What health insurance benefits constitute "essential benefits"? The obvious answer is that what's essential for one person isn't necessarily essential for another. But thanks to ObamaCare, the wise wonks at the Department of Health and Human Services have to decide what's essential for all of us. Modern Healthcare reports (via Kaiser Health News) on an Institute of Medicine report released last week offering some guidance to HHS bureauwonks about how to go about determining what should be included in the essential benefits package:
For all its complexities, the Institute of Medicine's report to HHS on essential health benefits last week is based on a simple premise: Find what works already and improve on it over time. Now a task that's by no means simple falls to HHS, which will develop the proposed and final rules that outline what an essential health benefits package must include and exclude for the sake of making the plans affordable.
You know what mechanism is useful for figuring out what works already and improving on it over time in a vast, complex industry like health care? Markets. No, markets aren't perfect; by design, they tend to allow a certain amount of failure. But they store, process, synthesize, and harness disbursed local knowledge in complex economic systems better than anything else we know of. If continuous marginal improvement across a service sector that accounts for about a sixth of the economy is your goal, then competitive, minimally regulated markets are probably your best bet.
You know what is not good at figuring out what works already and improving it over time in the health care sector? The federal government's health care bureaucracy. This is reflected in its historical lack of success with innovating through demonstration and pilot programs. As Congressional Budget Office director Douglas Elmendorf told members of Congress over the summer, "The demonstration projects that Medicare has done in this and other areas are often disappointing. It turns out to be pretty hard to take ideas that seem to work in certain contexts and proliferate that throughout the health care system. The results are discouraging." The problem, in other words, is scale. Even when federal health wonks identify successful experiments, they've had a tough time making them work system-wide.
Yet many of ObamaCare's reforms are premised on hope in such system-wide reforms: The law creates 29 new pilot programs, 68 grant programs, and a host of new compliance standards and bureaucratic entities in hopes that more of what hasn't worked will somehow work this time. Asking the federal government to experiment with various health care delivery systems, then implement successful experiments on a wider scale is not a new idea. It is an old idea that has consistently failed to work. Here's a KHN report from 2009:
Medicare has conducted hundreds of tests, called pilots or demonstration projects, since the mid-1970s, but can't apply them to the entire system without congressional approval. Lawmakers have made other important changes, but pilot projects have rarely been the catalyst. Most of these experiments haven't been expanded because they failed a threshold test; they didn't save money or improve care. Others passed the test but were derailed by objections from hospitals, doctors and other providers—or were caught up in political fights as control of Congress shifted.
Yet if you look at the few areas of the health system that have consistently operated in a consumer-driven, market-oriented environments—procedures like cosmetic and Lasik eye surgery—you've seen dramatic drops in cost and increases in accessibility. Are those procedures somehow different? One common argument says that they are because they're not essential to health and therefore of less concern to regulators. But perhaps that suggests the folly of tasking regulators with determining which benefits are and aren't essential.
Watch Reason.tv's pre-ObamaCare report on Lasik eye surgery and the health care debate:
