Republicans and Democrats have the same problem with the Congressional Budget Office: it refuses to score competition between health-care plans as a surefire way to lower the cost of health care.
This annoyed Democrats during the health-care reform debate, as it meant the Affordable Care Act didn’t get any credit for the competition it would foster on its exchanges. It’s annoying Republicans now, as it means their Medicare-reform plans need to impose blunt spending caps if the CBO to certify them as deficit reducing.
But the CBO is in the right here: No matter how much sense competition makes in theory, no matter how obvious it is that it will drive down the price of health care, the fact is that it keeps failing when we put it into practice.
Read the rest at The Washington Post
Competition hasn’t worked in health care
by Ezra Klein
I was going to answer your post from the Ryan post, but I think I may as well respond here.
ReplyDeleteGreat post by Klein btw.
One thing worth pointing out though is that Klein is mostly worried about the cost issue - not other benefits like increased innovation (both good and bad) and increased choice between plans and providers.
Another issue is that the way competition is driven is a result of a historical accident where health benefits were deemed a fringe benefit during WWII. The problem is that employer tax deduction for health benefits is regressive, restricts portability, and closes out smaller businesses and individuals from insurance markets.
I do agree with Klein that we need to rethink how we think about competition - and I think this is happening now. It appears that the provision of insurance and health services is becoming increasingly consolidated. And competition has worked well among integrated providers (e.g. Kaiser, Geisenger, Mayo Clinic, VHA) in terms of costs, quality, and access. Further, you saw some cost containment reforms that work towards this goal such as the ACOs and Patient Medical Home.
Here's a good piece by Reiham Salam refocusing what competition can look like for health care:
http://www.nationalreview.com/agenda/286018/why-exactly-will-competition-between-insurers-lower-prices-reihan-salam
The IT revolution and the technology revolution ALL and always claim that they will save big bucks and make healthcare better.
ReplyDeleteInstead it costs more.
The health insurance companies all used IT to make paperless claims and utilization by transactional servers.
They have not extended any of the savings to those insured.
Maybe that what it is about- make it save money only for shareholders and make it more expensive.
Where is Schiff now ?
This topic drives me crazy. Doctors and nurses provide healthcare, insurance companies do not.
ReplyDeleteMedicare can collect premiums (i.e. taxes) and reimburse providers more cost-efficiently than any private insurer. Once you accept that its immoral to underwrite the chronically out of the healthcare system, its clear that private health insurance provide no added value and are as redundant as storefront travel agencies in the internet age.
Anyone who argues competition between insurers will either improve the delivery of healthcare or reduce its cost is either a whore or a moron. You can usually tell within a sentence which category the arguer falls in.
I would add one more category to whore and moron — fanatic ideologue. However, arguably the "moron" category may cover this.
ReplyDeleteWay to keep the conversation above the 5th grade level...
ReplyDeleteOf course its only insurance companies to blame. Medical suppliers, drug companies, and especially hospitals should be above all recourse. I mean only a moron or whore could possibly care about 100000 deaths per year from medical errors, millions of preventable hospital acquired illnesses, and higher than average re-admissions rates. But of course, payment has nothing to do with delivery of services or the incentives for doctors to prescribe more medications!
I mean, how could anyone but a fanatic look towards immoral countries like Switzerland, France, and Germany that have universal coverage for guidance when they have kept health insurers? Or possibly think that competition between integrated delivery systems (e.g. Gessinger, VA, or Kaiser) could possibly be a good think?
Whatever happened to civil disagreement?
Dan,
ReplyDeleteI do not look at Kaiser as an "insurer" I look at them as a "provider"
Resp
Kaiser illustrates the fact that the way in which providers are paid for services affect outcomes, delivery, costs, and coordination of care more than anything else. The problem is the reimbursement models (i.e. FFS), not insurance.
ReplyDelete"Medical suppliers, drug companies, and especially hospitals should be above all recourse..."
ReplyDeleteWell, certainly they should be effectively regulated but to their credit, they provide lifesaving goods and services. If that's not valued added, I don't know what is.
I lost count of all the strawman you so methodically destroyed but no one is arguing against the systemic improvement of the practice of medicine. But again, insurance companies provide no added value, they simply free-ride on CMS's work (if Medicare decides to cover a treatment or set conditions on providers, the private insurers will tag along).
This would just be amusing except it does nothing to address the real problem--- tens of millions of Americans are rationed out of obtaining necessary healthcare because they can't afford it.
Of course insurance provides value: consumption smoothing.
ReplyDeleteThe other point is that people don't all value health care equally. People see added value in having a variety of plans, whereby they can choose how which provider networks to participate and how extensive they want their care package to be.
Of course access is important, but how about the millions of people that are harmed in the current system or the fact that fragmentation of health care in many ways limits access?
I'm with you on CMS though. In many ways, the problems with reimbursement can be traced to traditional FFS and the fee schedules/PPS.
It all comes back to "capitalism." The fundamental presumption of the superiority of "free market capitalism" is supposed to lie in competition resulting superior efficiency and effectiveness, therefore the lowest prices on the goods and services that consumers demand. However, this assumption is based on perfect markets.
ReplyDeleteThe fundamental constraint on perfect markets is market imperfection. To the degree it is not controlled and in many cases is actually encouraged institutionally, the argument for the superiority of capitalism fails.
It is pretty easy in many cases to see how this is the case by looking at the profit rate. In many industries and whole sectors, the profit rate greatly exceeds what could be expected as a normal rate of return under perfect or near perfect market conditions. Health care is one of these areas.
Market imperfection arises from many factors, and it is impossible to eliminate completely. Therefore, in some vital markets, the institutional arrangements are insufficient to the need.
Either the ideal of free market capitalism has to be modified or abandoned in these areas, or else much more accomplished by way of removing market imperfections.
I think that Ezra's post illustrates this. Simply put, competition has not resulted in superior outcome. There seem to be better ways of proceeding in this economic sector, e.g., more socialized solutions, or else completely overhauling the market structure to reintroduce something closer to perfect markets.