Economics columnist Robert J. Samuelson notes the intrinsic conflict between increasing access to health insurance and decreasing costs, arguing that it is impossible to do both at the same time. He suggests controlling costs first. One way to do it, he says, is to reform Medicare:
Just imagine what the health-care debate would be like if it truly focused on controlling spending.
For starters, we wouldn’t be arguing about how to “pay for” the $1 trillion or so of costs over a decade of Obama’s “reform.” Congress wouldn’t create new benefits until it had disciplined the old. We’d be debating how to trim the $10 trillion, as estimated by the CBO, that Medicare and Medicaid will spend over the next decade, without impairing Americans’ health. We’d use Medicare as a vehicle of change. Accounting for more than one-fifth of all health spending, its costs per beneficiary, now about $12,000, rose at an average annual rate of 8.5 percent a year from 1970 to 2007. (True, that’s lower than the private insurers’ rate of 9.7 percent. But the gap may partly reflect cost-shifting to private payers. When Medicare restrains reimbursement rates, hospitals and doctors raise charges to private insurers.)
Medicare is so big that shifts in its practices spread to the rest of the delivery system. But changing Medicare, and through it one-sixth of the U.S. economy, requires more than a few demonstration projects of “comparative outcomes” research or economic incentives. What’s needed is a fundamental restructuring. Fee-for-service medicine — Medicare’s dominant form of payment — is outmoded. The more doctors and hospitals do, the more they get paid. This promotes fragmentation and the overuse of services.
We should move toward coordinated care networks that take responsibility for their members’ medical needs in return for fixed annual payments (called “capitation”). One approach is through vouchers; Medicare recipients would receive a fixed amount and shop for networks with the lowest cost and highest quality. Alternatively, government could shift its reimbursement of hospitals and doctors to “capitation” payments. Limited dollars would, in theory, force improvements in efficiency and effective care.
I like FWS’s idea, expressed in a comment on our recent health care thread , of approaching it from the supply side: Let’s increase the number of doctors, hospitals, and high-tech clinics. A bigger supply of health care would send costs down. He writes:
the last time you sought medical care were you able to comparison shop for the best doctor based on his history of complications, education and price?
is there a reason there is a shortage of doctors and nurses fueling the demand side and prices? would it not make sense to open more medical schools and create more doctors and nurses?
Any other ideas for cutting costs without active or passive euthanasia?
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