Health Economics

What Paul Ryan’s Critics Don’t Know About Health Economics
by Alain Enthoven @ the Wall Street Journal

The Ryan plan isn’t perfect. It proposes that after 2021 the premium-support payments be indexed to the consumer price index, which grows at a lower rate than GDP. The feasibility of that proposal is debatable and negotiable. But instead of seeking common ground, Democrats immediately attacked the entire plan. We now face the kind of partisan brawl that absolutely turns off independent voters.

Personally, I think a growth rate as low as the consumer price index is probably unrealistic. But it is foolish to focus debate now on a formula that will not take effect until 2021. The premium-support payments in the next decade can be decided in the next decade, and reasonable people ought to sit down and work out a compromise.

A more pressing problem is that, in the face of unsustainable federal deficits, 10 years is too long to wait to start cutting costs. Congress should focus on implementing competition in Medicare sooner. The problem with just cutting hospital payments now is that hospitals will continue to shift costs onto private payers.

The 2010 health-care reform’s Independent Payment Advisory Board is unlikely to be effective. Appointed by the president, 15 experts with no financial ties to the health-care industry are supposed to dream up cost-cutting ideas that would go into effect unless overridden by a supermajority in Congress. But the reality is that most waste identification and cutting is local. These 15 central planners are unlikely to do as good a job as hundreds of doctors and managers in local delivery systems working with incentives to improve value for money for their enrolled members.

The IPAB, I feel, is the most problematic aspect of Obamacare. Once again, the Democrats have assumed that government bureaucrats can outperform a widely dispersed, systemic give-and-take regardless of all the history which indicates the contrary.


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