Cutting Costs Is Hard...No Wonder Folks Do Not Like It

From Ezra Klein at WaPo:
"Harvard economist (and former Obama campaign adviser) David Cutler runs through the 10 most promising cost control ideas of the past few decades and notes that six of them are fully included in the bill, three of them are at least partially present, and only one of them -- the public option -- is totally absent. "No one knows precisely how much medical spending increases will moderate," Cutler concludes. "But one cannot doubt the commitment to try. What is on the table is the most significant action on medical spending ever proposed in the United States."

One addendum to Cutler's op-ed: Cutting health-care costs is hard. And it needs to be distinguished from simply capping spending. When liberals say that single-payer will save a bazillion dollars, or conservatives point to Paul Ryan's plan and say that will save a bazillion dollars, they're talking about capping spending. Liberals do it on the provider side, saying that government will only pay so much for medical services people need, and the system will just have to adjust. Conservatives do it on the consumer side, saying that government will only give individuals so much for the coverage they need, and if that proves insufficient, then tough. But voters haven't evinced much appetite for either proposal.

So smart people have spent the past few decades trying to figure out softer ways to cut costs without cutting things that people need. One popular idea is to change payment systems so that they don't reward doctors for volume. That's in the bill. Another is to build more competitive insurance markets so that insurers have a more direct incentive to keep costs down in comparison to one another. That's in the bill. Another is to try to bring individuals closer to the true cost of the insurance coverage, which is currently hidden by employers. That's in the bill. And so on.

The problem, of course, is that no one knows how well this stuff will work. So the legislation is careful in implementation. It takes time to build up enough evidence so that doctors can confidently say what is unnecessary, and for whom. It takes time to figure out how to create new payment systems such that doctors don't find their practices in sudden chaos. It takes time to phase in taxes such that they nudge people rather than shove them, and it takes time to develop a new IT infrastructure and get doctors to use it effectively, and so on. We think a lot of this will work, but maybe it won't. So the bill is careful to move slowly. It tries a lot of different things on a fairly small scale in the hopes that some of them will pan out (hence the legislation's length).

That, of course, makes it harder to explain and less impressive when CBO looks at the savings it can predict with high levels of confidence. But until we decide to be radical with cost control, this is what moving forward looks like. As Cutler says, this is the most ambitious cost control bill Congress has ever passed. And that's a commentary both on the ambition of this bill and on the system's resistance to legislation that's yet more ambitious."
http://voices.washingtonpost.com/ezra-klein/2010/03/modest_far-reaching_cost_contr.html