The financial difficulties of Massachusetts should give everyone some attention over cost cutting in healthcare. Their premiums have risen, and it's grown from "base of $1.041 billion in fiscal 2006 to a projected $1.748 billion in fiscal 2010". I haven't seen much about this in the other threads with a simple search for the word "control". Because of its similarities with the national plan, I'm interested in the differences and where it'd diverge in terms of cost control. The biggest benefit I see outside of tax collection and Medicare waste/fraud reform is containing and reducing uncompensated care. Are there others? Here's a great article on why the list isn't easy to roll out. Health Care’s Obstacle: No Will to Cut By DAVID LEONHARDT For anyone who cares about medical costs — which is to say anyone who cares about the take-home pay of American families or about the budget deficit — President Obama’s health reform plan is a terribly mixed bag. It does so much less than the ideal plan would do. It would not come close to eliminating Medicare’s long-term budget deficit. It would reduce that deficit only if a future Congress did not tinker with the various taxes and spending cuts scheduled to be phased in over the next decade. On the other hand, the plan would make progress in all sorts of areas. Insurance exchanges would create more competition. A Medicare oversight board would gain authority over reimbursement rates. Hospitals that committed certain medical errors — harmful, costly errors — would face financial penalties. So which matters more: what the plan does, or what it fails to do? It’s a tough call, and the answer depends on what you see as the alternative to the current plan. If the past year of health care debate has offered a single lesson, it’s that the politics of cutting costs are miserable. We pay for most of our health care indirectly, through taxes or paycheck deductions, which lulls us into thinking that the care is somehow free. As the Stanford economist Victor Fuchs notes, many Americans say they want to control costs — but oppose just about any policy to do so. It should be no surprise that politicians do the same. In recent weeks, critics have done a nice job highlighting flaws in the White House plan (which Congress is now turning into an actual bill). What the critics have not done nearly so well, however, is explain which politically realistic plan they prefer. Paul Ryan, the top Republican on the House Budget Committee, has admirably produced a detailed alternative to the Democrats’ plan. It would balance the budget by getting rid of Medicare for everyone under 55 and replacing it with a voucher system. When I recently asked another high-ranking Republican what he thought about the Ryan plan, however, he replied, “Paul is very thoughtful.” Follow-up questions did not yield further details. So I agree that health reform should do more to reduce spiraling medical costs. But saying so doesn’t qualify as hard-headed fiscal realism. In fact, it’s the easy thing to say. The bigger issue is how policy makers can achieve the goal, given the political realities. Fortunately, they still have an opportunity to do better. • On the surface, the Senate election in Massachusetts in January should have been great for cost control. In the campaign, Scott Brown, the Republican, criticized Congress for not doing more about costs. Yet his victory failed to strengthen the cost-control crowd. Instead, the opposite happened. With health reform’s fate suddenly in doubt, Mr. Obama lost much of his ability to arm-twist the political left into accepting an idea it hated: reducing the federal government’s huge subsidies for high-cost insurance plans by taxing those plans. Labor leaders have warned that the tax would hurt workers. That isn’t impossible, though research has shown that the highest-cost plans offer no better care than merely good plans. Mainly, the subsidies appear to benefit drug makers, hospitals and insurers. But to keep House liberals in the fold, the White House delayed the tax until 2018. Conservative Blue Dog Democrats did not leap to the tax’s defense because they’re not sure about it, either. Many need union support in the midterm elections. Many are also struggling with the classic dilemma on health spending. They genuinely would like to control costs. They just don’t like a lot of the specific ideas for cutting spending or raising taxes. Like all of us, they want to lose weight without eating less or exercising more. This is why the Blue Dogs have never gotten behind a package of measures that would hold down costs. The same is true of centrist Republicans like Olympia Snowe, George Voinovich and Mr. Brown. And conservative activists have done nothing to demand that Republicans support cost control. Indeed, the activists have tried to punish fiscally conservative Republicans. Senator Robert Bennett, a Utah Republican, helped write a bill to give people more choice of insurance plans, creating more competition, and to reduce government subsidies for insurance. But he made the mistake of working with Democrats on the proposal (which went nowhere). Today, Mr. Bennett is at risk of losing the Republican nomination to a candidate backed by the Tea Party. What we’re left with, then, is this: A bill that would spend about $950 billion over 10 years to help the uninsured and small-business employees buy insurance. Initially, the bill relies on accounting gimmicks to cover these costs. Most important, the insurance expansion does not start until 2014, holding down the 10-year cost. The taxes and Medicare and Medicaid cuts in the bill are then big enough to pay for the bill. Over time, however, the cost savings are likely to rise more quickly than the spending, more than making up for the gimmicks. The Medicare oversight board will crack down on unnecessary tests. Medicare pilot programs will grow. The insurance exchanges will spur competition. In the second decade, the Congressional Budget Office projects the bill would cut about $1 trillion from the deficit. Critics have said, correctly, that this prediction might not come true. If the budget office took account of the uncertainty and the gimmicks, the $1 trillion savings estimate might well shrink. But to suggest that the most likely outcome is only marginal cost savings, or even cost increases, requires a selective reading of the evidence. Over its history, the Congressional Budget Office has tended to the effect of cost-reduction efforts in Medicare. As doctors and hospitals adjust to new rules, they figure out how to be more efficient than economists expected. And Congress, in most previous cases, has not overturned legislation that phases in changes — like the 2018 start date for the high-cost insurance tax. Looking at the whole picture, The Financial Times has said that the bill, “though flawed, is in fact a great step forward.” As I mentioned above, Congress and the White House can still do better. Mr. Obama and the Blue Dogs could throw their weight behind some popular cost-cutting measures, like the penalties for medical errors. Or they could back a proposal from Michael Bennet, a Colorado Democrat, that would push Congress to make up for any savings that did not materialize. Beyond these last-minute improvements, I see only two good options for anyone who wants to be fiscally conservative. The first is to say we cannot afford to cover the uninsured. Our health care efforts should instead start with building support for specific measures that can be shown to save costs. Who are the members of Congress who will support these measures, and how soon can they be passed? The second option is to say that expanding insurance would bring enormous benefits. It would allow people to get treatments — diabetes care, dialysis, chemotherapy, you name it — that they are now skipping. According to one conservative estimate, universal coverage would save “probably thousands if not tens of thousands” of lives a year. Yet we can’t afford simply to expand insurance. We also need to pay for the expansion — and to pay for the health system we already have. Some attempts at cost control will make us uncomfortable, because we can’t be sure that they will cut back only on wasteful care. All attempts will involve uncertainty. But that’s unavoidable. We all wish that Congress could summon the wisdom to come up with a politically popular plan that would sharply cut costs. Waiting for that day to arrive, though, doesn’t seem very conservative.
When you accept people who are health/money risk into the insurance risk pool, it costs more for everyone in the pool. Premiums by definition will go up since no one can be denied. The money for them has to be found somewhere. Some of it will come from healthy people now forced to buy insurance, some of it will come via taxpayers in the form of a subsidy, and the rest will come in the form of premium hikes. You can also save some money by reducing Medicare payment rates to doctors, but if they operate at a loss they will stop accepting Medicare patients or just go retire on a beach somewhere. That's why Congress will enact a "doctor fix" in a few months that will confirm the lie that this will reduce the debt (as if anyone with half a brain would believe that a new government subsidy will reduce the deficit).
THis is a pretty good article explaining the cost controls in the bill in a way that most people can understand. The media hasn't really been discussing the cost controls in the bill.
Ah the classic "you're too stupid to shop around" notion. Insurance companies would accept anyone if they could set premiums according to that person's risk (like car companies do with high risk drivers). But state regulations (and now federal regulations) cap premiums and make it unprofitable to take on certain individuals. If they passed a law that said car insurance could be no more than $50 per month, alot of people wouldn't be able to get car insurance. Coverage mandates increase costs and reduce choice, they raise premiums by their very nature. Even if I don't have kids, my policy now has to cover maternity care and pediatric care. If regulators prevent the provider from raising premiums to pay for these new mandates, they operate at a loss, which will eventually cause them to fold. I suspect this is what the crafters of this bill are ultimately after. Regulators setting rates doesn't control costs, it just means the provider isn't repaid in full for the cost. This is silly, as if the reason costs are high is because we don't a have a version of Lending Tree for insurance. The exchange means very little if every provider is forced to offer the same basic coverage. Just look at Mass., it's the exact failed model. This is the scariest notion of all. An unelectable, unaccountable, unappealable, faceless council of wise men deciding what medical procedures are worth. This harkens back to the Soviet Union trying to mandate the price of bread. The fact that Ezra Klien is delighted that this council is immune to our elected representatives is scary. He takes pleasure in the notion of that kind of unchecked authority. Not only are there mandates to make sure you get enough coverage, there are penalties if you get too much coverage! Social engineering at its finest. "Look buddy, I know you like to prepare for a rainy day, but the odds of you needing a liver transplant are 1 in a million, if you want a plan that covers that, we're going to penalize you for it." I could go on, but the bottom line is that this is the arrogance of the central planner on display. A bunch of people who think they know how to run businesses and people's lives setting a bunch of rules to control us. It won't work, but even if it did, it's paternalistic to treat people like this.
Actually it's technically called information asymmetry. Kenneth Arrow won a nobel prize for explaining this in 1968. Perhaps you could win one yourself by proving him wrong. Thus far reality indicates otherwise. YOu're aware that this is targeted towards situations where strong unions have negotiated super generous plans, and that they were the primary opposition to this part of the package? Anyway please tell me what's "social engineering" about taxing people for benefits they receive. Thanks. This is beyond stupid - there is no special tax on people who require extreme care. Given the ignorance you are showing here you are basically proving their point. Kenneth Arrow outlined why over 42 years ago.
How can we truly get competition when America is so focused on employer provided coverage? I hate the employer provided coverage system.
Me too. Part of being an american is coming to grips with the reality that a large segment of the population would prefer being ripped off by government sponsored corporations instead of *gasp* just paying a tax to have it done sans middle-men. Ce La Vie.
There will also be significant savings associated with reduced bureaucracy as well. Imagine how expensive the pre-existing conditions departments in these companies must have been. They had to have teams of researchers tracking all that information down, and teams of lawyers to fight these cases, in court if need be, and teams of paper pushers to handle all the documentation. Now these companies can cut all that out and just focus on getting people healthy the best way possible. This was one of the reasons why the bureaucracy in the old US system was so bloated and why the system was so much more expensive than every other first world country’s system.
Thanks, I like reading Ezra Klein. About those 5... #5 is optimistic. Other countries face the same problem of cost containment yet their politicians are afraid to cut costs. #2- The IMAC is a good step, but I think it needs more power. Physician and hospital payments are excluded until 2019. #3 got neutered when Unions were able to water it down, raise the trigger, and delay its activation date #1- I've been searching for participation rates for Mass. insurance exchange. One article claims "5 percent of those paying for their own insurance got it through the exchange". Source is biased though. For all we know, the regional pools can encourage a wider group of people other than the poor. #4- Is new to me. Sounds good. I think this shows the difficulty of convincing people about the law's cost cutting measures. The Cadillac plan is villified. IMAC is more commonly known as the Death Panel. No one is optimistic that Medicare or Congress is fiscally responsible. And the pilot programs... not sure many people know about what they'd do or which ones hold the most potential. It'll be interesting to see how the healthcare debate shifts in the next decade.
Agreed - employer based coverage is possibly the single biggest problem with the insurance part of the system. One of the single best pieces of this legislation is the Wyden amendment that lets employees opt of out their employer care and get an equivalent voucher to shop for individual insurance in the exchange. In theory, if enough people do that, it makes the employer part of the market smaller and the individual market larger, which fosters better competition. The other great part is #4 - changing the method of payment away from pay-per-test, which just provides a ludicrous incentive system for doctors and hospitals. At the end of the day, cost control is what everyone wants, but there is no proven method of doing it. Even the GOP "alternative" was focused entirely on the insurance side - but to really cut costs, you have to focus on the service side. So the third great thing about this bill (oddly, none of the 3 things I consider to be the best pieces were ever talked about by either side) is that it invests in experiments - everything that people have suggested as solutions to controlling service costs will be tested. And then we'll see what really works and what doesn't and expand the ones that do. Unfortunately, this is a long-term process, but since we don't know of other solutions, it's the best we've got.
You mean it's the best we've got because political reality... I am very hopeful of those pilot programs, but without it there wouldn't be much for me to like in long term. With or without the best projections, the system is headed towards insolvency. Yes, it does satisfy a moral imperative, but the way it's done doesn't give room for cost controls when debating over its merits, which means the political reality will be that there will be ongoing healthcare debates (hopefully unlike this one) in the future. Doug Holtz Eakon recently savaged the CBO score in a Times editorial. I fear the American public will believe the debate is settled, and those seeds "budget hawks" are planting now will bear fruit when the public perceives continued flaws in the system. Here's a depressing interview by Bill Moyers with Marcia Angell, who pushed hard for single payer: <script type="text/javascript" src="http://www.pbs.org/wgbh/pages/frontline/js/pap/embed.js?moyj06s3c91qe39&4x3"></script> I'm beginning to get annoyed by Obama's governing style of dealmaking first and then trying to sell the public. He has bigger clout than he realizes, but only when he doesn't allow the opposition to build momentum. Like the stimulus package, it always appears that he's conceding too much before using the bully pulpit. It's like having the atmosphere of what a Presidency Hillary Clinton would've been in but with moderate, sometimes conservative, policies.
No - I meant that we really don't know how to control costs (in terms of services, not insurance). Everything is just theory at this point. The left proposed things like the public option - but that's designed to control insurance costs rather than actual cost of care. At the end of the day, insurance can't be cheaper if the actual cost of services doesn't go down. So what I'm referring to more is "how do you make the cost to the hospital of a cancer treatment cheaper", etc. The one thing we know that would cut costs is to deny/limit high-end care. For example, is a $100,000 surgery that is designed to extend someone's life for 2 weeks really a logical use of limited funds? I'd argue no - but it's hard to make that argument to the person needing the surgery or their family. In that regard, there are certainly political realities, but I think those are also moral/ethical decisions that I don't think there's a really good answer to.
So true. Well said. Blind acceptance of corporate funded propaganda derived in think tanks has taken its toll. The efficiency of Medicare as a middleman paying doctors blows insurance companies away. They just can't compete.
