2009 December 13 Sunday
US Health Care Reform Bill Will Up Costs

A month ago Jeffrey S. Flier, dean of Harvard Medical School, said the big health care spending bill in Congress will accelerate the already unsustainable rise in health care costs.

In discussions with dozens of health-care leaders and economists, I find near unanimity of opinion that, whatever its shape, the final legislation that will emerge from Congress will markedly accelerate national health-care spending rather than restrain it. Likewise, nearly all agree that the legislation would do little or nothing to improve quality or change health-care's dysfunctional delivery system. The system we have now promotes fragmented care and makes it more difficult than it should be to assess outcomes and patient satisfaction. The true costs of health care are disguised, competition based on price and quality are almost impossible, and patients lose their ability to be the ultimate judges of value.

Worse, currently proposed federal legislation would undermine any potential for real innovation in insurance and the provision of care. It would do so by overregulating the health-care system in the service of special interests such as insurance companies, hospitals, professional organizations and pharmaceutical companies, rather than the patients who should be our primary concern.

Accelerated crisis. That pretty much sums up US federal fiscal policy at this point. Make it go wrong faster.

In effect, while the legislation would enhance access to insurance, the trade-off would be an accelerated crisis of health-care costs and perpetuation of the current dysfunctional system—now with many more participants. This will make an eventual solution even more difficult. Ultimately, our capacity to innovate and develop new therapies would suffer most of all.

By 2019, the number of uninsured could be reduced from an estimated 57 million to 24 million under the current Senate healthcare reform bill. However, the accompanying additional demand for services that would accompany this expansion would be difficult to meet initially with existing health provider resources—leading to "price increases, cost-shifting and/or changes in providers' willingness to treat patients with low-reimbursement health coverage," according to a Dec. 10 memo compiled by Richard Foster, the Centers for Medicare and Medicaid Services (CMS) chief actuary.

Foster does not expect some of the proposed Medicare savings to really save money and expects some of them to be repealed by Congress - as they have been repeatedly in the past. Lower pay-out rates to doctors result in fewer doctors agreeing to see Medicare patients. So then old folks complain to their Congressional representatives.

Higher costs are coming. I expect at best stagnation of living standards.

The report, compiled by the chief actuary at the Centers for Medicare and Medicaid Services, estimated that total health costs in the U.S. would be $234 billion higher than if the bill weren't passed.

Parenthetically, if you want to watch for reports on the health reform bill coming out of the Medicare Office of the Actuary then watch this page for new PDFs that analyze Congressional bills.

Meanwhile a bunch of liberal Democrat Senators oppose putting people into Medicare starting at age 55 since that would make Medicare supplier shortages even worse.

“We appreciate the rationale underlying the proposed Medicare expansion,” the lawmakers wrote in the Dec. 11 letter, “but fear that provider shortages in states with low reimbursement rates such as ours will make such a program ineffective, or even worsen the problems these states are experiencing.”

If you are an American citizen expecting Medicare to pay for your medical care upon retirement think again. Since Medicare pays doctors less than private insurers many doctors only accept patients paid for by private insurers.

David Gratzer, a physician and author of Why Obama’s Government Takeover of Health-Care Will Be a Disaster, points out that while a larger percentage of GDP goes to health care in the United States other Western countries are experiencing similar percentage rates of growth in health care costs.

Countries like Canada and Britain spend a fraction of GDP compared with the U.S. But, in recent years, government-run health care has lost control of costs. Between 2000 and 2006, the average real annual growth rate for health expenditures for OECD member countries was 4.9%; American health inflation over the same period was 4.95%.

Take Britain. Even with top-down management, the annual budget of the National Health Service rose between 5% and 10% faster than inflation through most of the decade.

Aging populations combined with more expensive newer treatments translate into much higher costs. Unless individual patients have incentives to demand less care the costs will keep going up until living standards go down.

Share |      By Randall Parker at 2009 December 13 11:05 AM  Economics Health

Mthson said at December 13, 2009 12:53 PM:

We sometimes suggest it's cheaper to cure diseases through advancing medical technology than to merely play whack-a-mole with symptoms of diseases.

It seems like we could increase pressure for greater research funding by publishing yearly estimates for how much more funding will be required to cure each of the 25 most common diseases.

Introducing measurements, even if they're speculative estimates, can radically re-frame our thinking.

Eric Johnson said at December 13, 2009 1:11 PM:

Such estimates would be preposterous rather than merely speculative. Things like that are just unguessable. For most of those diseases there is little agreement on the etiology.

Mthson said at December 13, 2009 3:32 PM:

Maybe a prediction market would be more useful. Intrade.com does have predictions on 3 scientific questions. Intrade is probably most widely known for its political prediction markets, which seem to be considered more reliable than polls.
-Higgs Boson Particle to be observed on/before [date]
-Dr Arata's experiment to be replicated in peer-reviewed scientific journal on/before [date]
-Focus Fusion process to generate net power before [date]

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