Changing the Game on Health Care Costs

Robert Laszewski

First published 4/10/11 on Health Policy and Marketplace Review

Last week, I posted that I was disappointed in Paul Ryan’s health care budget proposal because it lacked cost containment ideas other than the usual conservative reliance upon the market and defined contribution health care.

In my last post, Why ACOs Won’t Work, I argued that the latest health care silver bullet solution, Accountable Care Organizations (ACOs), are just a tool in a big tool box of care and cost management tools. But, like all of the other tools over the years like HMOs and IPAs, they won’t be used as they were intended because everybody—providers and insurers—can make more money in the existing so far limitless fee-for-service system.

How do you make the American health care system efficient?

You change the game.

You can’t let the $2.5 trillion health care industrial complex any longer make money just getting bigger. The new game has to be one that only pays out a profit for results—better care for a budget the country can live with. There are lots of tools available to do that. ACOs, capitated HMOs, disease management, enormous data mines, electronic patient data systems, and so on.

How do you change the game?

Generally, it will have to be an unavoidable policy imperative that will have to make the giant and powerful health care industrial complex shift to a more efficient and sustainable platform. They gotta have a reason that is unavoidable.

There must be no other choice for them but to play the game differently with new rules that make profit possible only if they make quality care affordable for America.

And, it has to be a policy change. As I have said here before, the conservative notion that the market can, by itself, accomplish this is every bit as naive as the liberal argument we just need a government payer to make things instantly better. There is no evidence in the under-65 market or in Medicare Advantage that the market can do it by itself. There is also no evidence that the giant single payer system we now have—Medicare—has done it.

I also have no illusions about how hard this will be—that recent history is evidence that accomplishing such a game changing policy is all but impossible. The recent health care debate and the lack of cost containment in the Affordable Care Act (I wouldn’t have called it that), makes that clear. Even as this country faces annual deficits of over a trillion dollars and an accumulated $14 trillion dollar debt there is no appetite for real health care solutions—witness the Ryan plan and the Congress’ inability to tackle the Medicare doc payment mess.

Just look at the one thing in the Affordable Care Act that might at least begin to put us on a path to affordable care—the Medicare Independent Payment Advisory Board (IPAB). It would take policymaking for Medicare payments out of the hands of the Congress starting in 2015—2020 for hospitals—and put those decisions with an independent expert board.

But already one Republican and Democratic “deficit hawk” after another is trying to kill the IPAB before it even starts mostly because the health care industrial complex wants it dead. These politicians argue these are decisions that should be left to elected officials. You might also find it interesting to know that the Republican leading the charge for the repeal of the IPAB, Representative Phil Roe (R-TX), received $91,000 in campaign contributions from providers in the last election cycle—double that of the next category of givers on his list (contractors).

A couple of years ago, I suggested a way to get the attention of the health care industrial complex and change the game was to tie the tax deductibility of health insurance offerings to that network of insurers, doctors, hospitals, drug companies, and other providers’ ability to meet cost targets (theAffordability Model). Either control costs or lose the tax incentives for consumers and employers to buy your services and therefore your ability to compete for business. That would get their attention.

That would change the game.

So, if in the face of all of these recent failures to really tackle costs, is there any hope policymakers will be able to give us a game changer?

I will remind you of a post I did last fall. In it I quoted former Fed Chairman Alan Greenspan. When asked if he thought we could ever implement the kind of tough budget medicine called for by the Deficit Commission chairs he replied, “The only question is, is it before or after a bond market crisis.”

This country is headed for a health care budget. The only question is will it be forced on us just before or just after the bond crisis. Just before or just after the rest of the world tells us they aren’t going to subsidize this American fiscal mess—largely driven by our health care costs—any longer.

Then the question will be about whether we have the sense to rationally manage that health care budget with all of these tools we have been developing for 20 years or will the politicians, in the midst of a real crisis, just impose expedient and arbitrary (as in ration care) budget solutions?

I hope the path we will then take is to change the game in a rational way.

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