Health reform prisms, scope, and needles

Igor Volksy does a superb job summarizing Jaan Sidorov’s insightful post on risk transfer and health reform. In even shorter form, the cost of Medicare to the federal government is or will be too high, threatening to overtake other priorities. It’s a risk that many no longer want the government to take, motivating policymakers to find someone else to hold the hot potato. Will it be beneficiaries (a la the Ryan Roadmap) or providers (a la the ACA via ACOs, bundled payments, and the like)? Finally, one could transfer risk to insurers, as in Medicare Advantage (albeit with a reformed payment rate setting mechanism).

In my view, this is exactly the right way to look at the problem. I like to combine this prism of risk with a consideration of who has the most information and influence relevant to spending. In principle, it could be the insurer, if we can stand much more care management (as in 1990s-style managed care). Or, it could be the consumer, if only consumers could intelligently make informed choices about care (I am deeply skeptical they can). In practice, it is and likely will be predominantly with providers.

I infer that the architects of the ACA thought so too, at least implicitly. By shifting risk to providers they are aligning it with the seat of maximal information. I’m not just talking about medical expertise relevant to care choices, though doctors obviously have that. I’m also talking about the detailed knowledge of and control over the cost of care and its quality. Patients don’t have that knowledge and control. Insurers don’t either. Providers do. It’s their shop, their equipment, their advice, their knowledge.

In addition to this prism of risk and prism of information, I think there is a third crucial element that determines how one views reform: scope. Is your focus the spending by government only or total spending? If your focus is on government spending only then things like raising the Medicare age, which shifts spending to others, might make some sense, though you still have to overlook quite a few problems to accept it.

If your focus is on total spending, then you have to admit you have a lot of work to do. Even the ACA isn’t likely to succeed in dramatically reducing that total, even if it succeeds in reducing (relative to trend) the federal total.

Thinking about risk, information, and scope goes a long way to establishing the type of comprehensive health reform you’ll find acceptable. Then the only trick is getting something like your preferred, comprehensive reform through Congress or passed into law. That’s not a prism and has nothing to do with scope. It’s an eye of a needle. And, though attempted many times, it has only been threaded once.

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