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What does it mean to 'start over' in healthcare reform?

January 18, 2010 |  3:57 pm

ScottBrown Lots of folks, particularly conservatives, want to cast the special Senate election in Massachusetts ON Tuesday as a referendum on Obamacare. I'm not close enough to Massachusetts politics to say how big a factor that is, but clearly Republican Scott Brown is emphasizing his opposition to the Democrats' healthcare reform proposals. "As your senator, I will insist they start over," he said on the campaign trail Sunday.

But what would a do-over mean, policywise?

If the goal is to slow healthcare inflation -- seemingly the one problem in the system that everyone can agree on -- Congress has a couple of options:

  • Try to impose national spending caps, but that's a political non-starter as well as constitutionally questionable. Spending caps = rationing by government. The public may be comfortable having private insurers ration care, but not with government doing it. (Witness the looming train wreck at Medicare, a testament to Congress' inability to curb the public's appetite for healthcare.)

  • Attack the roots of the growth in healthcare costs, particularly the wacky incentives the system provides to let people get sick, then perform as many procedures on them as insurers will pay for. That means finding ways to reward individuals, doctors and hospitals for preventing illness and injury, and to discourage the use of expensive new treatments and drugs that produce no better results than previous approaches. It also means providing more incentive to improve the quality of care, rather than simply paying for services rendered.

That's a Hobson's choice, yet there's no easy way to fix the problem of misaligned incentives. The government's main leverage is over Medicare and Medicaid, and there are plenty of good ideas for how to change the way those programs deliver and pay for care. The assumption is that the most successful efforts will migrate into the private insurance market. But it's hard to say which changes will work until you implement them and work out the kinks.

There's no question that the pending legislation could do more to "bend the curve" in healthcare costs. Even if Congress were to focus only on cost control, though, its success would be limited unless it sharply reduced the number of uninsured Americans -- particularly those who can't afford to pay for their own care. That's because their costs are passed on to everyone else in the system.

The ranks of the uninsured were growing even before the recession hit because private insurers have been denying or canceling coverage for the riskiest consumers (something they can do easily in the market for individual policies). One response would be simply to bar insurers from cherry-picking customers. But that would create a powerful incentive for people not to carry insurance until they needed medical care. This form of adverse risk selection would not only raise the cost of coverage, it would neuter the efforts to shift incentives from treatment to wellness.

The solution to that problem is not just to bar cherry-picking, but also to require people to obtain insurance. As soon as you impose an individual mandate, though, you have to provide subsidies for the working poor. Otherwise, you'd be ordering millions of people to purchase something they can't afford. To help make the coverage affordable, you'd also want to create a way for those individuals to pool their risks and shop as a group. That's where the concept of an insurance exchange comes in -- a new marketplace that effectively creates a pool for uninsured individuals.

One Republican alternative to an individual mandate is for each state to set up an insurance pool for applicants whom insurers didn't want to cover (e.g., those with pre-existing conditions or risky occupations). Providing coverage to members of this group, however, would be an extremely expensive proposition, so premiums would be quite high. Without subsidies to make the coverage affordable, the new pools wouldn't do much to pare the number of uninsured.

Other GOP proposals could help cut healthcare costs in the short term, but don't really address the forces that are rapidly driving up those costs. These include allowing insurers to compete across state lines and limiting damage awards in medical malpractice lawsuits. Malpractice insurance premiums have risen sharply over the past 20 years, so they certainly are a factor in healthcare inflation. But it's not clear that damage caps will rein them in.

In sum, it's hard to obtain the improvements in the system that seemingly everyone wants without a comprehensive (and costly) effort that includes healthcare delivery and reimbursement reforms, an insurance mandate, and new pools and subsidies for individual buyers. Otherwise, you're either tinkering around the edges or creating powerful and destructive new incentives to game the system.

The Democrats' approach is far from perfect, and it's to both parties' discredit that they haven't incorporated more of the Republicans' ideas for bringing market forces to bear on the healthcare system. But it seems unrealistic to think that lawmakers could start over on healthcare reform and produce a dramatically different measure unless they abandoned the intertwined goals of controlling costs, expanding coverage and improving quality.

So where does Brown stand on all this? Here's what he says on his website:

I believe that all Americans deserve health care coverage, but I am opposed to the health care legislation that is under consideration in Congress and will vote against it. It will raise taxes, increase government spending and lower the quality of care, especially for elders on Medicare. I support strengthening the existing private market system with policies that will drive down costs and make it easier for people to purchase affordable insurance. In Massachusetts, I support the 2006 healthcare law that was successful in expanding coverage, but I also recognize that the state must now turn its attention to controlling costs.

The centerpiece of said Massachusetts law is a requirement that almost all residents obtain insurance. The measure also creates an insurance exchange and provides subsidies to help lower-income residents buy policies. If that's what Brown supports, he's on a much different page than most Republicans in Congress -- they prefer to characterize the Massachusetts effort as a total failure. But the state wasn't trying to fix the skewed incentives in the healthcare system, and it took few of the steps that reformers in Congress have proposed to restrain costs.

Democrat Martha Coakley, meanwhile, supports a comprehensive reform similar in outline to the bills approved by the House and Senate. From a healthcare white paper on her website:

We can no longer afford to wait for meaningful health care reform. I believe that national health care reform should have three principal goals: expanding health insurance coverage to those who today lack it; improving the quality of health care for all; and containing costs. The legislation currently working its way through Congress takes steps toward these goals, but is only a starting point. Even if President Obama signs a final health care reform bill, federal and state governments will need to work with doctors, hospitals, nurses, insurers, and consumers to improve a complex system that badly needs repair.

Good thing she said "if" Obama signs a bill. After all, she's the one casting the most doubt about the outcome.

-- Jon Healey

Photo: Scott Brown campaigning Monday in Boston. Credit:  Robert F. Bukaty / Associated Press

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