ObamaCare and the Regulatory Feedback Loop

It's increasingly clear that the proposed regulations governing the so-called accountable care organizations (ACOs) created by the health care overhaul signed by President Obama last year are just another way for the federal government to micromanage the practice of medicine. They're also the latest example of the regulatory feedback loop, in which new regulations are layered on top of old rules in an an attempt fix a problem created by older rules and regulations. 

As Cato's Michael Cannon points out, the recently proposed ACO rules are part of an effort to undo years of federally designed payment incentives that have made it less likely that doctors will work together, in some cases actually penalizing providers for quality-focused coordination: 

"Accountable care organizations" is jargon for the radical concept that when doctors and nurses actually talk to each other about shared patients, there will be fewer mix-ups, less duplication and patients will receive better, more convenient care at a lower cost. Markets created the first ACOs, including Kaiser Permanente, more than six decades ago.

The federal government, in contrast, has long tried to ensure that nothing so sensible ever happens. For nearly five decades, Medicare regulations have financially penalized doctors who coordinate care. The Medicare Payment Advisory Commission reports that Medicare regulations are "largely neutral or negative towards quality" and sometimes pay providers "even more when quality is worse," like when poor coordination injures Medicare patients.

Obamacare supporters say the solution to this failure of centralized economic planning is … more centralized economic planning. The law therefore authorizes Medicare to encourage care-coordinating ACOs. 

Coordinating care between providers isn't necessarily a bad idea. The problem is trying to micromanage that coordination from Washington. The track record of such attempts isn't good: Pilot programs intended to test Medicare's ability to manage coordinated care groups have failed to consistently save money. And depending on how provider groups form up, the new coordination rules could actually have the effect of making care more expensive. Is there any reason to think that this 400-odd page round of "prescriptive and restrictive" rules drafted by administration bureauwonks will somehow get it right?