Cost
The problem of restraining health care costs is quite acute. I believe that cost is the most urgent issue of all for health care reform. It is impossible to envision making progress in dealing with access or quality without doing something to address cost.
All of our health care finance systems are under stress. The government system is completely unsound--the Titanic headed toward the iceberg of unfunded liabilities. Employer-provided health insurance is a questionable concept in theory that is unraveling in practice. The individual insurance market is a disaster, with something like 3/4 of all families who do not get insurance through work or government electing to remain uninsured.
The underlying driver of costs is that Americans make extravagant use of medical procedures with high costs and low benefits. See Crisis of Abundance or Overtreated.
A good way to help bring down cost is to provide patients with better information on the benefits and risks of medical procedures. As we have seen, this information will help with quality as well. In addition, consumers should be given transparent, advance information about the costs of alternative treatments using alternative providers.
Once consumers have the means to evaluate the benefit of procedures and to compare costs, they need to be given the opportunity to use that information. From the standpoint of opportunity, Maggie Mahar writes,
The well-informed patient, on the other hand, appreciates the grey areas of medicine. His doctor has been open in describing the uncertainties. As a result, this patient is more willing to accept answers like "We don't know." Or, "It depends." And he is more likely to listen to a doctor who tells him that the most aggressive approach is not necessarily the best approach. He is more likely to hear a physician who says: "Try physical therapy first. Try drug therapy. Try a change of diet and exercise."
This is why I think that, if doctors and patients work together, they can contain the cost of health care, paving the way for a sustainable, affordable, health care system that offers the right care to the right patient at the right time.
I believe, however, that having the means and the opportunity to make better choices is not sufficient. Consumers also need a motive, which is why I think that our system needs to eliminate the insulation provided by our poorly-designed forms of health insurance. Instead, I would like to see insurance policies with higher co-payments and higher, longer-term deductibles.
I would be very modest in portraying government's role in giving consumers the means, the motive, and the opportunity to make more cost-effective decisions. I think that government can contribute to gathering data and providing analysis, because it would be difficult for a private provider to profit from such an undertaking (information wants to be free). If doctors and patients need to have better conversations about treatment options, I do not see government as the natural driver of that. Finally, if the nature of insurance is going to change to give consumers more responsibility, that is going to require a less politically-tilted health care finance system, including a higher age of eligibility for Medicare and fewer tax advantages for employer-provided health insurance.
A bad idea for dealing with cost is "cost containment." What that means is cracking down on the prices and incomes of doctors, hospitals, and drug companies. Government attempts to do this run afoul of organized political opposition. Moreover, it is very difficult to implement heavy-handed negotiations on price without at some point stifling innovation and hurting quality. When it is allowed to operate, the market generally does a better job of cost containment. The example of laser eye surgery is frequently cited to support this in health care.
The government gets ugly when it regulates health care providers. My pet peeve is the requirement in Maryland that someone must obtain a doctorate to become a physical therapist. That regulation clearly was enacted for the benefit of incumbent physical therapists (who are exempt, of course) and works to the detriment of patients.
If health care is ever going to be rationalized, made efficient, deploy technology in a cost-saving way, and so forth, then practice regulations and licensing regulations will have to be revised. The anti-competitive nature of today's regulatory environment is discouraging.
The Superior Efficiency of Socialism?
One question concerning cost is whether costs would decline if we went with a single-payer health care system. Two arguments are typically made in support of the idea that socialism is the route to superior efficiency.
1. Other countries have single-payer systems, and they spend less on health care than we do.
2. Health insurance companies do not disburse all of their premiums to health care providers. Instead, they "keep" a large portion to pay for overhead and profits.
The amount that a country spends on health care is mostly a function of supply. In fact the amount that an individual state within the U.S. spends on health care is mostly a function of supply. One of the reasons that Massachusetts is a difficult state in which to try to offer universal coverage is that the supply of specialists and high-tech equipment is so high there. Given the vast supply of expensive health care providers in the United States, there is reason to doubt that shifting to a universal system provided by government would bring down spending.
Government is not as efficient as it might seem. While the government can operate without profits, it cannot operate without taxes. Taxes discourage work, thrift, and risk-taking. The deadweight loss from taxes as a percentage of revenue is higher than insurance company profits as a percentage of their revenue.
As to eliminating overhead, if all of private health insurance were ended, government would face a new responsibility: setting price schedules for every medical service in every section of the country. As it stands today, prices are negotiated with private insurers, and government programs feed off of these "usual and customary" charges. Deprived of this market information, government would have more overhead and would have difficulty correctly assessing the relative values of different services...
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