The Democrats’ Market-Friendly Health-Care Alternative

By Ezekiel J. Emanuel, Neera Tanden and Donald Berwick
The Wall Street Journal, September 24, 2012

Conservative and liberal health-policy experts agree that the key to sustainable cost control lies in encouraging physicians and hospitals to focus on quality rather than quantity, and value rather than volume.

According to a study published in August in the New England Journal of Medicine, over the past decade per-person costs in Medicare have increased less than those of private insurance, and are projected to be 1.2 percentage points lower than those of private insurance per year over the next decade.

Why should anyone believe that the Affordable Care Act and our new proposals will actually control costs? After all, skeptics argue, Medicare costs have increased inexorably despite myriad policies designed to control them. But we propose a break from the past, which has largely relied on the government’s setting of payments. Our alternative is to allow the market to set many prices for medical goods and then to change payment and reimbursement methods so that physicians and hospitals have the incentive to keep patients healthy. This is neither government nor insurer rationing. It is a market-friendly approach that empowers health providers to re-engineer how they care for patients.

http://online.wsj.com/article/SB10000872396390444017504577645193107383610.html?mod=googlenews_wsj

And…

Health Care Cost and Utilization Report:  2011

Health Care Cost Institute (HCCI)
September 2012

For 2011, HCCI found increases in prices were the primary cause of increased health care spending for the privately insured younger than 65 and covered by ESI (employer-sponsored insurance).

The rate of price growth for all major services outpaced changes in utilization. The primary cause of increased prices was growth in unit prices.

http://www.healthcostinstitute.org/files/HCCI_HCCUR2011.pdf

The authors of this Wall Street Journal opinion article have participated in the development and implementation of the Democrats’ Affordable Care Act. Increases in prices continue to be a primary cause of increases in health care spending, so what do these authors recommend? “Our alternative is to allow the market to set many prices for medical goods and then to change payment and reimbursement methods so that physicians and hospitals have the incentive to keep patients healthy.”

Health care prices remain a problem. The health care market, such as it is, always has set prices high and will continue to do so. Utilization is not excessive. It is comparable to other nations with far lower total spending. Incentives designed to reduce utilization risk impairing access to appropriate care, thereby impairing quality.

It is futile to continue to pretend that market approaches within our highly dysfunctional financing system – that perpetuated by the Affordable Care Act – will ever bring us quality health care at a reasonable cost. Allowing the market to set prices is utter nonsense. Our own public stewards, working with the health care delivery system, can price our health care services and products properly, providing that they are allowed to function as a single payer monopsony (not to mention all of the other benefits of single payer financing).

We don’t need more market-friendly Democrats. We need patient-friendly politicians, though they are a rare sighting these days.