The Homa Files

Ken’s Take: I agree that all US citizens should have access to healthcare, and I agree that healthcare spending is out of control.  But,  I really don’t want DMV-like government workers determining what medical services I get, where I get them, and when I get them (if at all).

Below are headlines from a WSJ piece that questions the fundamental assumptions underlying the Obama plan.

Note that neither the Obama plan nor the WSJ ideas address structural change like free (or low charge) clinics to handle routine medical care, or tort reform to minimize frivolus malpractice claims and the redundant services that they induce.

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Excerpted from WSJ, “Obama’s Health Cost Illusion”, June 8, 2009

The President’s main case for reform is rooted in false claims and little evidence.

The main White House argument for health-care reform goes something like this: If we spend now on a hugely expensive new insurance program for the middle class, we can save later by reducing overall U.S. health spending.

What if this particular theory turns out to be a political illusion? What if the speculative cost savings never report for duty, while the federal balance sheet is still swamped with new social obligations that will be impossible to repeal? The only possible outcome will be the nationalization of U.S. health markets, which will mean that almost all care will be rationed by politics.

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Since Medicare was created in 1965, U.S. health spending has risen about 2.7% faster than the economy and on current trend would hit 20% of GDP within a decade.

Now the White House claims the magic key is the dramatic variations in per patient health spending among U.S. regions. Often there is no relationship between spending and the quality of care, according to a vast body of academic research.  

But, Richard Cooper, a professor of medicine at the University of Pennsylvania’s Wharton School, has studied regional variation in aggregate health spending, and found that the areas with the highest quality spend the most on medicine.

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Obama’s ideas include more health information technology; emphasizing prevention and healthy living; rejiggering reimbursement policies so doctors and hospitals are paid more for quality care; and funding federal research that compares the effectiveness of medical treatments. There is scant evidence that any of them will ever save real money.

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According to Team Obama:  “Future increases in spending could be moderated if costly new medical services were adopted more selectively in the future than they have been in the past and if the diffusion of existing costly services was slowed.”

But technological change is the most important driver of health spending. Modern medicine can do so much more than it could in the past, but this costs a lot even as it has bought a lot in extending and improving lives. In a 2001 study, the estimated benefits of lower infant mortality and better treatment of heart attacks “have been sufficiently great that they alone are about equal to the entire cost increase for medical care over time.”

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A far better alternative is to increase individual responsibility for medical decisions.

In 1965, the average American paid more than half of his health care out of pocket. Spending has since increased sevenfold, but the amount that consumers pay directly hasn’t even doubled. When people aren’t exposed to the true cost of their care  — they consume more care.

Roughly half of the real increase in U.S. health spending between 1950 and 1990 is due to Medicare and the spread of third-party, first-dollar insurance.

Increasing cost-sharing would discipline the health spending curve and give it a more rational bent. The U.S. health cost “crisis” is that we spend so much without incentives to weigh the costs against the benefits.

Yet the entire Obama agenda is about increasing political, rather than individual, control of the health markets.

Full article http://online.wsj.com/article/SB124442772329993085.html

This entry was posted on June 8, 2009 at 7:10 am and is filed under Health Care / Medical Insurance. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.