Sunday, January 24, 2010

Short sighted partisans

Sadly, this blog post [nsfw] illustrates the short sighted, partisan thinking that drives our policy- on both sides of the aisle. The most popular health care plans are not transformational reforms, they are expansions of what we already have. They are mostly going to make the cost control problem worse, with a few notable exceptions. If we don't attack costs now, we won't even be able to save the risk protections we have in place today from the onslaught of baby boomer retirements. We obviously need to raise money as well, just to pay for what we already have, and completely removing the income tax exclusion on health insurance benefits would be a great place to start.

It's easy to attack the insurance companies and their ridiculous rescission clauses, but the problems we face are much deeper than that. The cost of insurance is driven by the cost of health care services. I'm not angry, but I differ from the implied view here that taxing people to pay the providers insane amounts (that we aren't even allowed to see before we have to incur them) is better than making the costs public and letting the consumer drive the system towards value. When you don't know if an MRI is costing us collectively $350 or $750, even if you had an incentive to choose the better value, you wouldn't have the information to make a good decision. Of course, the question as to whether Americans get too many MRIs is generally sidestepped.

We need to create the incentive for all of us to work together for lower cost care- and make the information available to enable that. I'll go to a different grocery store to save $2 on bananas. I'd definitely go to a different doctor if I could save $100 the next time one of the kids gets sick. It is that sort of behavior that drives prices down for most other things we buy, and it can work for health care too. The reason there is no low cost provider of health care, providing popular goods at low prices, is that there is no advantage to the insured consumer of trying to save money.

The generally naive response to this, which was my initial thought as well, is that we can just cap provider costs once we have a monosopony. Of course, the general response to that is that the providers stop offering options that are money losers, and you end up with something like the Canadian wait for your MRI. Markets, for whatever flaws they have, are good at one thing, setting prices. Without a market, determining a fair price is simply not possible.

Before we lose all of the energy and attention that we have currently focused on health, let's work together to find a way to make what we have cost less, so we can afford to get it to more people. We need to sell $1.7T of Treasuries this year to pay for our current deficit. Demand is likely to fall far short of that, meaning that the interest we pay on our debt will rise, along with other interest rates as government borrowing crowds out other lending. Reducing the cost of health care is a serious concern of every party, Tea, Democrat, Green, and Libertarian (have to leave out the Republicans responsible for the Medicare Part D monstrosity). Enacting benefits without caps will just put us in the Massachusetts situation, where they are struggling to figure out how to contain the rising costs. Looking at options like Health Savings Accounts, and high deductible plans give us better coverage on the big risks, and ways to cut spending on the most common costs. There are still hard choices out there- we'll probably need the "death panels" at some point since we outspend the rest of the world so much in the last six months of life.

There are hundreds of disruptive ideas out there to revolutionize health care in America so that everyone can afford some, let's set path out there to make it happen. I'd suggest reading "The Innovator's Prescription" if you want a good picture of how our policy is preventing the best ideas from coming forward.

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