Len Nichols: Why Coverage Expansion Comes First

Some budget hawks argue that we must control health care costs before enacting coverage expansion. We can’t afford the latter without the former, they say. That sounds so sensible it should make anyone wonder why it isn’t. In a 24 February 2010 article in the New England Journal of Medicine, Len Nichols provides the answer (h/t Ezra Klein).

[T]he simple answer to the hawks … is that it is not feasible to tackle costs without tackling coverage. Our delivery system could not withstand the stress. Two thirds of hospitals lose money on Medicare now. Virtually all lose money because of Medicaid underpayment. To impose serious delivery reform and incentive realignment while leaving hospitals on the hook for the mounting billions of dollars in uncompensated care would bankrupt many and strain most to the breaking point. With expanded coverage, we’ll get absolutely essential hospital cooperation. Without expanded coverage, hospitals will have to protect themselves from change, and their local communities will want them to.

… Within a decade, we will face draconian health care price controls, massive benefit cuts in Medicare, Medicaid, and the private sector, or both. This credible threat of cost slashing without coverage expansion is one reason the powerful provider lobbies, such as the American Hospital Association, the American Medical Association, and PhRMA (Pharmaceutical Research and Manufacturers of America), have embraced comprehensive reform.

Backing up to the first sentence in that quote, in what sense is it “not feasible” to implement more severe cost controls without first expanding coverage? The answer includes some dire predictions about hospital bankruptcies. But the real answer, as Nichols makes plain at the end of the quote, is political. The powerful interest groups Nichols lists would resist cost control without coverage expansion. Like it or not, those interest groups must be on board for anything substantial in health policy to occur. That’s just reality.

Hence, proposed health reform is heavy on coverage expansion and light on cost control in the near term. If there is to be any real cost control it will come later, and gradually. To think it can be done first is fantasy.

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