Just Because You Can Force An Issue Doesn't Mean You Can Solve It


Once in a while, an ObamaCare supporter will admit that the law might not succeed in controlling costs very well. But, the line usually goes, at least it will force the issue. That may be right. But just because you've forced the issue doesn't mean you've genuinely resolved it.

Witness what's happened in Massachusetts, where RomneyCare has certainly forced the issue of rising costs. Yet aside from desperate, foolish attempts to put arbitrary (and actuarily unjustifiable) price controls on health insurance premiums, raising the issue has yet to lead to any significant action, much less a working solution. In 2009, for example, a commission set up to look at health care costs urged a series of payment reforms, including getting rid of fee-for-service payments to providers. But a little over a year later, efforts to implement the plan are stalled:

A state commission recommended a year ago that Massachusetts adopt a new cost-conscious payment system and do so quickly, but a large number of issues remain unresolved. Consumer groups and some lawmakers, for example, want the legislation to guarantee patients freedom to choose doctors and hospitals, while other lawmakers and state officials believe that some limits are necessary for the plan to really save money and improve care.

Senate leaders and the Patrick administration disagree about how much authority a board that would oversee the new system should have over the actual fees paid to providers. And hospitals have been all over the map; some want the state to provide additional money, perhaps through higher Medicaid payments, for the technology that would allow them to help better coordinate patient care. But the state budget is already extremely tight.

As Arnold Kling and Michael Cannon have argued at some length, fee-for-service payment systems create significant problems. Yet payment-system reform of any kind still faces tremendous hurdles—the main reason being that while just about everyone pays lip service to the idea that we need to cut medical spending, no one wants their services or payments to be cut. Doctors, naturally, want to keep getting paid every time they do something, and patients, who typically don't shell out directly for the bulk of their medical costs, want doctors to have the fee-for-service system's incentive to do more rather than less. At the same time, politicians don't want to be seen as shorting doctors, or as passing payment plans that might reduce consumer choice.

That leaves insurers stuck in the middle. The increased costs of care and the increased costs of regulation lead insurers to increase premiums. But steadily increasing premiums, as well as a reputation for stinginess with reimbursements, tends to increase public antipathy toward the entire health insurance industry. That makes insurers political targets, which leads to moves like Gov. Deval Patrick's arbitrary rate caps. Along the way, the whole system begins to break down—and all the while, costs are still going up, and no one has figured out a way to hold them down. When it comes to rising costs, RomneyCare has certainly forced the issue—but only by making it worse. Expect the federal overhaul to do the same.