Controlling Healthcare Costs

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In the Wall Street Journal today, health economist David Cutler takes a look at the cost savings measures in the current healthcare bill and gives it full marks in six areas: forming insurance exchanges, reforming Medicare Advantage, value-based payment for Medicare, creating an independent Medicare advisory board, fighting Medicare fraud, and investing in IT. Not bad! And there’s partial credit for three more: prevention programs, a tax on high-value insurance plans, and malpractice reform. He gives no credit for only one thing: creating a public option.

So reform gets full credit on six of the 10 ideas, partial credit on three others, and no credit on one. The area of no credit (a public option) is because Republicans opposed the idea. One area receives only partial credit because of Democratic opposition (malpractice reform) and two other areas reflect general hesitancy to increase taxes (taxing Cadillac plans and taxing drivers of obesity).

Why is reform viewed so negatively? In part, it may reflect the perfect being the enemy of the good. If the only passing grade is 10 out of 10, then reform clearly fails. But given where the Republican Party is on a public option, no reform will get a passing grade. If both parties were willing to raise taxes and Republicans negotiated malpractice reform for their overall support, we could probably get a nine out of 10.

I’ll add two things. First, surely the idea of price transparency and larger copays for certain kinds of healthcare ought to be on the list? It’s true that conservatives have turned this into something of an idée fixe, making claims for it way out of proportion to what it can accomplish. And there’s no doubt that it would have to implemented carefully. Still, I think there’s fairly broad agreement that this could have some impact on cost containment, and it’s nowhere to be found either in the current bill1 or on Cutler’s list. Even if you think it’s a bad idea, it deserves at least a mention.

Second, Cutler is, of course, dead wrong about why reform is viewed so negatively. That’s because he’s an academic and has to be polite in public. The real reason is that the Republican Party has no interest in reining in healthcare costs and no interest in reforming healthcare. Their only interest is in wielding the biggest partisan cudgel they can find. So they call the Medicare advisory board a “death panel” and insist that exchanges and a public option are the road to Stalinism. Say this often enough and loudly enough and eventually plenty of people believe you. And even the ones who don’t will eventually become uncertain enough that they decide they might as well oppose whatever the Democrats are doing. After all, healthcare reform doesn’t provide much benefit for the vast majority of people, so why take chances?

If Republicans were genuinely interested in controlling healthcare costs, the political dynamic of reform would be entirely different and the bills going through Congress would look entirely different. Better in some ways and worse in others, but the product of genuine negotiation. But Republicans aren’t interested in negotiation, just demonization. That’s why reform is viewed so negatively.

1UPDATE: Michael Russo of CALPIRG emails to correct me. In fact, in the Manager’s Amendment to the Senate bill, Sec. 2718(e) provides that “Each hospital operating within the United States shall for each year establish (and update) and make public (in accordance with guidelines developed by the Secretary) a list of the hospital’s standard charges for items and services provided by the hospital, including for diagnosis-related groups established under section 1886(d)(4) of the Social Security Act.”  Says Russo: “Obviously it’ll take some strong regs to make the rubber hit the road on this so patients really do know what things cost, but as written this is a big step forward, and very helpful to consumer advocates moving forward.”

Assuming those strong regs are written and implemented, this is good news.


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