Health Care Should Reform Health Care

So, the big news in health care is the CBO’s assessment that the bills under consideration (sans, of course, the Wyden-Bennet bill) won’t do anything to curb spending — or in wonk speak, “bend the curve.” This is partially a reflection of the difficulty of scoring expected, but essentially uncharted savings in things like health IT and comparative effectiveness. However, the bigger problem is that it’s right.

Asked what provisions should be added, Elmendorf suggested changing the way Medicare reimburses providers to create incentives for reducing costs. He also suggested ending or limiting the tax-free treatment of employer-provided health benefits, calling it a federal “subsidy” that encourages spending on ever-more-expensive health packages.

It seems the Administration is responding to this charge, most notably through this proposal to give teeth to proposed Medicare adjustments.

The proposed five-member Independent Medicare Advisory Council would be charged with making two annual reports dictating updated rates for Medicare providers including physicians, hospitals, skilled nursing facilities, home health and durable medical equipment. Congress could block the recommendations only if lawmakers agreed within 30 days on a resolution, and the greater veto power would lie with the White House itself.

To be sure, this is a demand trimming measure. Basically, the IMAC would set reimbursement rates (limit demand) and those who take Medicare would be forced to accept them. The problem is that while this might be great for reducing federal expenditures on health care, it’s a bit more difficult to see how savings would spread widely to the rest of the system. That is, the mechanism for lowering Medicare and Medicaid payments is simple: contain costs by fiat (subject to Congressional review). However, there’s really no reason this would prevent providers from simply making up the difference — or a large chunk thereof — elsewhere. It’s worth noting the same thing applies to ending the employer tax exclusion. Obviously, this would do a great deal to reducing federal spending on health care, but it’s not clear why it would reduce total health spending on its own.

In order to contain health spending across the entire economy, both of these measures need to be paired with broader reforms that will have more systematic reach. A strong public option to which anyone had access — like the one included in the House Tri-Committee Bill with a greater emphasis on access — would accomplish this, but it looks like that proposal faces significant hurdles in the House, not to mention the Senate.

I guess what I’m trying to say is that it’s useful to differentiate between what’s the right thing to do, what’s good for the federal treasury, what’s good for the economy and what’s good for all of the above. The House bill, which sadly is the best option being seriously debated (unless the Wyden-Bennett bill picks up steam), performs best on the “right thing to do” metric. The HELP bill is similar, but will be worse for the treasury and economy, and the Finance bill will be best for the treasury and worse on the other two metrics.

I guess I’ve talked myself into being a bit pessimestic, but it seems the real danger to health reform is forgetting that we’re trying to reform the health system. The legislative process is just that — the process.

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One Response to “Health Care Should Reform Health Care”

  1. disinter Says:

    Why Obamacare Can’t Work: The Calculation Argument

    http://mises.org/story/3543


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