What If There Are No Cost Savings?

Physician and Democratic party stalwart Howard Dean takes to the pages of the Wall Street Journal in an op-ed, pointing out what everybody not overwhelmed by the hype or partisan fervor already knows—that one of the main cost control mechanisms of the Affordable Care Act, the Independent Payment Advisory Board, won’t control costs:

There does have to be control of costs in our health-care system. However, rate setting—the essential mechanism of the IPAB—has a 40-year track record of failure. What ends up happening in these schemes (which many states including my home state of Vermont have implemented with virtually no long-term effect on costs) is that patients and physicians get aggravated because bureaucrats in either the private or public sector are making medical decisions without knowing the patients. Most important, once again, these kinds of schemes do not control costs. The medical system simply becomes more bureaucratic.

The nonpartisan Congressional Budget Office has indicated that the IPAB, in its current form, won’t save a single dime before 2021. As everyone in Washington knows, but less frequently admits, CBO projections of any kind—past five years or so—are really just speculation. I believe the IPAB will never control costs based on the long record of previous attempts in many of the states, including my own state of Vermont.

That’s assuming that the IPAB passes constitutional muster, far from a sure thing. It involves a bit too much delegating of Congress’s power to what would be an instrumentality of the executive branch.

That’s a leg of the ACA that’s unlikely to produce cost savings. Anyone with ground-level experience has known that another of those legs, electronic recordkeeping, is equally unlikely to produce much in the way of cost savings.

As I have pointed out before just as Republicans are attacking aspects of the ACA they should be supporting merely out of a desire to deny President Obama a victory some Democrats will defend aspects of the law that aren’t worth defending to spare him from taking a loss. This is a case in point.

Dr. Dean goes on to consider one of the real structural problems with the healthcare system, something that remains unaddressed by the ACA:

If Medicare is to have a secure future, we have to move away from fee-for-service medicine, which is all about incentives to spend more, and has no incentives in the system to keep patients healthy. The IPAB has no possibility of helping to solve this major problem and will almost certainly make the system more bureaucratic and therefore drive up administrative costs.

That sort of structural reform is a sine qua non of healthcare reform. Without it the ACA isn’t a good first step in the direction of genuine healthcare reform. It’s a misstep, costly in time, energy, and money.

10 comments… add one
  • BTW, just to head off the inevitable comment, healthcare costs are not falling. They’re rising more slowly but they’re still rising at almost double the rate of the non-healthcare rate of inflation. That’s unsustainable.

  • TheOtherOne Link

    So……suggestions??….remedies to offer??…alternatives to choose from??…explanations as to why Romneycare is working well in MA??

  • Every post isn’t about everything. I have posted extensively on this subject over the period of the last nine years. Just check the topic “healthcare”.

    The number of things we could do is practically unlimited. Stop passing “doc fixes”. Go to a capitation system. Means test Medicare. Tax compensation rather than income. Mandatory advertising of prices. Over a period of thirty years or more I supported a single-payer system although I think things have become so bad and regulatory capture so complete that I’m skeptical that would be sufficient.

  • jan Link

    Romneycare has proven to be suitable, well-liked (but not necessarily cost-effective) for MA, because it was crafted for MA, and not as a one-size-fits-all legislation for every demographic, all healthcare circumstances in all 50 states.

    It was also a 70-page bill, not a complex, bloated, unmanageable 2700 page POS, which most didn’t read, let alone mentally process, before passage. Furthermore, I doubt that Romneycare has generated some 20,000 pages of regulations, like the PPACA has, for it’s flawed, uneasy, soon-to-be implementation.

    Lastly, Romneycare was developed and passed by a truly bi-partisan approach, through the leadership of a business-oriented moderate governor seeking solutions through a diverse and collaborative venue. It then received an almost unanimous vote count, of both the minority R’s and majority D’s. Whereas, the PPACA was unilaterally approved, on Chistmas Eve with nary an R vote.

    Basically, there’s a big difference between the inception, development as well as application of Romneycare versus Obamacare approaches for healthcare reform.

  • jan Link

    …as for remedies, many doctors have suggested a more consumer based approach would be effective in stabilizing and/or reducing costs. If there is some built-in reason, a price cap, for consumers to shop and make prudent decisions in obtaining their health care, there will be fiscal savings, versus something consumed freely, with no thoughts or efforts as to cost comparisons. It’s all a matter of working with and understanding human behavior, rather than just creating a Pavlovian society, where all you have to do is provide a lever to press in order to get something for nothing, without any thoughtful choices in the mix.

    Dave mentioned some possibilities as well, including overdue means testing. There is also the idea of raising the age on medicare qualification. Paul Ryan’s plan on vouchers was derided in the last election cycle. However, here too, I think there were some intrinsic merit to his ideas, when applying them as options, ‘other’ ways and choices for younger generations to consider.

  • Andy Link

    Regulatory capture is, unfortunately, a feature of the system.

  • steve Link

    Dean’s understanding of the IPAB is different than mine. I thought it was not allowed to set rates. At any rate, similar entities have helped keep down costs elsewhere in the world. It could probably work, if we had the political will. FFS and its incentives are always a problem, but it has been solved in other countries.

    Keep up the talking points jan.


  • Andy Link


    The FFS and incentive problems haven’t been “solved” for half a century because we aren’t like other countries. Our political system is different and we’re much less homogenous since we are not a nation-state.

  • jan Link

    Keep up the talking points jan.

    …..In other words, a different POV from your’s, Steve.

    In the meantime an estimated 10,000 physicians are going to opt out of accepting medicare patients, and more family physicians are retiring early, just in anticipation of the new bureaucracy required under Obamacare. And, in the future, there is already an expectation of a severe doctor shortage. But, what is there to be concerned about, as people will have their government insurance and/or government health care subsidies to do what with?

  • steve Link

    “In other words, a different POV from your’s, Steve.”

    Nope. You are just repeating what I find on Drudge sites and/or leftovers from the 2012 campaign. Even folks like Goodman dont just repeat that stuff over and over. Docs have been “retiring early or going Galt” ever since Obama was elected over concerns about health care reform. Not.

    Andy- Guess I was a little obtuse. My point is that there are ways to address it and make it work. It is our politics that keep us from doing so. It is our politics that make us end up with stuff like the ACA. Dave wants sweeping change. Most of us do. However, anything you do must be politically acceptable. That means we will only get incremental change. Now, you also have to deal with attempts to sabotage bills that were passed by lawmakers representing 67% of the population, both at the federal and the state level. (Please note that these same states sabotaging the ACA have no plans and are making no plans to deal with health care issues. Well, some are just kicking people off the Medicaid roles, if you want to call that a plan.)


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