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March 28, 2013 8:34 AM Medicare and Health Care Costs

By Ed Kilgore

If you need any further evidence that the two major political parties have wildly different and entirely incompatible approaches to health care policy, check out Ezra Klein’s piece on how Ds and Rs view the relationship between Medicare and health care costs:

There is a sense in which the fundamental health-cost theories of Republicans and Democrats have become perfectly contradictory. Republicans believe Medicare is the singular problem contributing to the relentless growth in health-care costs, and the only way to truly fix our health-care system is to turn Medicare into a voucher system, breaking it up among private and public options and letting competition work its will.
Democrats look at the lower prices paid in single-payer countries as well as the lower prices paid by Medicare in this country and come away with a very different conclusion: We could be paying much less and getting much more, but the insurance industry, at the moment, doesn’t have enough power via-a-vis hospitals and other providers.
Medicare, as the nation’s largest payer, is thus the most promising solution to health-care costs, and Medicare should be using its bargaining power to lead the private market — in particular, by persuading hospitals and other providers to make overdue, but difficult, reforms to how they deliver care.

Beyond that, the arguments can get confusing. Sometimes Republicans seem to identify health care inflation strictly with rising public costs; shifting those costs to beneficiaries, from that perspective, “solves” the problem. Other times Republicans appear to believe that over-utilization of health care is the only real problems in the system; thus, exposing patients to more of the costs generated by their demands for care will “bend the curve” of health care costs. More direct reductions of costs via the use of the government’s leverage “distorts markets” and can’t, according to conservative dogma, possibly work.

How do you find a “compromise” between people with such diametrically opposed ideas of how the health care system works? Beats me.

Ed Kilgore is a contributing writer to the Washington Monthly. He is managing editor for The Democratic Strategist and a senior fellow at the Progressive Policy Institute. Find him on Twitter: @ed_kilgore.

Comments

  • ArchTeryx on March 28, 2013 8:49 AM:

    SATSQ: You don't. Like so many other issues, there is no "compromise" possible. There's only who wields sufficient power. We, the Democrats, largely squandered that power while we had it, though we got some very good things passed as well, even if they were half steps. If the Republicans were to take over government completely, they'd dismantle it all in a heartbeat, and privatize and block grant everything they could get their hands on.

    Which is why I'm watching California very closely. They took nearly 30 years to discover that there is absolutely no compromising with modern-day Republicans, and finally worked the will to vote them into abject powerlessness. Now we'll see just what the Democrats do with that power on the state level.

  • c u n d gulag on March 28, 2013 8:50 AM:

    One side wants a pasta primavera for dinner, and the other side wants raw chicken, marinated in anthrax, and finished off with a rich belladonna sauce.

    What do they settle on?
    A Philly Cheesesteak?

    To paraphrase Abraham Lincoln:
    'A house divided against itself cannot stand. I believe this government cannot endure, permanently, half rational and half batshit fucking insane.'

  • Domage on March 28, 2013 9:11 AM:

    The answer to this is, as with so many other policy questions, for Republicans to begin to experience personally some of the policies they espouse.

    So, the next GOP congressman who needs an appendectomy should be forced to shop around to get the best deal. That's the magic of the marketplace, baby! I think you'd find that congressperson would start screaming for single-payer the instant the anesthetic wears off.

  • Altoid on March 28, 2013 9:21 AM:

    The idea that government exists mainly to promote and ensure economic efficiency is probably one of the most destructive and pernicious dogmas ever to take over any nation's politics. Among other flaws, it's completely anti-democratic. We need to take it on frontally.

  • paul on March 28, 2013 9:24 AM:

    Rendering the D position as "the insurance companies don't have enough power to force cost savings" is really pretty terrifying.

  • beejeez on March 28, 2013 9:28 AM:

    It won't be reassuring to those with immediate health-care needs and out-of-pocket cost horrors, but it should be remembered that the birth of equitable health care systems in other countries was no picnic, either. In most cases, they started to settle down after 5-10 years or so, nobody went back to laissez-faire medicine, and finally countries started to get better at improving their health care issues rationally. It's not a lock that the same will happen here -- our insurance and medical lobbies are nasty muthas -- but remember things looked bad sometimes in other countries, too.

  • boatboy_srq on March 28, 2013 9:53 AM:

    Given how thoroughly the Confederate mentality has permeated the GOTea, it makes one wonder how well and how long the Confederacy would have stood if it had been allowed to secede. I can't help thinking it would have fractured fairly quickly, with some states (Missouri, Texas, Tennessee and Virginia spring to mind) breaking up internally as segments of the population preferred different agendas and alliances. The right question might not have been "can a state leave the Union" but rather "under what circumstances can a state which left the Union be readmitted". With the modern GOTea's fixation on whichever federalism/centrism solution appeals to them at the moment, it's not difficult to see thirteen states seceding - and thirty territories clamoring for readmission to the Union as the Confederacy unraveled.

    It's hard to maintain a Union when one whole political party is built on sheer contrarian orneriness. We can't forget that too many policy items - including healthcare - have had practical (if less-than-ideal) GOTea-sponsored solutions which were promptly abandoned when Dems began to accept those solutions. There really is nothing more corrosive to the common weal than an orthodoxy built on "the other side is wrong."

  • Ron Byers on March 28, 2013 9:58 AM:

    The problem with insurance companies is they don't have any incentive to keep healthcare costs down. Their business model passes all health care costs directly to the insured. Their financial success is tied to high healthcare costs not low.

    It is widely recognized that healthcare Information Technology is a very important tool for cutting the high cost of healthcare, but a Rand study I read the other day indicates that private health care providers, especially the suburban and rural hospitals and doctors used by many Americans have been slow to fully implement modern EHR systems. That is changing, but not because of anything the health insurance industry has demanded, but because of incentives in the ACA. There is still a real problem with health information portability and we have been fighting that for decades. Our big health care software companies products don't talk to each other very well. At the recent HIMSS convention in New Orleans about 5 of the major players announced that they are going to spend some money working on the problem. The biggest company in the business Epic didn't want to particpate.

    The standard business model for Epic, Cerner and the rest is capture the flag. Once a hospital or hospital system is captured it is never allowed to leave. That leads to high profits for Epic, but high prices and lousy innovation for the rest of us.

    Smarth systems technology is another way to bring down the high cost of healthcare. That is where a physician inputs his diagnosis and orders into a computer system and is told whether he has over ordered or if other tests are indictated. If the doctor disagrees he can override, but he will have to demonstrate why his choice was better than the smart system to get paid. Unnecessary testing is a big deal in the high cost of medicine. I can tell you first hand that the health industry has been slow to adopt smart systems technology. Doctors don't want anybody second guessing them especially a computer program. The health insurance industry hasn't done much to adopt smart systems.

  • Ron Byers on March 28, 2013 10:03 AM:

    "Smart" not "Smarth." Fingers got ahead of themselves.

  • mb on March 28, 2013 10:11 AM:

    "We could be paying much less and getting much more, but the insurance industry, at the moment, doesn’t have enough power via-a-vis hospitals and other providers."

    That should read:

    "We could be paying much less and getting much more, but we have an insurance industry."

  • Peter C on March 28, 2013 10:38 AM:

    I’m not sure I agree with Ezra on this. I’m not sure that Republicans see Medicare as the cause of healthcare inflation. I agree that they say that they are concerned that healthcare inflation will bankrupt government. I agree that they want to voucherize Medicare. But, I’m not convinced they believe that dismantling the bargaining power of Medicare will ‘solve’ the ‘problem’ of healthcare inflation; it will merely make it someone else’s problem (Grandma’s). They want to take one of Government’s problems and make it everyone’s problem (to be solved individually, on our own, in the cold harsh marketplace which they consider to be the essence of economic perfection).

    We and the Republicans are solving different problems. The problem isn’t healthcare inflation (in the eyes of Republicans); it is that government is involved in healthcare. The problem is that we decided (by enacting Medicaid and Medicare and SChip and now Obamacare) to face the challenge of keeping our society healthy collectively in the first place. We intervened in the market, destroying its perfection! And, this intervention isn’t bad because of its consequences, it’s just bad by definition – against dogma. Intervening in the ‘market’ is almost as bad as intervening with God. Thou shalt not!

    Their fundamental misunderstanding (and one which they refuse to even confront) is that no markets are perfect, and that the ‘healthcare market’ is especially imperfect. Buyers and sellers do not act with the same information. They do not have equal motives. There is not a smooth curve of outcomes; it has a cliff called ‘death’ at one end. When healthcare is distributed solely by the ‘market’, the outcome for many is painless, pointless death, because fundamentally markets don’t ‘care’.

    Most every other modern society has decided that looking to markets to manage healthcare is fundamentally cruel, counterproductive and wrong. Only we cling to the simplistic idea that markets, because of their inherent ‘perfection’, have the magical power to manage the terrifying complexity involved in allocating healthcare resources.

    We are stuck with this simplistic idea because Republicans refuse to reconsider their dogma and because doing so would deprive a wealthy and powerful constituency (health insurance companies) of an enormous flow of wealth. But we, as a society, don’t fundamentally need health insurance companies; we need healthcare. And we, as a society, can solve some problems collectively better than individually. And the decision to solve these sorts of problems through collective action is the rightful realm of a democratic government. It is part of ‘forming a more perfect union’ through promoting the ‘general welfare’.

  • Bruce S on March 28, 2013 11:12 AM:

    The problem isn't finding compromise among opposing views. The problem is that one view is nonsense - some combination of willful ignorance and cynicism and the other is based on evidence and a reasonable intent to solve real problems. There's not much room for compromise there. Nor should there be.

  • davids1234 on March 28, 2013 11:23 AM:

    There is an easy way to test the theories. Allow an at cost Medicare public option for people aged 55-64. An even better test would allow people to choose the VA at cost as an insurance option in that age group.

  • Mimikatz on March 28, 2013 11:36 AM:

    HMOs have the right incentive structure. Kaiser Permanente shows that the HMO model, if not-for-profit, can deliver good care. Moreover, their size enables them to undertake their own effectiveness research, which then redounds to their benefit in controlling costs. They are the model for single payer. It does really work.

    The problem is really the issue of profit. It really needs to be taken out of the health care system if we are to have any hope of controlling costs. That is the difference between our system and most of the rest. As long as the GOP is wedded to the idea of medicine for profit, the only way to control costs is rationing by income, but they will never say that even as they do practice it when they are in power, for example in the states they have taken over.

  • PTate in MN on March 28, 2013 11:56 AM:

    --Interesting observation about the sustainability of the Confederacy, boatboy_srq.
    --mb: a precise reframing!

    I think that it is precious that Kilgore starts from the generous assumption that Republicans have an idea of how the health care system works when the very concept of "system" is anathema to them. Collectivists have systems, don't you know?

    Modern Republicans are in a terrible spot because they have had great success beguiling ill-informed voters with their "Government is the problem not the solution" and "The free market is always the solution, never a problem" cons. These are cons because, in fact, Republicans love government that privileges them at the expense of other Americans and love a "free market" that lets them act as modern day robber barons.

    Healthcare represents a clear failure of the free market. Government is the solution, not the problem. This refutes everything Republicans claim. As those low-information, slow learning voters figure this out, it will go badly for Republicans.

    The fundamental drivers in health care costs are the growth of an aging population and a "free market" that allows the providers to set prices and get very, very rich. So, of course, the Republican solution is a privatization/voucher scheme to cut off the aging population. The alternative would be to accept solutions that will mean less wealth for Republican-supporting insurers & health care providers, and God forbid that should happen! Republicans will go down defending their turf. Unlike immigration or gay marriage, they won't give in on this one until the very end.

  • schtick on March 28, 2013 12:46 PM:

    Insurance companies don't care about your health except when they originally take your premiums. They are in business to make money and nothing else.

  • Rick B on March 28, 2013 1:18 PM:

    @Mimikatz - You have the right idea. Healthcare is a social cost that must be reliably paid so that the providers can operate where they are needed for health reasons not for profit reasons.

    Insurance companies not only do not have the power to enforce prices, they don't have the capability to lower them. Only the health care suppliers have the medical procedural knowledge needed to lower health care costs!

    As long as financial managers like insurance executives control the health care system the only power they have is to select which suppliers they will pay and which ones are 'Out of network.' The motivation to physicians and other medical professions then becomes a question of how they get more money from the money-handlers.

    Only physician-run systems are capable of lowering costs. There is no form of signalling to financial managers built into financial accounting systems. The information cannot reach the financial managers because they don't have the medical training required to lower costs and their financial statements and reports are not suited to that problem. Nor can they be retrofitted.

    Health care must be controlled by healthcare specialists, not financial specialists trying to wring another buck out of the system which which to line their pockets.

    One effort with promise to achieve this is the system of Accountable Care Organizations (ACO) currently being experimented with. In any repeal of Obamacare, the ACOs will be gone.

  • Rick B on March 28, 2013 1:24 PM:

    My statement above "Only physician-run systems are capable of lowering costs" is too broad. The correct statement is "Only physician-run systems are capable of lowering costs without providing worse medicine or otherwise reducing health care outcomes".

    The ACOs are in fact both lowering costs and improving the medical care provided. This is what physician-run organizations are capable of that financially managed organizations simply cannot do.