The Washington Post

Some guidelines for controlling health-care costs

These are implicit in a lot of my posts. I figured it might be useful to make them explicit. I’m sure I’m forgetting a couple.

1) Five percent of Medicare’s patients account for almost 50 percent of its costs. This 5:50 rule is true elsewhere in the health-care system, too. This means cutting health-care costs — as opposed to shifting health-care costs from the federal budget or employers onto individuals — requires making it cheaper to treat sick people or making it rarer for people to get sick and need expensive treatments.

2) Controlling health-care costs is likely to be the result of a slow, continuous process in which many different reforms are tested and expanded over a long period of time. The political process is impatient, however, and wants to pass a bill and be done with it. The problem is that none of the bills will really be credible to people, because in order to achieve their savings, they need to go through this process.

3) Reforms to how medical care is paid for and delivered are more important than reforms to how insurance is paid for and delivered. But insurance reforms are much more politically salient and much easier to understand than delivery-system reforms. Very few people even know what “delivery-system reform” means.

4) Where insurance matters most is the mismatch between the fiscal pain caused by medical costs and the fiscal pain people realize is being caused by medical costs. People with employer-based health care, Medicare, Medicaid or some other government program — that is to say, most Americans — are not as worried about health costs as they should be. But this is very hard to change, as “you should pay more of the cost of your health care directly” sounds like your health care should be more expensive,” even though that’s not what it’s saying.

5) Government-provided health care works much better, both at providing care and holding costs down, than most conservatives want to admit. Consumer-directed health care works somewhat better, and eventually will work much better, than many liberals want to admit. These two points need not be opposed to one another. Jason Furman’s health-care ideas remain very smart.

6) The most depressing trend in the health-care policy space — at least from a cost control perspective — is conservative opposition to end-of-life counseling and coverage decisions based on comparative effectiveness data.

7) The most depressing trend is in the health-care delivery space is the absence of electronic medical records, though this is beginning to change due to the stimulus.

8) If we had somewhat less innovation in medical treatments and somewhat more innovation in how we manage illnesses and organize medical practices, costs would be lower and people would be healthier. Put differently, the big gains in health that we could make right now would mean increasing access to low-tech, high-return diagnostics and interventions.

9) If both political parties want the Affordable Care Act to succeed at controlling costs, it will do so. If one political party is working to sabotage the ACA’s cost controls, there’s an excellent chance it will succeed.

10) Partisanship is a bigger problem for the political system than “political will” or lobbying. This is true when you’re trying to control health-care costs, and also true at virtually all other times.


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