An op-ed in yesterday's New York Times begins:
The problem with American health care is not the care. It’s the insurance.
The author, Christy Ford Chapin, is a history professor, and she recounts a golden age of innovation in health care delivery before the advent of insurance companies. She notes that prepaid physician groups (like the original Kaiser Permanente), union health plans, and consumer cooperatives and mutual aid societies delivered low cost care. She asserts that the American Medical Association's aggressive advocacy for fee for service care helped drive our current insurance company model.
In this system, insurance companies would pay physicians using fee-for-service compensation. Insurers would pay for services even though they lacked the ability to control their supply. Moreover, the A.M.A. forbade insurers from supervising physician work and from financing multispecialty practices, which they feared might develop into medical corporations.
She's right - the American Medical Association helped scuttle universal health care schemes from the Roosevelt administration through the 1970s-and even hired Ronald Reagan to weigh in against Medicaid, which it fashioned as socialism.
Chapin is no fan of the National Health System in the UK or current salaried capitated groups like Kaiser in the US - where she says "patients frequentl(ly) complain about rationed or delayed care."
Chapin's solution:
To actually bring down costs, legislators must roll back regulations to allow market innovation outside the insurance company model.
She marshals no evidence to suggest that regulations are the problem here. There are many examples to counter this assertion. Medicare delivers more cost effective care than the private sector with high enrollee satisfaction - and it's highly regulated. Almost 1/3 of Medicare beneficiaries are insured through private insurers (Medicare Advantage plans). Again, satisfaction is high, and there are plenty of regulations to protect the elderly from predatory practices.
Obamacare ushered in a new set of insurance regulations that made it more difficult for insurers on the individual market to discriminate against those with preexisting illnesses and mandated meaningful coverage; these regulations helped shape a market that delivered care for lower costs than were projected -and focused innovation on improved care delivery and away from risk selection.
Most markets need some degree of regulation to function well, and the health care market has built-in challenges of information asymmetry. A small portion of patients represents most medical spending (5% represent 50% of spending), and much of the care that those with terrible illnesses receive is not at all amenable to shopping by the "educated consumer."
Many of us believe that health care is a right -and it's almost impossible to imagine achieving affordable universal health care with no regulation. Other developed countries have more regulations (including price controls) and have lower costs, better outcomes, and higher satisfaction among patients and providers. Many point to Singapore as example of a country which has more personal responsibility and less government regulation. Singapore regulates prices, though, and quasigovernmental agencies own the hospitals and polyclinics.
High unit prices of health care in the US represent the largest challenge to offering high quality affordable health care. Does Chapin think that decreasing regulations will decrease the cost of new pharmaceutical agents?
Chapin's halcyon days of the early 20th century where innovation ruled were also a time where medicine was offering a lot of snake oil and useless treatment -and none of it was exceptionally expensive.
For Americans, the problem with health care isn't insurers or regulations. It's prices.
"Today's Managing Health Care Costs Number" will return with the next post.
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