, lower premiums and reduced cost sharing. If they seek care in cost-effective settings, comply with medical regimens, preventative care, and lifestyles that reduce the likelihood of chronic disease, they should share in the savings.
I have no idea what that means, especially in the context of the spirited defense elsewhere in the op-ed of employer-based health insurance. Most of the consumption of healthcare is done by people whose healthcare is subsidized by Medicare, Medicaid, or the Veterans Administration or by people whose healthcare insurance is part of their total compensation. As long as that’s the case, how can these measures have any notable effect on prices?
On the subject of legal reform, I recognize that medical lawsuit reform is an evergreen among Republicans as a target for criticism. However, malpractice suits account for a vanishingly small proportion of total healthcare spending (low single digits) and even if they were to be eliminated entirely wouldn’t do much to change the trends in healthcare costs. The assumption that freedom from fear of lawsuit will result in less of what’s called defensive medicine does not stand up to scrutiny, cf. here.
As I’ve noted here repeatedly before, the impact of pay for performance, usually interpreted as capitation, will not be cost benefits unless you believe that healthcare providers will take a pay cut voluntarily but a transfer of adverse selection from insurance companies to healthcare providers.
With respect to the efficiencies that can be realized through electronic recordkeeping, this is a subject about which I should write at length some day. I can only say that the problems with it are formidable, there are substantial barriers to acceptance that I don’t believe are surmountable, and that the cost benefits are being overstated.
The fundamental problem with Gov. Jindal’s proposal is that it rides on the assumption that the current unsustainable trends in the cost of healthcare can be stopped or reversed by changes on the consumption side of the equation alone in a manner consistent with good public health. It is not self-evident. I know of no evidence that it is the case. I do know of studies that demonstrate the obvious: that people consume less healthcare when the cost falls directly on them. But I know of no evidence that the reductions in spending that occur are such that they result in lower overall costs. People defer needed healthcare spending as well as unneeded healthcare spending.
Reforms in healthcare consumption are necessary but not sufficient to reverse the unsustainable path we’re on.
There is an impasse in healthcare reform today caused by the immovable object of Republicans who won’t stand for anything but propping up the current defective system and the irresistible force of Democrats who are determined to increase total demand in a system in which there’s already excessive demand. Something’s gotta give and right now it looks like it will be taxpayers.