House Republicans are getting to work on the “replace” part of their health reform agenda. I’ll be very interested to see what they come up with. So far, the dominating concern seems to be costs, which is understandable and appropriate. It really is the next major issue. (Yes, “next.” I’ll come back to that.) Coverage expansion, in their thinking, follows from cost control. Jennifer Haberkorn explains, quoting Ways and Means Committee Chairman Dave Camp (R-Mich.).
Republicans say they’re more likely to introduce small bills than a large replacement package to counter the Democrats’ law. They also dismissed the idea that their plans have to provide insurance coverage to as many Americans as the Democrats plan does. The Congressional Budget Office said the new health law will provide coverage to 32 million uninsured Americans.
“I think one of the focuses needs to be getting the costs down in health care,” Camp said. “Polls show that people are most concerned about cost. Obviously if we can get more costs down, the opportunity to afford health care goes up and you get more coverage.”
I think this would be great. If health care or insurance for it really could be made more affordable, many more people would be able to purchase coverage. It makes sense. So, it would make sense to look at where those high health costs are coming from. Insurers play a role, naturally, but they cannot be the major driver of cost.* This is obvious when you look at the numbers.
Over the last fifty years (i.e., from before Medicare, before managed care, etc.) the average additional cost insurers have layered on top of medical costs has been in the 8 to 14 percent range. Flip that around. Over that entire span of time, medical costs (actual payment for health care to providers) has accounted for over 85% of premiums.
I have no doubt that there are ways to squeeze some efficiency out of the insurance system. But how much? If you think you can solve this country’s health care cost problem by focusing on insurance reforms alone, you don’t understand basic math. This is precisely why the ACA, which is mostly an insurance reform law, itself may not do that much on cost control. A lot depends on the new, experimental ideas in it. And that is why we need to let those experiments play out and to keep at this problem.
If most of the cost is not in the insurance system (though they pass through it), where is it? It’s in medical care. Thus, providers need to be part of the solution. Last I checked they have some very politically powerful organizations representing their interests. I wonder how we might get them to go along with some cost-saving reform, if any?
I’ll stop there. I don’t want to prejudge what the Republicans might propose. But I do want them to think this through. I have my own reasons for favoring coverage expansion, not all of them pertaining to the politics of cost control. However, maybe one could obtain even more cost control in the bargain? Tell me how! I’m listening.
* Some will say it isn’t the insurers but the insurance products. They are too generous. Deductibles are too low, moral hazard too high. It’s likely true that if one shifts the cost risk more toward individuals, others (the government in the case of publicly subsidized care) would pay less. The body of evidence does not suggest there are large overall cost (or curve-bending) savings or that people are really any wiser shoppers. Even high-deductible plans don’t do anything about spending above the deductible, which is where most of it is (the vast majority of health spending is concentrated in a small minority of patients). Yet, I think high-deductible coverage is precisely the way premiums will be held in check, at least for a subset of the population that is relatively low-risk, like young, healthy workers. So we’ll have more opportunity to study the effect of such plans.
