Senate planning to regulate health insurance premiums

From the New York Times:

Fearing that health insurance premiums may shoot up in the next few years, Senate Democrats laid a foundation on Tuesday for federal regulation of rates, four weeks after President Obama signed a law intended to rein in soaring health costs.

Not sure how this will work. If the underlying health care costs continue to rise, but the amount of money insurance companies collect is capped, then that seems to me to be government mandated bankruptcy. Perhaps this is a hidden way to cap health care expenditure without directly taking on doctors. Normally, I’d say “Price caps lead to scarcity” which they do in a normal market, but since the government now mandates coverage and mandates benefits, I’m not sure how this will turn out.

But make no mistake, this bill, if it passes, will mean the government runs our health care. You may like that or not, but it is. And, as many have said so far, the health care bill just passed is the beginning, not the end.

on doctors pay

I’ve been talking a lot about health care costs. A natural question to ask then, is “Are Doctors Overpaid?” There are a few ways to look at this. I’m pretty sure (can’t find it now) that there has been a worldwide comparison of doctors salaries and those in the US make more than many, if not all, countries. Thus, it would stand to reason, doctors pay is a key component of US healthcare costs.

Not so fast, my friends! New research by Sherry Glied, Ashwin Prabhu, and Norman Edelman says that doctors are not overpaid. How? They compare doctors pay to similarly skilled and trained individuals who choose to do something else and find their pay is the same. Essentially what they are saying is that the high pay is attracting highly skilled people who, if the pay were less, may choose to do something else.

Now, I’m not saying that all doctors are money grubbers who would ditch their career in a heartbeat if their pay was less. Rather, I’m saying we need to be very, very careful in what we advocate for change. Capping doctor’s pay, for instance, may have a bad outcome. This will not likely have an immediate effect, but in the long run what it may mean is less skilled people choosing to become doctors and more skilled people becoming…whatever, lawyers, environmental engineers, etc.

Soundbites on why the current health care bill is not going to help

When you increase the demand for something without increasing the supply, you either get price increases, or shortages.

That is from Megan McArdle. Why? Because we are providing much more access to health care – a good thing by itself – without addressing any of the underlying issues. The Dean of the Harvard Medical School agrees:

In discussions with dozens of health-care leaders and economists, I find near unanimity of opinion that, whatever its shape, the final legislation that will emerge from Congress will markedly accelerate national health-care spending rather than restrain it. Likewise, nearly all agree that the legislation would do little or nothing to improve quality or change health-care’s dysfunctional delivery system.

A few excerpts:

As the dean of Harvard Medical School I am frequently asked to comment on the health-reform debate. I’d give it a failing grade.

…

Speeches and news reports can lead you to believe that proposed congressional legislation would tackle the problems of cost, access and quality. But that’s not true. The various bills do deal with access by expanding Medicaid and mandating subsidized insurance at substantial cost—and thus addresses an important social goal. However, there are no provisions to substantively control the growth of costs or raise the quality of care. So the overall effort will fail to qualify as reform.

…

In effect, while the legislation would enhance access to insurance, the trade-off would be an accelerated crisis of health-care costs and perpetuation of the current dysfunctional system—now with many more participants. This will make an eventual solution even more difficult.

 

Meanwhile, Congress chugs along with a health care bill

Highly recommended article from David Leonhardt, Econonics correspondent at the NYT.

Since I’ve resigned myself that something like one of the two bills in Congress is going to pass, I hope it does something related to costs, like at least keep the “cadillac” tax in place to stop the maddening growth of tax-subsidized employer-based health care.

He seems optimistic about the Senate bill. I’m not, but it is better than the bill that just passed the House.

Why is health care so expensive?

From Atul Gawande in the New Yorker, we bring you McAllen, Texas, the most expensive city in the U.S. for health care.

I’ll give you the cliff’s notes version of the important points:

1. Doctors. The doctors in McAllen are businessmen first, and not only practice medicine, but form real estate partnerships, invest in retail space, etc.
2. Whole Person Care. There is much discussion about the Mayo Clinic which pays their staff flat salaries (not by the procedure) to deliver good health outcomes. In Grand Junction, Colorado, doctors have agreed, informally, to work together to pass information and not duplicate care to deliver good health outcomes.
3. Nobody has any idea what things cost. It’s not like the doctors/hospital admins/etc. are trying to squeeze as many dollars as they can out of their patients. The folks in McAllen were genuinely surprised to find out they were anything other than average cost.
4. Higher cost does not equal better outcome. But you probably knew that already.

Update: Atul and some others have an Op-Ed in today’s NY Times