A Brief History…

I am as confused as most people about what is really going on with the negotiations in Congress on “health reform.” Democrats are negotiating with Democrats and much of this is going on behind closed doors. Here is a column from NRO on the Public Option. The author thinks it is dead. I am not so sure.

The truth is that Speaker Pelosi and her lieutenants are having trouble finding a majority to pass anything because their starting point is far too liberal for many rank-and-file Democrats.

Indeed, it seems the president himself doesn’t much like the House bill anymore. In his prime-time speech to a joint session of Congress earlier this month, he said he wanted a bill that costs no more than $900 billion over ten years, doesn’t increase the federal budget deficit “one dime,” and is paid for with offsets coming from within the health-care system. The House bill, as passed by three committees this summer, fails all of these tests. A back-of-the-envelope estimate indicates the House legislation would add about $10 trillion in unfunded liabilities to the federal books over 75 years.

This is one of two strong arguments against this bill or any bill with the same structure. This is basically a bill to enact a huge bureaucracy to then take over health care in a command model with bureaucrats choosing every option and market forces excluded. This did not work well for the Soviet Union but better health care may not be the true motivation of these people.

The confusion of government price setting with efficiency really goes to the heart of the entire debate. Yes, Medicare does dictate payment rates to hospitals, physicians, and others. On paper, that can, for a time, look cheaper. But hardly anyone believes that is really the solution to our long-term cost problem. In fact, a consensus is finally forming that Medicare’s current fee-for-service payment systems are really the problem, not the solution. Medicare’s payment rules are arbitrary, shift costs to others, promote fragmentation and autonomy among health-care providers instead of integration, and reward volume instead of quality and efficiency. A growing chorus, including the leaders of the Mayo Clinic, says what’s really needed is a far-reaching reform of how health care is actually delivered to patients. The last thing we need is for more of the health-care system to adopt Medicare’s payment rules.

This is the second and more important reason why it is a bad bill. It does nothing to modify the complex and self-defeating Medicare reimbursement methodology. There are two ways to do this. One is to adopt something like the French system where market forces can help control costs. The system pays a flat rate but patients may choose to pay more for services they value more highly. We already see how the market system has worked in plastic surgery and ophthalmology. Insurance does not pay for cosmetic surgery and for procedures to correct myopia. Both services are provided in a cash market that is highly efficient and which has seen prices fall as competition becomes more active.

You can argue that it is difficult to negotiate price when you are having a heart attack. That is true but insurance was invented to apply to uncommon events like heart attacks and not to common and optional events like office visits for routine checkups. We don’t use our auto insurance to pay for oil changes. There actually are market mechanisms developing to deal with routine care outside the insurance and Medicare world. These are appearing as a response to inadequate reimbursement as the government tries to cut costs by cutting payment. I have already discussed this development in another post. This is a growing trend and may continue to grow if the Democrats use Medicare and Medicaid reimbursement schedules to try to control costs in a vast new program. If so, we will see, as usual, the poor take the brunt of their patrons’ ignorance of economics.

Of course, then there is the issue of government-driven rationing of care. Sector-wide price controls always lead to a reduction in the number of willing suppliers of services. If proponents of widespread adoption of Medicare’s payment schedules really got their way, it would only be a matter of time before demand far outstripped supply for any number of critical services and procedures. And waiting times would get much longer.

Yes, but that may not matter to Democrats. Ideology seems to drive them on Honduras and maybe health care is another area where logic fails to impress.

The Washington Post, inadvertently I’m sure, seems to agree with me. Rationing is often misdefined by leftists who assert that price is one form of “rationing.” Actually, the definition is dependent on “A regulated allocation of resources among possible users.” Who regulates ? Not the user.

The largest potential area for savings — up to $600 billion a year — is the great “unexplained” variation in hospital procedures such as the number of Caesarean sections and coronary bypass surgeries performed. Vaginal delivery is far safer than a C-section, and prescription medicines can stabilize many heart patients without dangerous surgical complications, Rosof said. Less invasive and risky alternatives are also less expensive.

“We will eliminate a lot of harm that comes from the overuse and inappropriate use and misuse of medical interventions,” he said. “This is not about rationing. This is about practicing evidence-based medicine.”

I agree with “evidence based medicine,” as I have pointed out before. The key is who pays and does the patient have an option or are all decisions made by bureaucrats?

In theory, Joseph Antos, a health policy scholar at the American Enterprise Institute, agrees. One classic example, he said, is the widespread use of full-body scans “by middle-class people who are probably a little neurotic.”

“If they want to spend their money on that, that’s fine. If they want to spend our money on that, we ought to think about it,” he said. “The problem is, there are very few examples of things like full-body scans where it is a no-brainer. When you get down to the specific individual cases, it’s very difficult.”

There is a way to do this. The health plan pays for those items that are supported by evidence based medicine. The patient and the doctor have the option to negotiate about the rest. The only problem is with the control freak bureaucrat. Why do we need them ?

Tags: health care

This entry was posted on Tuesday, September 29th, 2009 at 9:36 am and is filed under health reform. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.