25 February 2010

"Health Care Summit Pre-Mortem" -or- There *Still* Aint No Such Thing as a Free Lunch.

EconLog | Arnold Kling | Health Care Summit Pre-Mortem

Thoma comes very close to saying that in Medicare we need to cut costs, not benefits. That would be wonderful. Don't reduce consumption of medical services, but make costs magically disappear. That is not going to happen. There are certainly ways to improve efficiency, but there are no big free lunches out there. The only way to significantly slow the growth of health care spending is to make less use of procedures with high costs and low benefits.
This is somewhat pedantic of me, but actually the only way to slow the growth of health care spending is to make less use of procedures with costs. Full stop.

The relative mix of high cost and low cost procedures doesn't matter. More importantly, the benefits of the forgone procedures doesn't impact the total bill.*  As long as some procedures go undone total costs are cut. Ideally we'd like to forego the procedures with poor cost/benefit trade-offs, but strictly in terms of limiting aggregate spending it doesn't matter whether that analysis is done well or poorly, wisely or foolishly, logically or irrationally, scientifically or politically. Which is exactly what scares me.

(* "But what about preventive care?" you ask.  Preventive care may keep your total costs down as an individual (or it may not) but aggregating over society as a whole it is unclear whether it lowers total spending.  Some procedures, like giving TB vaccines, save us money.  But witness last year's hullabaloo over mammograms for an example of a procedure that may not only raise costs, but introduce risks that are not offset by their benefits.  (I'm referring specifically to frequent mammograms for younger women, not all mammograms, just to be clear.))
There are two ways to approach reducing the use of high-cost, low-benefit procedures. You can have the government tell people what they can and cannot have. Or you can have individuals pay for a larger fraction of the medical procedures that they consume. It really comes down to those choices.

Advocating either one of those is political suicide, and talking about anything else is a waste of time. The Democrats will not advocate government rationing, and the Republicans will not advocate scrapping most of our current system of third-party payment in medicine. Instead, the summit, like the entire "health reform debate" this year, will be a waste of time.
Actually there is a third way. Well, really it's the worst of both those ways, but disguised as something else.  Have the government impose de facto limits on procedures and spending, but make insurance companies be the ones to deliver the bad news. This is the worst approach, though the most politically tractable. And wouldn't you know it? That's the approach Obama is proposing.  Coyote Blog has more on this.

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