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Robert Reischauer's bright idea

I was reading the transcript of the Center for American Progress/Center for Budget and Policy Priorities deficit conference over lunch today -- totally gangster, I know -- and was rewarded with an interesting idea from the Urban Institute's Robert Reischauer:

First and foremost, the issue is health-care reform, that we really need to bend the curve. Now, Alan correctly said, everybody says that, but nobody knows really how to do it. And that is true, but if you took the consensus of health experts, they would suggest that the curve is not going to be bent until we change the incentives in ways that will modify the delivery system, and that the best prospects for that involve integrated coordinated care, payments for broader bundles, like capitated payments, risk adjusted, and bonuses for performance. And one has to ask if we think that’s the right way to go, why don’t we say, if you want the full tax advantage that we give out now, or you want a subsidy through exchange, your plan has to comply with that formula.

Most economists tend to advocate removing the subsidy, and then when that proves politically impossible, they either give up or think of sneaky ways to remove or cap the subsidy. That's how we got the excise tax on insurance plans, which is a way to cap the subsidy at $21,000, but call it a tax on insurers rather than a tax on businesses or workers. But it works the same way.

Reischauer, however, is arguing for a subversion of the subsidy in service of cost control. Defining and agreeing on what counts as a "cost-controlled" plan will be incredibly different, and at the moment, we probably don't have enough data to even make such a judgment. But after a few years of health-care reform, when the pilot programs are returning their data and comparative effectiveness research is flooding into the health-care system and the exchanges are creating a more competitive insurance market, you could really see something like this taking off.

By Ezra Klein  |  November 17, 2009; 2:25 PM ET
Categories:  Health Reform  
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Of course, these are all supply side solutions.

What about the demand side solutions?

And I consider some of these supply side solutions low hanging fruit. Society hasn't yet had a real debate about technology.

The healthcare bills are all lacking in cost control.

Posted by: RandomWalk1 | November 17, 2009 2:41 PM | Report abuse

One way to make a dent in health care costs on the demand side is by reforming lunch. Today, I had a really awesome sonoma chicken salad today from the Whole Foods Market.

My sense is if people around this country ate more organic chicken salad this would do something to bend the cost curve? no??

Posted by: zeppelin003 | November 17, 2009 2:52 PM | Report abuse

Others have said, but it bears repeating that people need to define the problem - are you trying to control costs, or are you trying to control expenditures? They're not the same thing and since it seems going after the per unit cost of health services, pretty much none of the stuff found in the Senate or House bills are going to do a thing to bring down costs. In fact, they very well can drive up total expenditures per capita as more people are brought into the system.

Posted by: novalfter | November 17, 2009 3:02 PM | Report abuse

Ezra Klein: "Most economists tend to advocate removing the subsidy"

Yes, and "most economists" missed an $8,000,000,000,000 housing bubble. If you're going to cite vague, anonymous authority, is that really the one you should choose?

Posted by: alex50 | November 17, 2009 3:10 PM | Report abuse

One way to make a dent in health care costs on the demand side is by reforming lunch. Today, I had a really awesome sonoma chicken salad today from the Whole Foods Market.

My sense is if people around this country ate more organic chicken salad this would do something to bend the cost curve? no??

Posted by: zeppelin003 | November 17, 2009 2:52 PM | Report abuse

WHAT!!! Is the boycott over??? Weren't we all supposed to boycott them for the WSJ op-ed piece?

haha seriously I'm all for cost control reforms. What I think they should do is have a test pilot insurer in the old HIP model on the exchange. Make it 100% cost control reform type plan that doesn't cow-tow to the wants of the left or right. Capitation, mandatory generics etc etc etc. Whatever it takes to get to an appropriate price point.

Posted by: visionbrkr | November 17, 2009 3:19 PM | Report abuse

Yeah I read John Mackey's oped and do remember hearing about the Whole Foods boycott, and I tell you what....I'm a pretty liberal fellow, but a Whole Foods Market boycott is just a bridge too far. Je refuse!!

Posted by: zeppelin003 | November 17, 2009 3:45 PM | Report abuse

Yes, let's study the hell out of trying to incrementally control health-care costs around the edges, in flatteringly (for guys like Ezra) wonky ways, while ignoring the elephant in the room - the utter failure of the private health-care market, diagnosed by Kenneth Arrow in 1963. Let's continue to have the insurance companies and health-care providers tell the rest of us what health care we're going to get, at what cost, and maybe experiment with a few pilot programs and noodle the problem for another 10-20 years. What's the big deal? After all, Ezra and Reischauer have good, affordable health care right now, so no rush.

Posted by: redscott | November 17, 2009 4:45 PM | Report abuse

The insane howling that has been going on all day about the proposed new guidelines for mammograms is a depressing reminder about how difficult it's going to be to do anything rational to reign in costs.

Posted by: exgovgirl | November 17, 2009 6:30 PM | Report abuse

The wonks are mistaken if they think extremely complex payment systems are going to save money. These things only appear to save money because they drive care toward large-scale integrated providers who can handle the administrative overhead. We need to collect some data so we can do proper risk adjustment, but we should also try to keep things as simple and transparent as possible.

Posted by: bmull | November 17, 2009 6:47 PM | Report abuse

Wow, that's completely stupid. We have no proof that any of those proposals cut costs, and putting more burdens on the insurance plans only makes them less affordable as they have more risk.

Why don't we just do what works with every other good and service that we need at a fair price and allow value based competition that will drive disruptive innovation. If I can see a doctor and get a prescription at CVS for $25, why pay $180 to see an MD. Sure, it's great if YOU'RE paying for it. A cost control plan encourages cheaper services. I don't know how to encourage that behavior, except to make people pay a higher co-pay for choosing the more expensive care.

We have the classic restaurant problem where we've all agreed to split the bill and people are ordering too much, and I am the cheapskate at the end of the table who just wants a glass of water and a sandwich. I'd save my money for when I really need the steak, except you already spent it all.

Except, maybe there's a new cancer treatment that costs $25M. We can't afford to offer it everyone. Do we offer it to no one or to those who can pay for it?

Posted by: staticvars | November 17, 2009 11:29 PM | Report abuse

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