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The Health-Care Sacrifice
What President Obama needs to tell the public about the cost of reform

Sunday, July 26, 2009

PRESIDENT OBAMA sometimes presents health-care reform as a pain-free proposition, as simple as choosing the red pill over the blue -- one that's no more effective but costs twice as much. Asked at his news conference whether "the American people are going to have to give anything up in order for this to happen," Mr. Obama's basic answer was no. "They're going to have to give up paying for things that don't make them healthier," he said.

This all-gain-no-pain stance may be politically advisable; people are increasingly edgy about how reform will affect their own health care. A new poll by the Kaiser Family Foundation shows that that the percentage of those who believe they will be worse off if reform passes (21 percent) has doubled since February.

But Mr. Obama's soothing bedside manner masks the reality that getting health costs under control will require making difficult choices about what procedures and medications to cover. It will require saying no, or having the patient pay more, at times when the extra expense is not justified by the marginal improvement in care. Mr. Obama is right that sticking with the status quo is a bad alternative, but he isn't leveling about the consequences of change.

Take Mr. Obama's red pill-blue pill example. What if the pricey blue pill is actually better than the cheaper red one? What if it's better but just a little bit? What happens when a yellow pill comes along, costing twice as much as the blue? What happens if there's a new procedure that cures the ailment, but at an even bigger cost?

Instead of taking on these hard questions, Mr. Obama emphasizes wringing waste and inefficiency out of the system. Certainly it's there -- Mr. Obama cited repetitious tests as one example -- and it makes sense to change payment policies to reward better care and remove incentives for unnecessary procedures. Preventive care can save money in some situations: Mr. Obama pointed to the situation of the diabetic who obtains nutrition advice and avoids an unnecessary amputation. But mostly it doesn't. A 2008 study published in the New England Journal of Medicine concluded, "Although some preventive measures do save money, the vast majority reviewed in the health economics literature do not."

More important, lowering the level of spending, although a good thing, is different from slowing the rate of spending growth. Without the second, the underlying problem persists; it will just pinch more slowly.

To his credit, Mr. Obama gets this. "I won't sign a bill that doesn't reduce health-care inflation," he said Wednesday night. Here's the difficulty, though: The fundamental driver of health-care inflation is technological innovation. The Congressional Budget Office (CBO) estimates that new technology accounts for about half the increase in health-care costs over the past several decades.

This is, for the most part, a good thing. Adjusted for inflation, health-care spending per person is six times what it was 40 years ago. But no one today would settle for 1960s-style medicine. Treating patients with heart disease was inexpensive then, because there wasn't a great way to detect problems before a heart attack and not much to do afterward. Today, angiograms can diagnose blockages. Bypasses and angioplasty can fix them. Drugs such as beta blockers can prevent repeat heart attacks. So spending for coronary care has soared, along with survival rates. Some medical innovations can save money, but the general arc has been better treatment -- at higher costs.

There are reasons to hope that "comparative effectiveness research" -- spending to determine what treatments work best -- can make inroads on health spending. A Dartmouth study of regional variations in Medicare costs found no correlation between higher spending and better outcomes. Knowing more about which treatments are effective is essential, but, without a mechanism to put that knowledge into action, it won't be enough to bend the cost curve.

As CBO Director Douglas Elmendorf testified in February, "Given the central role of medical technology in cost growth, reducing or slowing spending over the long term would probably require decreasing the pace of adopting new treatments and procedures or limiting the breadth of their application."

In other words, you can't always get what you want -- at least not if you want costs to be lower. This would require an enormous change from current practice, particularly in Medicare, which under existing rules covers all treatments with net medical benefits, regardless of cost. Private insurers, certainly, have much more leeway in making coverage determinations, but the backlash from the managed-care experience of the 1990s and pressure to follow Medicare policies restricts insurers' willingness to limit coverage.

The current system is untenable and getting worse, with employers dropping insurance and premiums rising for those who still have it. Reform is essential. But Mr. Obama does the public a disservice by acting as if it will not require anything from them in return.

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