The Treatment

What, You Have a Better Idea for Cost Control?

By

David Brooks thinks it. David Gregory thinks it. The Washington Post editorial page thinks it. And, what the heck, I think it. If health care reform passes Congress, the final legislation probably won't cut the cost of medical care as quickly as seems possible on paper.

But would the legislation make a good start--as good a start as possible, given political reality? Brooks, Gregory, the Post, and plenty of other critics seem to think the answer is "no." I think they are nuts. And since arguments about costs are likely to loom large in the thinking of nervous House Democrats, it's worth explaining why.

The issue here isn't, or shouldn't be, whether the legislation will save the government money in absolute terms. The Congressional Budget Office has predicted that health care reform, fully implemented, will save a small sum of money in the first decade and a considerable sum of money in the second decade. This is not an accounting trick, as critics like Republican Congressman Paul Ryan has claimed. If anything, it's a worst-case scenario, given CBO's famously dour predisposition. And, despite what you may have heard, the government has actually kept promises to cut costs before.

CBO doesn't produce estimates of how reform will affect overall health care spending--that is, the amount of money our society, as a whole, will devote to health care. But the official actuary for Medicare does. The actuary determined that, after ten years, overall spending would be slightly higher. But that's largely because of a one-time burst in spending, which comes from the expansion of coverage to those who don't have insurance and strengthening of coverage for those who do. Overall, the long-term trend is towards less spending: Inflation after ten years would be lower than it is now. And it's the long-term trend that matters most.

OK, but couldn't reform bring down costs even more? Well, sure. If it were up to me, the government would be more aggressive about determining which treatments to finance and what prices to pay for them. A good starting point would be to establish a public insurance option--which, with its potential to drive down prices of medical services and goods, could save another $100 to $150 billion in the first ten years, according to the Congressional Budget Office.

But it's not up to me. It's up to Congress. And if you were to survey its 535 members, you'd get 535 different ideas of the best way to cut costs. 

You'd get answers that reflected different ideological beliefs. The more liberal the member of Congress, the more you'd hear about putting the onus for cost control on government. The more conservative member, the more you'd hear about putting the onus for cost control on individual consumers. Senator Bernie Sanders of Vermont, for example, would tell you we should have a single-payer system--in which the government had far more price-setting powers than anybody is contemplating now. Paul Ryan would say it's all about making sure individuals have more skin in the game.

You'd also get answers that reflect the influence of special interests. Remember, "cost control" is a euphemism for taking a dollar out of some person's, or institution's, pockets. It may be the right thing to do--a lot of times, that dollar isn't making anybody healthier--but you're not going to get it without a fight. Want to dictate lower prices on drugs and medical devices? Rest assured, the drug and device industries will have something to say about it. Want to change the way medicine is practiced, by pushing physicians into groups that coordinate care? The American Medical Association will see you now. Want to start the tax on benefits sooner and make it bigger? Say hello to the unions.

Critics insist President Obama should have demanded these groups give up more--or simply fight them openly. I've actually made that argument myself, mostly about the deal the administration (along with Senate Finance Chairman Max Baucus) made with the drug industry. But, overall, it's awfully hard to argue with a straight face that the administration didn't push for cost control. Were it up to Congress, even the scaled-back versions of the benefits tax and Medicare advisory board probably would not be part of reform today. But Obama made them top priorities, both publicly and privately. The political capital he spent getting those victories was capital he didn't have for other purposes, including--to my chagrin--better subsidies and protection against out-of-pocket expenses.

Of course, sometimes the people and interest groups resisting cost control efforts have a point. Or, at least, you can understand why they think what they do. There are conservatives who worry, honestly, that government might push too hard on prices, running some practitioners or suppliers out of business and leading to shortages--just as there are liberals, like me, who worry that exposing consumers to excessive cost-sharing will cause some, particularly the non-rich, to ration their own care in ways that lead to worse health. The truth is, almost any cost control effort can go too far.

In addition, most of our ideas on how to control costs involve some speculation. They've worked well in demonstration projects or shown impressive results in academic papers. But nobody has tried them on a wide scale, at least here in the U.S. In such a situation, there's a certain logic to trying as many different approaches as possible, but pursuing each one in relative moderation, in order to see what works best (and what works worst).

That's what this bill does. Conservatives frequently say they'd prefer a system in which everybody has high-deductible insurance. But the new minimum requirements for insurance would still leave people with substantial out-of-pocket expenses--much more, frankly, than I would prefer. Liberals want more direct control of prices. But the White House's latest twist would give government regulators the opportunity to reject premium increases that are excessive. Pushing doctors into multi-speciality groups, bundling payments to encourage quality over quantity, changing the compensation for malpractice reform--all of these, and more, are in the bill already.

Some of the people complaining about this bill seem to acknowledge the political forces at play. If it's not possible to pass a bill with stronger cost control, they suggest, there should be no bill at all--or, at least, not one that looks like this one. They'd prefer only a very small expansion of coverage, if any, until real cost control has set in.

But here, too, the political logic isn't so simple. Just think about hospitals for a second. Reducing spending on health care is going to require a massive change in the way both public and private insurers pay them. But, as Len Nichols has pointed out in the New England Journal of Medicine, that's neither advisable or practical without simultaneously expanding coverage:

Two thirds of hospitals lose money on Medicare now. Virtually all lose money because of Medicaid underpayment. To impose serious delivery reform and incentive realignment while leaving hospitals on the hook for the mounting billions of dollars in uncompensated care would bankrupt many and strain most to the breaking point. With expanded coverage, we'll get absolutely essential hospital cooperation. Without expanded coverage, hospitals will have to protect themselves from change, and their local communities will want them to.

You could make the same argument about other interest groups--or what the public, as a whole, would be willing to tolerate. The most aggressive cost control efforts from left and right would start by getting everybody out of their present insurance arrangements. Good luck trying to enact that.

To be absolutely clear about this, I would support health care reform if it did nothing more than expand and strengthen health insurance coverage. I think it's a moral imperative, as much for the sake of the middle class as the poor. But it so happens that the bill moving through Congress will do something more. It will reduce the cost of care--not by a lot and not by as much as possible in theory, but as much as is possible in this political universe. That's far better than the alternative, which is to do nothing.

For more TNR, become a fan on Facebook and follow us on Twitter.

Loading Related Articles...
Article Tools
SHARE YOUR THOUGHTS

Show all 19 comments

You must be a subscriber to post comments. Subscribe today.