• Priceless: Chapter 18

    Chapter 18 of John Goodman’s book Priceless is the final one. It is mercifully short. As I have been throughout, I am assuming you’ve read it and all the other chapters and posts in this series to date. The chapter nicely summarizes the core of John’s proposal for reform of the health care system. I’m going to summarize just part of it and in my own way.

    Almost nobody thinks there ought to be no insurance whatsoever. At a minimum, catastrophic coverage is sensible and reasonable. Once it exists, however, the standard operations of supply and demand are distorted. People with third-party coverage for major health shocks are, individually, less motivated to purchase the (sometimes) cheaper preventative and disease-management services that would prevent those major health shocks. If they don’t, there is a negative externality. The (sometimes) higher cost of those major health shocks that are not avoided are borne by the entire risk pool. Premiums go up. The existence of this externality is a market failure.

    Value-based insurance design is a solution, and John builds it in into his “New HSA.” If health insurers offer some first dollar coverage for at least the subset of preventative and disease-management services that is cost-saving, the externality is avoided. That’s why in John’s “new HSA” there is some third-party payment down to the zero dollar level. However, at zero out-of-pocket price, there is a risk that preventative care will be overused. It’s hard to tune this just right.

    John’s solution to this tuning problem is not to try to dictate what’s in the HSA and what should get first-dollar coverage. Instead, he wants to level the playing field of regulations and taxation so that the market can provide whatever products make economic sense in light of cost-benefit trade-offs and consumer demand. After all, this is what markets are for, provided they work well enough.

    This invites a new problem, however. No doubt, products more attractive to young, healthy people will differ from those older, sicker ones. In fact, there may be hundreds of different products designed to attract hundreds of different types of people. The products more suited to the costlier people will have higher premiums. Some of those products will fail for this reason. Even though they offer a mix of coverage some people want, if the risk pool they attract is too costly, the products will be unaffordable. This is another market failure.

    John recognizes this problem and has a solution, a form of risk adjustment. It’s not terribly different from risk adjustment as we know it, only the risk adjustment payments — how much to transfer from plans covering the healthy pool to the sick pool — is to be set in the market via negotiation between firms. As far as I know, nothing like this has ever been attempted, certainly not on a wide scale and for health insurance products. I would not expect it to go perfectly smoothly in all cases. Some deals will go bad. Some market segments could collapse. To the extent that’s disruptive, it would be a problem, another source of market failure. (In the comments to my review of Chapters 8-9, readers raised some other, related limitations and concerns.)

    Also, a necessary condition to make this work is that insurance contracts would have to be longer than one year, as is the current custom. If contracts are too short, people could switch to plans that provide greater coverage for the services they want in the short term and then, after consuming those services, switch to plans that don’t not cover them, saving money both ways. Insurance cannot work on this basis because insurer’s can’t build what they don’t know into their price or even into their negotiated risk adjustment transfers, and individuals are likely to have more information than insurers about their short-term demand.

    Of course, long-term contracts hamper competition. The more constraints people have on their ability to vote with their wallets, the less competitive the market. So, a balance must be struck. What’s the optimal insurance duration? I doubt anybody knows.

    Still, this is all logical, more so than our current Byzantine patchwork of public and quasi-private insurance programs and products. It is also no less logical than the reasoning behind the ACA that leads from the community rating combined with the banishment of pre-existing condition exclusions to the adverse selection problem to the need for a mandate (or the equivalent) to the need for subsidies. In as much as any of these approaches are logical, they’re also, in different ways, uncertain to succeed and, therefore, come with limitations. Let’s not pretend any approach is perfect in every way. Logic can only take you so far. Not everything about the real world is logical.

    So, as is the ACA, John’s approach would be a bold experiment with some risk. Would costs and spending go down? Would quality improve? Would population health measures look more favorable? Would consumers like it? John makes some theoretical arguments and points to some studies. But nothing quite like the totality of his proposals have ever been implemented anywhere in the world. The outcomes are empirical matters and we simply have no evidence. In the face of uncertainty, caution and incrementalism are reasonable. They are certainly politically rational, which cannot be discounted.

    There is one thing the market absolutely cannot do, though. It cannot tell us how much public support we should provide for the poor, elderly, and very sick, the populations relying on Medicaid, Medicare, and in 2014, some subset of those relying on exchange subsidies. Minimum levels of support — even in dollar terms — need to be defined. We, collectively, need to decide the “right” level, even though we can’t know it. The question, How much income redistribution is right? does not have a market-based solution.

    The foregoing, plus some things I wrote in other posts about the book (in particular in my reviews of Chapters 9 and 10), describes ways John has moved my thinking. The logic of his view (just described) was not evident to me before reading the book. But, boy did I have to work hard to receive his insight! I think John does his good ideas a disservice by dragging the reader through what is, in my view, a parade of self-contradictions, overreaches, unnecessary fights, and misleading impressions. Pulling from my prior posts, below are just a few examples. In some cases John has explained a bit more in comments to my posts, but that doesn’t change the impression I received from the book, which is what my posts are about. They are:

    Some of these problems arise when John tries to buck conventional wisdom. But it is not necessary to do that for him to make his key points. (Go back to the top of this post and see how I made some of his points without reliance on any of this.) It’s just gratuitous contrarianism, an unnecessary fight. It only distorts and distracts. To the extent I find his arguments in opposition to a complete view of the evidence, it is not credibility enhancing. Notice that despite differing with him on these ancillary issues, I find value in his core points.

    Beyond my reaction to what was in the book, I also took note of some things that were left out. I was disappointed that health literacy and the cognitive limitations of Medicare beneficiaries did not receive any attention. The book is devoid of any consideration of the health value as opposed to consumer value of the care we receive. Do we just trust that providers are selling things of value? Why?

    Given the reality that John’s full proposals are unlikely to be implemented in the form he suggests, what does a partial and politically-constrained version look like? How does it operate under the bureaucracy we actually have, not the idealized one we might imagine? What could be the unintended consequences? These are challenging questions, and I don’t expect John to have answers. But I’d like to see them acknowledged as valid ones. That they are is the very reason the status quo is hard to change.

    In this or in any of my other posts in the series, I hope I have not come off as too hard on John. I meant none of it personally. It’s always about the ideas and the evidence to me. I need the former to be consistent with the latter much more than I need to “win” anything. I tend not to trust people who have not convinced me they feel the same. Why should I?

    @afrakt

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    • I’m speechless. Well, almost speechless.

      There are two central themes of Priceless. I don’t want them to get lost in Austin’s summary. (BTW, sorry we lost Aaron along the way. He needs to read the rest of the book.) The two themes are:

      1. We need to quit suppressing the market for medical care and for health insurance. That is, we need to let prices allocate resources throughout the health care system – while protecting the vulnerable along the way.

      2. We need to liberate people – doctors, patients, employers, employees, entrepreneurs, etc. — to use their intelligence, creativity and innovative ability to solve problems that can never be solved by top-down bureaucracy.

      As for what is politically possible, I learned with Health Savings Accounts that people will eventually come around to a rational solution – at least after they get through trying everything else.

      My prediction for the future: First the ObamaCare/ACO approach will increase costs and do virtually nothing to improve quality. This is an easy predication. Hospitals acquiring doctors is already increasing Medicare costs and we have barely left the starting gate. Second, the reforms I recommend will develop outside their third-party payer system (like Wal-Mart engaging in medical tourism) and these changes will ultimately get reflected in public policy.

      Austin, thanks for spending so much time on this exhaustive review.

      Ciao.

    • I noticed that my last comment didn’t pick up the links.

      Here is the link for Wal-Mart engaging in medical tourism:

      http://healthblog.ncpa.org/employers-opt-for-medical-tourism/

      Here is the link for hospitals aquiring docotors is increasing Medicare costs:

      http://healthblog.ncpa.org/this-would-be-funny-if-it-were-not-so-sad-2/

      • John,

        The second link appears to say nothing about hospitals acquiring doctors increasing costs to medicare. The NYT article linked through is entirely about upcoding increasing costs to medicare, although it briefly mentions Aetna and Cigna as well, and posits that electronic medical/billing records are to blame for making the billing process both more efficient and thus more vulnerable to fraud on the providers’ end.

        I agree that it’s definitely troubling, but it seems as if it’s a problem that will inevitably come up with any solution to address the generally cited problem of provider overhead and administration costs related to billing. I’m not sure that keeping things purposefully inefficient on that end is a better solution than simply increasing auditing and oversight on the part of the payer, be it government, private insurers, or the patient.

        You would almost definitely need to bring the patient into the loop here as well since they’re the only ones beside the provider with direct knowledge of the care provided, and the article provides an example of this happening. Maybe this would require additional cost sharing with the patient or some other kind of sign off on their end to acknowledge what they had received. I don’t know, though. I’m not sure of what the best solution would be here.

        Still, blaming EMRs for upcoding and fraud seems like the medical economists’ equivalent of blaming guns for killing people. They clearly facilitate the process, but it’s not really fair to blame them entirely.

    • Austin, I think you missed something that should be on your list. John admitted to being ignorant of a significant fact, Chapter 8-9 he posted:

      Comment:
      @ Leon
      “When i wrote Priceless, I was unaware that employers could put cash in an account for employees, using the HRA vehicle. I have subsequently learned that this is legal and doable.”

      Portable HRAs such as LyfeBank accounts are employee-owned bank accounts which solve many of the problems John presented in his book. Hopefully others will now understand the advantages of a P-HRA through this discussion and John’s honest answer.

    • Austin,

      Your cautions about how hard it is to get the policies “just right” are important. In fact, I would say it is impossible, and that is why we need generally to rely on markets rather than legislation. Markets can adjust very quickly while laws are extremely difficult to revise (look at how long it took to get Rx covered in Medicare). Therefore I cringe when people sit around a table to try to come up with an ideal system, be they liberal or conservative.

      One comment on your thoughts about cost sharing (whether through a new HSA, an old HSA.) You are still making a bilateral distinction between the healthy and the sick. I don’t think this is valid for several reasons —

      1. Today’s healthy are tomorrow’s sick. HSAs of any kind can be seen as risk pooling between today’s healthy Austin and tomorrow’s sick Austin.

      2. Among “the sick” there are vast differences between the acutely ill and the chronically ill. A number of studies have been done (some by Commonwealth, as I recall) that point out that HSAs are great for very high utilizers because they get to 100% coverage faster.

      These studies usually mean the observation critically, but it really isn’t. Fact is HSAs have little effect on the spending of people at the low end or the high end. This is appropriate because people at the low end don’t spend enough to make a difference, and people at the high end are beyond being able to control their costs.

      The real impact comes with people in the middle, the chronically ill. But these are the people who are both well enough to have some control over what they do and also sick enough that their spending matters to the system. They are also the people who are involved enough in health care to be informed about choices and alternatives. This is exactly the target market.

      Curiously I don’t think very many HSA advocates or policy makers thought about this aspect of the idea. It is just happenstance that it worked out this way. It could be said (paternalistically) that HSAs are mean to this population because it puts the onus of spending on them, but HSAs also empower them to take more control.

      Thanks for the opportunity for an interesting discussion.

      • Superb comment. Thanks.

        Sick vs. healthy is just a shorthand. At the moment of open enrollment, I have only one expectation about my future utilization. That drives selection and can be problematic. If it wasn’t, risk adjustment wouldn’t be an issue. But it obviously is.

      • Greg
        Do you define middle by premium or # of beneficiaries in each band?
        You know the graph well:
        http://facts.kff.org/chart.aspx?ch=1344

        Given amount spent per beneficiary at the 20-80% level (“chronic care”), even with a $500-1000 deductible, prudent spenders will bump against the limit, and temptation to spend past it great.

        Its the bottom 50% of folks (“the well”), with their 3.6 prescription and 2.1 docs visits/year, etc. that will watch the spending needle.

        I have enjoyed reading many of your comments btw.

        As an aside, as I have read these series of posts, and uncharacteristically (for me at least), remained silent, I was struck by the lack of engagement by John. An opportunity for substantive discourse was missed, and many of Austin’s observations and questions were left untouched. It was not a two way conversation and should have been. A shame, and above is as good an example as any. I say it collegially and without malice.
        Brad

        • Good meta-review, Brad. Perhaps what you observed explains why this project was less fulfilling to me than I had hoped. In all honesty, I’ve been depressed about it. It was worth a try, but I won’t do something like it so readily again.

          • If I could, I suggest that a forum like this works well when the discussion is confined to a couple of topics, but it is unreasonable to expect someone (in this case John) to respond to a list of nine bullet points like you have in your post.

            You did well in taking the book chapter by chapter, but even that may be more than such a forum can manage. FWIW, perhaps an over-all book review would have worked, followed by a discussion of several key points such as tax credits/vouchers, cost sharing, individual ownership, and the function of prices.

            That way you could have gotten your complaints about the tone of the writing out of the way in the review and then drilled down into the meat.

            But I for one have enjoyed participating. I was not very familiar with this blog before but I think I will come back more often now.

        • Brad,

          The spending range I am thinking of as middle is more like $1,000 to $15,000 per year. I don’t know how many people that might be. But obviously this level will have an effect on people above that as well.

          One thing that has been completely unexpected by me and most other HSA advocates is the change in overall spending and utilization (Rand puts it at 30%). I never had an answer to those who argued that HSAs might be okay for reducing spending at the low end, but once someone breaks through the deductible all constraints are gone.

          I can’t tell you why, but that does not seem to be the case. Perhaps the habits of cautious utilization stay with people even above the deductible.

          • Greg
            I think its too early to untangle HSA effects re: reduction in overall HC cost growth vs. per capita spending on the well. With the right incentives, i am more confident in the latter than the former.

            I dont know much about spending thresholds though. There may be a literature base, but it is not on my radar.
            Brad

    • Covering preventive care from the first dollar will not make a difference in short or long term outcomes. Screenings lead to overtreatment, and ultimately cost more than treating the conditions that would have created a symptom. Early detection, in virtually all cases, costs more and does not produce superior outcomes.

      Disease management can improve treatment compliance, especially for lower social-economic status people. But evidence is thin that disease management saves more money than it costs. The “strong” evidence for disease management comes from the vendors themselves, not from peer reviewed research.

      It will be a great day when we admit these truths, and health insurance can stop covering things that feel good but don’t work.

    • Given the reality that John’s full proposals are unlikely to be implemented in the form he suggests, what does a partial and politically-constrained version look like?

      I think that some kind of promotion of individual health insurance policies and discouragement of employers providing health insurance policies would be a good start. This could be done making say 10% of employees’ health insurance benefits taxable and giving a 110% deduction to no drop individual policies.

      Also: I think that this is not true:

      John missed one important result from the RAND health insurance experiment.

      I think that the result that you are referring to to is bad data mining.

    • I think I felt much as Austin did. I think there are some decent ideas in John’s book, but I have some reservations. I would very much like to see them trailed before they become general public policy. AFAICT, all of the HSA studies have pretty severe selection bias. Maybe John could convince some enlightened governors in a pro-market state (Texas, Utah?) or two to try this out statewide. His plan wold require major cultural changes and lots more information for consumers than we currently have available. After 40 years of working with patients, I am not so sure that this will work so well for most people. The non-financial incentives keep a lot of people from being able to respond to the financials. 98% of the time I get “Whatever you say doc”. Mind you I am not saying this cannot change, I just don’t know how it will change. The unintended consequences of letting providers act as uninhibited entrepreneurs may not be good for costs.

      My biggest regret with the book is the lack of more numbers. Maybe John has done it elsewhere, but I would like to see his projections on what happens care spending as we set different coverage levels of deductibles or HSAs.

      Steve

    • “The book is devoid of any consideration of the health value as opposed to consumer value of the care we receive.”

      This may be key, and is absent in most discussions of costs and benefits. That is the lack of assessing and appreciating so many of the positive intangibles that are created via the proper and ethical rendering of HC. Intangible benefits not only to the individual patient, but also to the family, friends and then on to society.

      Very few will add in those so difficult to numerically assess, and those so critically important factors related to HC value. Because they are mostly subjective. Like reassurance, security, happiness, quality of life and of course life itself.

      I’d long since be dead without my $133K surgery in 2002. My wife would long since be dead without her $134K treatments in 2004.

      What is it worth to me, my family, friends and society, that we both are still alive today? Especially of course what is it worth to me?

      And then passed simple survival, I would freely give $1M for a new back! I had back surgery a few years ago, and my back is much improved, but how do I or we quantitate the amount of improvement? Or the dollar worth of improved quality each day? I personally value a new back at $1M. But how does one quantitate any of these subjective outcomes to another patient or a general population?

      “Screenings lead to over treatment, and ultimately cost more than treating the conditions that would have created a symptom. Early detection, in virtually all cases, costs more and does not produce superior outcomes.”

      There is much more to the overall equation than resultant cost issues and even direct medical outcomes related to screenings.

      Early colon screening may have saved my life. Routine colonoscopy screening in 2003 yielded a pre-malignant polyp. Otherwise I may well be fighting or dying from colon cancer today!
      We don’t screen for everything! In fact screening with colonoscopy only became worthwhile more recently as the costs and safety of the procedure improved. But no one ever seems to add onto the benefit side all those intangible values as I described above. And those can be worth some serious dollar value! Like reassurance, security and health and life itself. And then multiply all that by X millions of beneficiaries of HC! Huge, huge value there!

      http://www.nber.org/papers/w11405

      Hospitals acquiring docs will undoubtedly raise costs. Hospitals make money based on local doc numbers not so much as local patient numbers. And when they ‘own’ the docs, they will own all the referrals, labs and scanning. And there is huge money there retaining all that outpatient HC money within the system.

      • Your comments about the non-financial value of health care are exactly what fuels the noble enterprise of bio-tech. The plain truth is that we simply cannot afford to spend every dollar on new inventions that will extend life for a few. We cannot justify these financial investments based upon non-financial gains. The human imagination is limitless; the human wallet is not.

        • These non-financial values area all to often ignored even with the evaluation and assessment of cost/benefit for even the most mundane of medical testing and treatments.

          For instance PSA’s in men over 80. This information can have great value for the patient, spouse and family. In so far as reassurance and security. As well as medical and life planning.

          Yielding to patients or families requests for antibiotics with not so simple colds can yield similar value. Many patients and families can’t be quickly educated and convinced on the realities of medical standards. So when we docs are pressured down this treatment pathway we pick the cheapest and safest drug. But the paitient and family get significant value with reassurance, empathy and the security of knowing or feeling that all is being done to limit the intensity and duration of any suffering. Along with planning to go back to work or school for instance.

          And sure some of this can come into play with new and advanced and expensive bio-tech. But if there is enough of a market and demand from those who can pay, it may eventually create a worthwhile business. For instance maybe there are enough of us willing to pay $1M for a new back, not covered by insurance for what ever reason. And if so, and the procedure is successful for enough patients, the costs may come down. And it eventually might become more acceptably mainstream. Of course the overall cost/benefit impact would depend on so many factors, as to be virtually unknown until many years have gone by. It might or might not be cheaper than the summation of a series of more conventional back treatments and care. But if the new procedure provides much less pain and better quality of life, and maybe make those treated more productive and go back to work, the overall benefits could easily be positive.

    • Observing from abroad (the UK in my case) the main conclusion I can come to from all this is what a waste of time and energy it is to keep on analysing to the nth degree a way to ‘fix’ American healthcare with anything other than the premise of universal care. The sheer amount of waste in life quality and productivity you sacrifice by not adopting some kind of national insurance system is just mind boggling.

      Part of my work in Europe is inteviewing senior doctors and policymakers – I always ask them if they think health outcomes are better in the US thanks to access (to technology, expertise). Not only are they as one in despising the most basic abdication of a doctor’s charter in the US – universal access and care – they also say that in recent years Europe has established leadership in many areas of health research.

      And I can’t help wondering about John’s main planks as below. Am I alone in finding them mutally exclusive? The one thing we know for sure about health services is that they have to be planned and commissioned by someone, not by some mythical consumer guiding hand. That’s why we have armies, police, public health systems and so on (and in the UK a superb family doctor (GP) system).

      Innovation works very well within a public-private system – that’s been an outstanding dynamic in America but you have to fuel academia. John frames the wrong problem – it’s not ‘problems that can never be solved by top-down bureaucracy’ but that we use that partnership to solve problems that are set by society.I guess John would say society is a bureaucracy and I suspect that’s the root of the issue…

      ————————————————————————————————

      1. We need to quit suppressing the market for medical care and for health insurance. That is, we need to let prices allocate resources throughout the health care system – while protecting the vulnerable along the way.

      2. We need to liberate people – doctors, patients, employers, employees, entrepreneurs, etc. — to use their intelligence, creativity and innovative ability to solve problems that can never be solved by top-down bureaucracy.

      • “what a waste of time and energy it is to keep on analysing to the nth degree a way to ‘fix’ American healthcare with anything other than the premise of universal care.”

        Yes. This was exactly my thought from watching this from a Japanese perspective. Unlike the UK, Japan leaves health service provision completely to the private sector, but does universal coverage through mandated insurance, either through one’s employer or through a national system with premiums based on one’s income tax level for folks not employed by a large organization. It just works (with strict rules on what providers may do and what they may charge; most patients pay 30% of costs at point of service but are refunded for costs above some limit). The Japanese are also aggressive on prevention, awareness (diabetes in Japan is a tiny fraction of what it is in the US, but they’re always talking about it), and education (there are lots of good programs on the tube, both public TV and commercial on health issues with quality information; although they are a bit long-winded for my tastes).

        Moderator: this is definately a “peanut gallery” level comment: I haven’t read the book, just a few of the discussions here. Feel free to reject it.

    • One of the great divides in American social policy is paternalism vs. libertarianism.

      My reading suggests that European systems (and certainly the English system) tend powerfully toward paternalism.

      With paternalism, you will have some outlier patients who really could have benefitted from doctor shopping rather than the narrow range of treatments in a public health service.

      With libertarianism, you will of course have patients who make poor decisions about when and whether to seek treatment. Their decisions will be influenced by their bank account and who knows what other factors.

      For what is loosely called ‘public health’ in all nations, paternalism is dominant.

      For self-contained diseases, that is the question.

      If my neighbor has high blood pressure and ignores it, that does not make me any sicker. If he dies early, then in a way I benefit because that is one less person on Medicare and Social Security.

      So, the key question is this: is society responsible for self-contained diseases? Answer that, and then Dr Goodman’s ideas will either make sense or be abhorrent.

    • “The book is devoid of any consideration of the health value as opposed to consumer value of the care we receive. Do we just trust that providers are selling things of value? Why?”

      Because at the level of individual preferences – there is no clear distinction between the two.

      The objective health value delivered by homeophathy, for example, is at *most* zero – and is probably actually negative once you consider the adverse consequences that arise from treating real diseases with substances that have zero proven therapeutic value at concentrations where perhaps a few molecules, at most, are present. Yet one only has to look at the tens of billions of dollars spent on this and other alternative modalities with zero proven health benefit to establish that the aggregate consumer value of these interventions is equal to the annual spend on them.

      Once you move into the realm of modalities with proven clinical efficacy – you’re left confronting the fact that two sane, rational individuals can place vastly different values on a procedure that delivers precisely the same objective health improvement. A die hard skier will probably value an ACL reconstruction differently than someone who derives most of their joy in life from needlepoints or crosswords.

      Inasmuch as third party payment will always be a reality – value based payment by third party payors is one way address the gap between the objective health value of a particular treatment and the subjective value to the consumer. I think it provides a possible mechanism with which to span at least some of the divide between the libertarian desire for personal autonomy and decentralizated decision making/resource-allocation and the technocratic paternalism at the heart the progressive desire for a centrally administered single payer system.

      I could live in a world where Medicaid/Medicare pays nothing for treatments that don’t work (and so on up the scale of clinical efficacy), and will only cover the second-most expensive option when the therapeutic gap between the top-two options is sufficiently small – provided that patients are free to cover the difference with their own money and take a voucher and their chances in the private market instead of Medicare/Medicaid.

    • I want to thank John, Austin, and Aaron.

      As a non-economist who tries to follow this to the extent I can, I also thank Rob whose comments in the post for Chapters 8-9 flagged John’s reliance on Cochrane’s idea for time-consistent insurance, which Austin describes as a form of risk adjustment. As far as I understand, insurance contracts could be bought and sold like futures contracts.

      In addition to the problems Austin describes, Cochrane’s idea seems to me to present the danger of making health insurance subject to fluctuations in financial markets. Even if the market for health insurance is insulated from other financial markets, there would be speculation and panics. A rumor of a new disease or cure could send a market into turmoil.

      (I also started looking at my co-workers differently. Those in poor health started to look like distressed assets, like buildings in a poor neighborhood that might be gentrified soon. Just kidding!)

      But the existence of Cochrane’s idea helps explain why John is confident that solutions can be found. So it’s good to understand what this confidence might be based on.

    • I know we are pretty well done with this conversation, but I came across something this morning that relates to something I wanted to say and didn’t at the time. It relates to John’s contempt for pilot projects, ACOs in this instance. It is from a newsletter that Deloitte distributes, a summary of comments by the FTC. You can read it (below). MY point: the pilot projects are part of a political process, a chance for believers of various stripes to test their hypotheses agains a potentially more supportive set of healthcare policies. In this instance, yes, ACOs increase provider consolidation (not, as I recall it, a concern of John’s, but a development that may not bode well for health costs.), The FTC point of view represented below is a cautious ‘show me’, show me if they work (skeptical), and then if/when they don’t, well maybe we have some political will to limit consolidation. And with other piloty things, the same mindset, it seems to me, applies. Not, maybe a lot of backroom confidence that the pilots will work out, but a sense that they are necessary to move the argument forward.

      Friday, the Federal Trade Commission (FTC) Chairman Jon Leibowitz told media his agency was focused on three areas to achieve lower health costs: (1) increased oversight of anti-competitive hospital mergers, (2) implementation of the pay-for-delay patent settlement agreement between brand and generic drug makers that keep generics off the market, and (3) increased flexibility in oversight of accountable care organizations (ACO). “Health care is 18 percent of [gross domestic product] (GDP) in the United States. That is unsustainable and unacceptable. So whatever we can do to reduce that cost we will,” Leibowitz said. Data from ACOs in coming years should settle whether they are anti-competitive or not. If they lower costs, expect to see them expand. If they end up raising costs that will be more problematic.”