And what is the result so far? Overwhelming, amazing failure.
The health care bills now winding their way through Congress would cover many of the uninsured. They would pay for most of the costs associated with that expanded coverage. But they would do little to change the fundamental incentives that drive health care inflation.
Health care providers would still rely on a fee-for-service system. They could still ignore cost-benefit analyses when deciding what treatments to provide.
As Alec MacGillis reported in a front-page piece in The Washington Post this week, “All signs in Washington suggest that cost considerations will be kept at arm’s length as health care legislation moves forward.”
The basic problem is that the American people have gotten used to high-tech, all-everything health care, under the illusion that they don’t have to pay for it and that it’s always better for them. Politicians are unwilling to force voters and donors to give up that sort of system, even the parts that are ineffective.
Several ideas floating around that could reduce inflation are neutered in the current bills.
Many people believe that ending the tax exemption on employer health benefits would reduce costs and make consumers more conscious of cost considerations. But the House has rejected that, and the Senate doesn’t even want to cap that tax exemption.
Many people believe that a public plan would save money through lower administrative costs and because a government-controlled system would allow the government to ram through cost reduction. But lower administrative costs, even if they materialized, would not affect the incentives driving inflation.
And the current public plan wouldn’t really change the system. A Congressional Budget Office analysis of the public plan provisions in the bill from the Senate committee on Health, Education, Labor and Pensions projected that they would neither increase the total number of people insured nor substantially affect costs, “largely because the public plan would pay providers of health care at rates comparable to privately negotiated rates.”
Then there are all these mysterious deals the White House is cutting with industry groups. They sound good, but it’s not clear what industry is getting in return, and they, too, would not alter the fundamental incentives.
Keith Hennessey, the former chief of the National Economic Council, studied the HELP bill and wrote on his blog that, aside from one provision, “I can find nothing that would provide information and incentives to consumers, medical professionals, health plans, employers or government to slow the growth of long-term private health care spending.”
The bills not only fail to reduce health care inflation, they make it harder to fix the larger fiscal mess later. They do that by taking the chits we could use to balance the overall budget and using them to cover the $1.3 trillion in new federal health spending.
To get our overall fiscal house in order, we’re going to need to raise taxes on the rich. The House bill would use that chit to pay for expanded coverage. We’re going to have to take a bite out of Medicare spending. The administration plan does that to pay for expanded coverage. We’re going to have to tax people in the middle class more. The congressional bills effectively do that by mandating coverage and then failing to subsidize middle-class consumers. But that burden, too, is to pay for new coverage.
Instead of brightening the fiscal picture, these bills make it immeasurably worse.
Health care inflation is not some optional side issue that can be left out of reform. It is the core problem that undermines the viability of the health care system, the federal budget and the economy as a whole. Maybe the administration will provide some last-minute solution in conference. But prospects don’t look good.
David Brooks writes for The New York Times.