Buy Now, Pay Later

The health care cost-control conundrum.

Peter Suderman | July 24, 2009

Listen to liberal advocates of health-care reform and you'll hear two constant refrains: We must expand coverage to everyone, and we must control costs. Democrats tend to sell this as a package deal, a sort of political version of the Billie Mays pitch—but that's not all! And while they've put forth a number of plans that would expand coverage by varying degrees, the tacked-on bonus—as is the case with most info-mercials—is essentially a scam: Claims that the Democrats' current proposals will rein in health-care spending are sketchy at best.

Nor is that surprising. Despite all the talk of cutting costs, the tacit plan, from the beginning, has been to pass reform by building a coalition that would collectively agree to give members whatever they wanted now, while cheerfully talking around the serious budgetary complications posed by universal coverage.

This strategy was sketched out in a March New York Times article on lessons learned by advocates of national reform during the recent overhaul of the Massachusetts health-care system, which expanded coverage but saw costs rise sharply. According to some who backed the Massachusetts overhaul, however, that was a necessary ingredient in the recipe for reform. As the Times notes:

Yet, even now, the lawmakers and strategists behind the Massachusetts plan strongly defend their incremental approach. Only by deferring the big decisions on cost containment, they said in recent interviews, was it possible to build a consensus among doctors, hospitals, insurers, consumers, employers and workers for the requirement that all residents have health insurance.

The piece quoted strategists and stakeholders agreeing that, as Washington attempted to implement reforms similar to those in Massachusetts, the key would be to focus on building the coalition—presumably through dealmaking and handouts—while carefully avoiding anything more than platitudes on the sensitive issue of spending. Defenders refer to it as an "incremental approach," but seedy salesmen have long used the same gimmick to unload get-it-out-the-door-now stinkers under a different name: Buy Now, Pay Later!

Subsequently, this year's health-care debate in Washington has featured a raft of insider deals and stakeholder handouts—to everyone from Wal-Mart to the drug industry—as well a lot of talk about cost-control without much substance to back it up. That's partly due to a string of sobering reports from the Congressional Budget Office that have made the fiscal aspect impossible to ignore. The independent office says that the current path for the country's health-care entitlements is "unsustainable," and, without major changes, will likely cause "substantial harm to the economy."

And those changes, the CBO says, are not to be found in the current legislation. Indeed, none of the bills the CBO has examined would sufficiently tamp down on health-care expenses. To the contrary, CBO chief Douglas Elmendorf told members of the Senate Budget Committee, the legislation would "significantly expand the federal responsibility for health-care costs." Specifically, the House bill would add $202 billion to the federal deficit by 2019.

Both Massachusetts and Obama have, in the past week, announced strategies they hope will deal with the problem of paying for health care. A Massachusetts health-care commission voted unanimously to end fee-for-service payments to doctors and other medical practitioners in favor of capitation, which means care providers are paid per patient rather than per service. Obama, meanwhile, came out in favor of a commission of his own, the Independent Medicare Advisory Commission (IMAC).

But the tricky politics of both ideas means that neither appears to be a likely solution. Capitated payments are deeply unpopular with both doctors and patients. Doctors stand to make less money, while patients find themselves in the hands of providers with the financial incentive to provide as little care as possible.

Details on IMAC are still somewhat vague, but according to Office of Management and Budget Director Peter Orszag, the commission—which is really just an expanded, more powerful version of the current Medicare advisory group, MedPAC—would "have the authority to make recommendations to the President on annual Medicare payment rates as well as other reforms." The idea is to keep politically motivated legislators out of the business of determining Medicare pay rates and reimbursements. But rather than insulating health care from legislative politics, it insulates legislators from the political backlash against rationing and restrictions on care. IMAC would essentially turn Medicare into a government-run HMO, leaving seniors stuck with the sort of micromanaged coverage much of the country rejected throughout the 90s—and perhaps exacerbating the potential for care shortages as doctors look to avoid treating those covered by low reimbursement rates.

The fact is, health-care costs are rising across the developed world, even in the most widely praised systems. Britain, for example, has kept total health-care spending as a percentage of GDP lower than many other Western countries through stingy, centrally rationed care, but its costs are on the rise, and its National Health Service is facing a severe financial crunch. And while advocates of liberal reform hold up countries like France and the Netherlands as models of high-quality care, even boosters must admit that these countries, too, face troublesome rising costs.

Health-reform advocates here in the states think savings may be found in a number of other measures—health IT, comparative-effectiveness review, various changes in provider payment structures—but all are untested. They also have important political constituencies invested in their defeat. That makes them tough issues for politicians who like to sell the public on the wonders of their plans while sweeping the costs and complications aside. In other words, like the dearly departed Billie Mays, politicians are pitchmen—always urgently, enthusiastically peddling something new and shiny in the desperate hope that you, their political constituents, are buying.

Peter Suderman is an associate editor of Reason magazine.

Comments

kilroy|7.24.09 @ 3:28PM|#

Umm. It's now being called "Insurance Reform", or "Climate Reform" or "Insurance Warming" or some such shit.

They never really wanted to change healthcare, no really. Look over there. Shiny!

|7.24.09 @ 3:59PM|#

On the one hand liberals tell us that there are millions of uninsured who are forgoig basic medical treatmet and being denied other treatment because they can't pay for it. On the other hand, they tell us they are going to create a governmnet entitlement that will fix this problem and cut costs. How exactly is that going to work?

|7.24.09 @ 4:12PM|#

Well to be fair, there could be some cost savings by people using primary care instead of ER care. primary is much cheaper.

And even when ER care is not charged back to the government, we are all still paying for it, in the form of higher insurance premiums etc.

That's why I think it's important to look at reducing overall system cost, not just trying to shift costs from one sector to the other like the government tries to do with Medicare (reiumbursing below cost)

|7.24.09 @ 4:27PM|#

Right up front are two canards:
1) We must expand coverage to everyone
2) We must control costs.

Which translate to:

1) You must pay for everyone else.
2) Doctors must not make more then we deem "enough"

The liberals have not articulated what is broken which must be repaired. Has anyone encountered a doctor's office which guards against patients entering for care? It is not a coincidence the people most urgently pushing this plan themselves possess the accumulated wealth which could be used to pay for health as a charitable endeavor rather than an exercise in social engineering.
How are we fixing anything when we send a dollar to Washington for a bureaucrat to deliver twenty cents worth of health-care? Fast forward a decade, the system is found to be deficient and we must spend more money because now so many people are dependent on the system and well, it is too big to fail. This is a bad idea from the start and needs to be aborted now.
How much better would things be if instead of 0bama lobbying to get his wife a phony baloney 300k / year job, he instead raised his $810 million dollars not for political power but instead to help people.
It is too bad people did not see 2 years ago what is being displayed now. What we see in 0bama today is nothing different from what he has presented since he started running for office. His problem has become that no teleprompter can get him out of this mess. His deficient intellect and his inability to competently articulate what he is proposing has begun to be his undoing.

Paul|7.24.09 @ 4:51PM|#

Umm. It's now being called "Insurance Reform", or "Climate Reform" or "Insurance Warming" or some such shit.

Turns out I was right about what I heard on NPR the other day. NPR has struck the word 'reform' from their style guides on Obama's healthcare plan. They are all... to. the. last. using the word "overhaul".

johnny john john|7.25.09 @ 1:02AM|#

Solution = Raise TAXXXXESSS!!!!

Space Fiend|7.25.09 @ 1:24AM|#

If you check over at cnn.com right now, they've taken to calling the Blue Dogs "conservatives." I don't even know what to do with that.

|7.26.09 @ 6:02AM|#

Let's score this SECRET, KEY and GAME CHANGER first, CBO !

The House leaders reached a deal on Medicare payments: A "Pay for Value" reimbursement system that rewards doctors and hospitals that achieve the best outcomes at the lowest cost.

As a result, The House gained a lot of votes, a lot of people who were withholding support.

The federal Medicare program insures some 44 million elderly and disabled Americans at an annual cost of $450 billion, almost one-fifth of total U.S. health care spending.

Supporters of the agreement say it could save the Medicare System more than $100 billion a year and improve care, that means $1trillian over a decade. (Please visit http://www.kare11.com/news/news_article.aspx?storyid=820455&catid=391 for detailed infos)
The Times in a July 7 editorial argued "As much as 30 percent of all health-care spending in the U.S. -some $700 billion a year- may be wasted on tests and treatments that do not improve the health of the recipients," Thus the remaining $239 billions over a decade do not matter.

No one can disagree with this best outcome / evidence-based system, and private insurance, too, will be greatly influenced by this change with the focus on value over volume. !

Dr. Armadio at Mayo clinic says, "If we got rid of that stuff, we save a third of all that we spend and that is 2.5 trillion dollars on health care. A third of that and that is 700 billion dollars a year. That covers a lot of uninsured people."

THANK YOU !

|7.26.09 @ 12:18PM|#

There are two separate questions ... Where does US healthcare want to go, and how do you get there? When you mix the two, logic gets warped ...

Where does US healthcare want to go? Good healthcare for all folks at some reasonable cost to each family/person and at a reasonable cost to the country. Besides looking at the "big" countries, look at some small ones like Singapore, where people live on average 4 years longer than Americans, mass healthcare indicators like infant mortality (one of the rockbottom lowest in the world) and maternal mortality beat the US by a country mile, and where healthcare costs about four percent of GDP, with the government paying about one third. The recent innovation of "healthcare savings accounts" in the US, Singaporeans had since the 1980s. There is a national health insurance system that deals mainly with catastrophic illnesses (hence focusing on the big expenses without being dragged down by GP type costs, the little ones) that is voluntary yet reaching nearly 90% of the population.

How to get there is a much hard proposition. The providers and professionals in the US are just great (and not the problem), but the system is. What created this system? Politics. Too much legislation, compliance, lobbies ... The creator of the horrible system is going to now be the destroyer of any reform, because too many parties have veto rights.

As the US debates their next step, be clear which question is being answered at what point ... too many people are arguing for the solution not based on its benefits to the country but its harm to their own ricebowl ...

A tough situation ... and one that probably requires a very large stroke than many small tweaks ...

Chad|7.26.09 @ 8:26PM|#

But the tricky politics of both ideas means that neither appears to be a likely solution. Capitated payments are deeply unpopular with both doctors and patients. Doctors stand to make less money, while patients find themselves in the hands of providers with the financial incentive to provide as little care as possible.

Why switch to capitated payments? They are just as idiotic as fee-for-service. The former causes doctors to do as little as possible. The later causes them to do as much as possible. Both are obviously wrong.

The places where health care is the least @#$@#ed up is where doctors are salaried, and have no financial stake in individual patients or short-term results.

Truth in these words|8.6.09 @ 8:56PM|#

http://www.latimes.com/news/opinion/la-oe-rachlis3-2009aug03,0,538126.story