First published 4/9/11 on Organon
I’m agnostic about whether Rep. Paul Ryan’s budget quasi-plan is ultimately constructive or not. We should absolutely welcome any serious Republican attempts to grapple with the hard problems of health care costs. I’m just not sure if that’s an apt description of what the Ryan quasi-plan does. (It’s not an actual budget plan because it lacks sufficient detail to be a budget plan. For one thing, its revenue side remains a mystery; it is all hat, no rabbit.)
Whether it is or is not constructive, a budget, or even a plan, it does present an opportunity for debating the role of healthcare-cost control in a constructive budget plan. The trouble is, as Ezra Klein points out, Ryan has kickstarted a different debate. This debate is not so much about reining in healthcare costs as about redistributing them from Medicare to its beneficiaries.
The basic theory of Ryan’s plan is that you can control costs by focusing on the insurance system. Seniors become consumers and their decision-making holds down costs. The Affordable Care Act has a lot of the same insurance-system reforms that Ryan does, but the basic theory of that plan is you control costs through the care delivery system. It’s about knowing what treatments work and what treatments don’t, paying for value rather than quantity, cutting down on unnecessary readmissions and errors, doing more to manage chronic diseases, etc.
It’s only once you can do all that that exchanges really become useful, because then and only then will insurers — be they private or public — really be able to control costs. The reason none of them really do it right now is that none of them can force hospitals and doctors to hold down costs. It’s not like there’d be no competitive advantage in being the cheapest, best insurer in the country. But you can’t find one example of the model Ryan proposes slowing costs to even half what Ryan predicts. That’s why his plan really isn’t a plan — it’s just a way to make the numbers work so he can “balance the budget” without tax increases and make some conservative changes to entitlements.
I’m a big fan of exchanges. I’d use them systemwide if I could, as the Swiss and the Dutch do. But health-care costs are not all about, or even mostly about, insurance. Indeed, so much as I like exchanges, it’s very possible that you need the government putting pressure on the delivery system to control costs. What we tend to see with private insurers is that they just don’t have enough leverage over hospitals or doctors to get major changes done. Medicare does have that leverage, which is why it makes sense to use Medicare as a tool to reform the health-care system, as opposed to just the health-insurance system.
However “aft agley” they may go, the best laid schemes of mice and men are the ones that at least aim to solve the problem that needs solving, rather than simply making it someone else’s problem.
Jim Hufford is a lawyer who writes at Organon.