Friday, January 21, 2011

The Grand Bargain

Austin Frakt responding to Republican claims that they want to first lower health care costs which would make it easier to insure more people. This is of course true, but it is hard to do and the public and providers will freak out if we actually lower costs because providers would make less money and the population would get less care. I don't think you can realistically tackle costs without addressing coverage. Austin wonders if there is a compromise that could lower costs while expanding coverage?

I wrote a post about a month ago that outlines what I see as a way forward to try and do this. However, the policies I suggest wouldn't represent a series of small bills, but would in fact be quite a grand compromise. This 'plan' really represents what the health bill that passed might have looked like if the two parties had actually compromised with one another in the 111th Congress.

If we are looking for a smaller compromise, look to the interests of Democrats and Republicans. When you do this, I am not optimistic that a smaller compromise exists because the ACA passed, moving us toward a key Democratic party goal: universal coverage. Arguing for a compromise in spite of the passage of the ACA is the uncertainty of the legal challenges related to the individual mandate.

To simplify, Democrats (liberals/progressives) understand the lack of universal coverage to be an existential mark against our country, really a matter of national shame, and so universal coverage of some sort is their ultimate health policy interest. I am not sure that Republicans (conservatives/liberterians) have one health policy goal that is as widely held as strongly as is universal coverage for Democrats, but I think that worries that costs are too high and the moral hazard of overly generous insurance is as close as you can come. If you combine medical malpractice as a generalized proxy for lawyers/regulation holding back business, then you probably have a comparable Republican interest.

Democrats have just passed a bill that will move us to around 94-95% insurance coverage by 2020; no universal coverage, but creeping up on it. The only way the Democrats will play ball on a compromise is one that produces universal coverage.

If Republicans decided to focus on costs and trade universal catastrophic coverage for heightened cost control, they would deserve a great deal of credit. And they could claim a victory in getting rid of the individual mandate, though of course guaranteed catastrophic coverage is a type of mandate (as is Medicare). They could of course, still claim victory. And Republicans could likely get quite a lot on malpractice reform for universal coverage, which would save some money, but not as much as most think. And the trade of universal coverage for pared back guaranteed insurance levels (high deductibles) would also help to slow cost inflation.

The hardest health care cost control steps would remain to be taken, notably ending the tax preference of employer paid insurance premiums which would mean making those with generous private insurance worse off, and doing something to slow cost inflation in the Medicare program. Whatever mechanism is used, the test of success is whether less care is delivered to Medicare beneficiaries than will be done under the default. This will be hard.

Would a malpractice reform and less generous guaranteed benefits be enough of a victory for Republicans to cut a deal that gave the Democrats universal coverage? Would such a compromise then pave the way for a later compromise that truly addressed health care costs?

My head says yes, but my heart says no. Or maybe it is the other way around, I am not sure.


  1. i think if the norm was for people to pay providers out of pocket then providers would in fact be able to both charge less and make more. Providers carry a tremendous amount of overhead costs associated with chasing around reimbursements. That is the first bit of low hanging fruit.

  2. might be true for office based primary care, depending of course on your patient population. Don't think it would be the case for surgical/procedure-driven sub-specialists. Certainly if people had high deductible they would have more incentive to pay attention to cost of routine care anyway.

  3. Also, your questions (on your blog) about the size of the deductible and whether HSA might be a better approach than very large deductible with private market for underneath cover are good ones. I just generally think we need to get away from tax preferenced health care spending...

  4. I agree with both of your points. I have focused on HSAs if we are to continue with some level of tax preference but certainly getting rid of the tax preference is the best of all worlds. What do you think the likelihood is that there will be any substantive reform? I think if McConnell had actually wanted to improve health care reform he could have had his way by providing a couple of republican votes to give Harry Reid bipartisan cover. Maybe I am naive but it appeared as if he had a significant amount of leverage and eschewed it in favor of the prospect of having a campaign issue. It seems like that dynamic will continue to inform republican politics through 2012.

  5. After Scott Brown, Rs could have gotten almost anything they wanted on med mal to go ahead, and other stuff...but I think they thought the House would not pass Senate bill. In fairness, I didn't think so either. I think best hope for something on cost savings in health care this congress is probably that tax exclusion of employer paid insurance gets capped on the way to being ended in out years as part of a tax reform a la Bowles/Simpson. It would be a flexible policy that would work to slow cost inflation regardless what happened with explicit health reform bills.