• Do people who want to balance the budget hate innovation and capitalism?

    Recently, I feel like I’ve been having the same argument over and over again. I start by agreeing with someone else that we need to find a way to reduce future health care spending. From there, though, it goes downhill. Every mechanism by which I suggest we reduce said spending is rejected by a “do you want to kill innovation?” or “do you want to drive the smart people out of medicine?” retort.

    Let’s say I favor an IPAB-like panel to suggest ways that will reduce payment on things that don’t work. That will keep people from innovating because they will find such a panel will not allow for money to be made for potentially incremental gains. Let’s say I suggest stricter rules for ACOs to penalize wasteful spending. That will make doctors want to leave medicine for other fields. Let’s say I bring up changing the way we pay for pharmaceuticals or negotiate with drug companies. That will stifle innovation, because without those payments, the drug companies can’t do research.

    Basically, every time I try to suggest a way we can reduce spending, my opponent gets upset because that will mean that someone will make less money.

    Um… yes?

    Do people really not get that every dollar that we spend on health care is going into someone else’s pocket? It’s not being burned in a pile, nor is it vanishing into the ether. Even the “waste” is someone else’s livelihood. If you eliminate all of it, and all of the fraud, you will still have a long, long way to go. The money we spend on health care is going into the bank accounts of doctors and hospitals and nurses and pharmaceutical companies and medical device companies everyone they employ. It’s all someone else’s wages and profits in the end.

    No matter how you cut spending – even if it’s entirely in the hands of the individual – that will mean someone else is going to make less money. If you go all the way to the barter system, doctors will make less money. If you drop Medicare Part D, less money will be spent on pharmaceuticals, and drug companies will see revenue decrease.

    If you reduce spending, less money will go into the health care system.

    There’s nothing magical about government money compared to the money in your pocket. If I, as a physician, get a dollar from Medicaid, it looks the same, it smells the same, and it has the same purchasing power as a dollar I get from Anthem. I am totally open to the argument that reducing spending through government intervention impact the levels of health care spending differently than private sector intervention might, but the overall outcome will generally be the same. We will spend less money on health care. People in the health care system will see less in revenue and profits. Period.

    If you can’t identify anyone in the health care system who you think could take a pay cut, or who could be fired, then you can’t be for reducing health care spending.

    Comments closed
    • I feel like this post encapsulates nearly every frustrating conversation I’ve had about health care reform. In fact, this dynamic also exists when talking about tax reform. These are issues where everyone benefits, so talking about meaningfully reducing spending in either category necessarily means talking about winners and losers.

    • Of course someone will make less. I agree with you–that’s a given. Less spending means less income for someone.
      I proprose that the real problem isn’t the spending. It’s “who is going to PAY for it.” That’s why I think more cost needs to be on the patient. Is “X” procedure (drug, visit, supply) worth it to the patient? How to do that is up to futher debate, of course, but let’s not lose sight that everyone wants the moon if they don’t have to pay much for it.

      • Total dollars spent on healthcare is heavily concentrated on the top 10% or 20% of spenders and little of that spending is discretionary. It’s mainly very expensive procedures necessary for life – emergency surgery, cancer treatment, etc.. There’s no meaningful opportunity to shop around. The choice is whether to stay alive in reasonable health or not.

        Where people can economize are things like checkups, preventative care and the like. Savings here can easily lead to higher costs later that more than make up for the savings.

        This topic has been extensively covered on this blog. Pushing more cost on the patient won’t accomplish anything useful.

        • foosion is absolutely correct, as regular TIE readers will know. Just in the last week, consider the posts about why HSAs can’t/won’t bring down health care spending. Or the post about surrogate decision-making and end-of-life care. Or the item on Ezra Klein’s blog about how treatment provided during the last 10 days of the reporter’s father’s life cost over $300,000.

          When the top 5% of users account for about 50% of spending, and they are mostly elderly people with advanced illnesses and multiple co-morbidities, expecting them to pick up a larger share of the cost is a “death panel” recommendation for most of them. Ron would deny that characterization, of course, but he’s wasting our time with an “answer” that doesn’t fit the evidence. Show your work, Ron.

          • I’ve seen the reports on this blog outlining that most costs are in the upper 10 % of “users.” That still does not change who pays. If we, as a society, state we are going to pay, then we pay, and everyone shut the hell up. But if we decide spending has to decrease, then people will have to start paying more if they want the same level of care. My point is, that if everyone is guaranteed prime rib every night for $2, then expect a real problem to develop.

            • Ron, do you mean like England and France and Germany have a problem with their $2 steaks? They have out of pocket costs that are the same or lower than ours as a fraction of health spending, but they have total costs (and thus total out of pocket) about half of ours.

              What they have a national budget for health care that they stick with, through a wide variety of different mechanisms using single-payer and multi-payer models. We tried constraining costs via a budget target with Medicare under Clinton, and for political reasons couldn’t make it stick (hence the “doc fix” which is really just a failure to conform to budgets but is re-framed as something unfair that must be corrected). Our problem is political and based on cultural attitudes (encouraged by powerful industry forces) that don’t allow us to take what in the rest of the world are obvious measures to control costs.

        • Many dollars are spent on care near the end of life and do not promote quality life.

    • Only way to slow cost as compared to the baseline project (on per capita basis) is to provide less care and/or pay less per unit of care (both in per capita terms). Both will be hard. The last step (less care and/or less $ per unit) is the same regardless of the mechanism used to get there.

      • Don, that’s as undeniable as Cost = Price x Quantity. What muddies things up in my mind is that “quantity” is not so well defined (and therefore, “price” isn’t really either). Over time there are quality changes so that we become more efficient at curing or preventing disease X. That, in turn, usually leads to more spending for some other disease Y, at least for those who would have been killed by X and now live to suffer Y. So, we can spend less per quantity of cure of X while achieving better health, a win-win. Does cost come down overall? No, and you only see that with a pretty expansive and intractable definition of the “unit of care.” Given all this, I’m not sure how to formulate or get a handle on “price” and “quantity” except perhaps in a capitated system, price per life-year covered.

        Some political lubrication is achieved by recognizing that we can spend more on health care. Moreover, we can do it every year, forever. We just can’t do it forever at a rate of growth faster than the economy.

        (This presumes a growing economy.)

    • Why does every medical care intervention cost 2x to 10x more in the US than other developed countries?

      It’s the prices!

    • That’s EXACTLY why elected officials can never make these decisions – you HAVE to put them back into the hands of the consumers of the services, who also have to bear the costs, either through direct spending or through premiums. Restructuring the tax exclusion to make it a flat refundable credit would ultimately do exactly that, for the private market. then we could do something very similar for large parts of Medicare and Medicaid, reserving active government management and decision-making only for individuals who truly cannot help themselves.