Friday, March 4, 2011

Budget Deficit and Health Care

WSJ report noting Speaker Boehner saying he is determined that the 2012 budget address long term Medicare and Social Security cost problems.

To do this, he will need a health reform plan, because the budget deficit is primarily a health care cost problem. Social Security faces a purely demographic problem (it is a problem that needs fixing). However, Medicare shares the same demographic problem, but joins it with the fact that Medicare pays for health care, whose costs have been going up much faster than inflation for 40 years. The entire health care system has a cost problem; Medicare both contributes to it and is harmed by it because it is nothing more than a government insurance program that pays private doctors and hospitals for care. So, you have to address health care costs in the entire system.

We have no hope of a balanced budget without slowing the rate of health care cost inflation; doing so is a necessary, but not a sufficient condition for ever achieving a balanced budget.

The Affordable Care Act (ACA) provides a path to expanding insurance coverage via an individual mandate and a Medicaid expansion while addressing health care costs in a variety of ways. It remains controversial politically, but Republicans have no alternative that can expand coverage while addressing costs. To do so (expand coverage and address costs) will require a mandate of some sort (expand government insurance, individual mandate, employer mandate). You could attempt to address health care costs and accept 17-18% uninsured and maybe higher. That is a plausible strategy, but so far the Republicans have not owned that it is theirs. They act as if there is a simple, cheap way to cover everyone and reduce costs. But there is not.

I thought that after the ACA passed the hullabaloo would subside, that the law would continually be tweaked making it the strategy of both parties, and that we would begin the process of muddling through toward a (nearly) universally coverage system that gave us a chance to address health care costs. I was obviously wrong about that, and politically, the ACA remains toxic.

If we ever succeed in addressing health care costs it will mean that we spend less on health care in the future than we are projected to spend on our current, pre-ACA path. This will mean less care of some sort provided to patients and/or less payment to providers as compared to the status quo projection. This will be extremely hard to do. The only hope of taking on such a tough challenge is to obtain a general agreement in the country about how to deal with insurance coverage first. The big picture choices are:
  • Determine some type of mandate(s) that is/are acceptable to move toward universal coverage
  • Decide that we will accept 17-18% (and maybe more) of our population to be uninsured, and say that we will seek to slow health care costs but not try and expand coverage
I think the best way forward is to tinker with the ACA, and this is my suggestion of what a compromise could look like; it is a mix of substance and political 'wins' that appeal to both 'sides' but it will take something like that for our nation to decide on a strategy to move toward universal coverage and prepare for the hard work of addressing health care costs.

If such a compromise is not forthcoming, then Republicans owe us their plan. If it has a chance of achieving universal coverage, it will look something like the ACA (private insurance markets, mandates of some sort), or will include guaranteed federal catastrophic coverage as I suggest in the link above. If they are not going to propose such a plan, they owe it to the country to state that they will not seek universal coverage, and instead prefer to address health care costs while not addressing coverage, and then make the case for why that is the way forward.

We have to address health care costs if we are to ever have a balanced budget. I see two choices: make the ACA the health plan of both parties to expand coverage and address costs, or have the election in 2012 be litigated over whether we will move to address health care costs while seeking universal coverage, or not.

update 2:15pm: Health Affairs blog from today discussing need to control health care costs generally; haven't looked closely and what they suggest.

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