• What will slow the growth of private health costs?

    I think the ACA has lots of provisions that could, if allowed to work, slow the growth of public health costs (Medicare and Medicaid). What about the private side? I’m not seeing a lot of help there. The best idea is the Cadillac tax and that doesn’t kick in until 2018 and won’t affect most policies for many years after.

    Check out the implementation timeline from the Kaiser Family Foundation. See also Ezra Klein’s  list of cost controls (h/t Aaron Carroll). Did I miss something? Do you see anything that seriously addresses private health costs across the entire private sector? (The bundled payments idea is for Medicare, prudent purchasing applies to the exchanges. I’ve already mentioned the Cadillac tax.)

    The likely course is they keep going up much faster than inflation, the economy, and incomes. That can’t continue forever, but it can for some time, especially as the government is paying subsidies. So, I expect we’ll pay more for little additional value. If we’re not happy about it, what should we do?

    The right’s solution is, broadly, to keep shifting costs to individuals. That will reduce utilization. But liberals hate the idea. Among other things it doesn’t address the information asymmetry problem. Individuals can’t really assess what is high or low value health care. Knowing prices and a few quality indicators is not enough. The reason we visit doctors is because they, theoretically, have some idea of what we need.

    The left’s solution is single payer. If the government is controlling the budget then costs are checked by fiat. The right hates this idea. It’s anti-market, big government rationing. It will stifle innovation. It steals our individual liberty to make our own health care choices.

    Of course, what we have now is some of each. The left has it’s Medicare. The right has it’s private-sector based system for the non-elderly (and non-poor). Both are entrenched institutions supported by powerful interest groups. Yet neither represents a political equilibrium on its own.

    The private-side health care cost problem has solutions, but none that seem politically viable. Each side of the debate can point to something it deems technically workable. But each side is pointing to a different thing. So this problem is far from solved.

    • The early results from HSAs and consumer-directed health plans are encouraging:


      The left may hate it, but it is a way that shows some potential at reducing costs without reducing necessary care. We visit doctors because they have some idea of what we need, but their incentives are skewed when they know someone else is paying. If doctors are looking out for the interests of patients, I don’t see why we cannot rely on them to provide the care we need if we pay for more of it ourselves.

      Unfortunately PPACA moves us in the opposite direction, making it more difficult if not impossible to purchase real insurance (i.e. high-deductible coverage), and instead forcing more people into the pre-paid health care pseudo-insurance we have now.

    • As long as you have any insurance at all, it will be difficult to control costs. We docs will just shift to the more expensive care options that will be paid for by the high deductibles. I could see us bundling our care together to make sure that we give more expensive options.


    • I would argue that information asymmetry in health care is in many ways comparable to information asymmetry with repair operations. You go in for an oil change and come out with cancer.

      Auto mechanics have diagnostic machines to test different systems in your car and tell you what’s wrong. You don’t know whether they’re using the automobile equivalent of an MRI or an X-Ray. You have to ask to figure it out. The same service can cost twice as much depending upon where you go. Get your oil change at the car dealership where your purchased your automobile, it will cost you more than the Jiffy Lube. Is the oil higher quality? Maybe. Do they use a superior filter? Potentially. Do you know for certain? Probably not. You would have to know cars to know the differences. You’re paying them to know the differences and give you enough information to make a rational decision.

      If individuals want to fight information asymmetry, they need to stand at the counter and talk to the tech, the mechanic or, in this case, the physician, which unfortunately is at a premium in most primary care practices. In lieu of that, in our digital age, we can research illnesses, symptoms, medications and procedures online. We can learn the different effects of multiple types of blood thinners on liver and kidney function so that if we know that we have renal disease that a certain prescription may not be best and talk to doctors about a generic instead of name-brand “Lipitor” or “Clavix.”

      Pushing more (not all) costs to individuals to have them evaluate their own health decisions would have no greater effect on information asymmetry than warranties have on auto repair currently. Can you say “aftermarket crash parts”?